Consumers call it "choice," but service providers have a different term for when a customer leaves one and joins another: "churn."
Internet service providers lose an average of 1.4 percent of their customers each month, according to a Billboard report, but if they were to add a streaming music service that locks a subscriber's music to their ISP account, they would save hundreds of millions of dollars per year by lowering that churn.
From the consumer's perspective, that translates roughly to: "If you participate in an ISP's music plan and later want to switch ISPs, you'll have to rebuild your music collection all over again somewhere else, so you might as well keep your account and put up with whatever bothers you about our service."
This may seem like a theoretical issue now, because ISPs have only talked about adding a bundled music service to end users, and none of them have actually done it yet (although some ISPs bundle ESPN and other programs). But it will become a practical one if Spotify manages to launch stateside in the next couple of months, as promised, and if it does so as an option on your ISP, as Spotify has done in Sweden and says it wants to do here -- or if another company should manage to fulfill the desire of some at the labels to unite with ISPs for a music service.
It seems outrageous that ISPs would consider forcing their users to pay for one specific music service -- theirs. But an attractive-enough music service offered in optional form could gain traction. The same way Skype users can click phone numbers on web pages to call them, subscribers could click on songs wherever they're mentioned in order to search for and play them in the music service.
Billboard has evidence to back up the contention that bundling music services with ISPs would reduce churn. The Danish ISP TDC reportedly reduced churn 50 percent after it added a music service for all of its subscribers "at no additional cost to the subscriber." If the U.S. internet service provider Comcast were to experience even one fifth of that success, reducing churn by ten percent, it would earn an extra $162 million after taxes over a five year period according to Billboard's calculations.
However, that analysis neglects to consider that one company's churn is another company's new customer. When people terminate their ISP account, they don't forswear the internet forever; they're switching to another ISP. If all the major ISPs were to bundle a music service, as would seem likely if one does so with success, this reduction in churn won't make more money for them on the whole. Besides, plenty of people will be wondering why they need a music service from their ISPs in the first place.
Given that, here's a novel approach that ISPs might want to consider rather than using music to keep customers tied to their accounts. Internet service providers should offer music services as an additional feature, rather than a mandatory bundle, and rather than tying subscribers' music collections to their accounts, ISPs should agree to provide metadata for the entire collection, in a standard format, to whatever ISP or music service the customer goes to next.
This wouldn't help churn, but churn isn't an issue for ISPs in general (or the music industry) for the reason mentioned above. The issue for the music industry and ISPs that might collaborate with it is how to create a music service consumers will be happy to pay for as an extension to their internet accounts.
Whatever they do, ISPs should not use music as a form of DRM. It won't make the ISP industry money, but it will give people yet another reason not to pay for music.
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