Media Forum: Can Sky vie for iTunes' turf?(British Sky Broadcasting Group PLC)(Apple Computer Inc. iTunes Music Store)

Will Sky and Universal's mp3 subscription plan succeed?

The record industry hasn't exactly been astute in its attempts to come to terms with the new challenges and opportunities offered by the digital world - though arguably, of the big four music companies, Universal has been making the most effort to wake up and face the future. Back in July 2007, it had the sheer effrontery to pick a fight with iTunes, arguing that its flat, 79p- a-track fee approach to life was not in Universal's long-term interests.

In the end, it decided to continue its relationship with iTunes on an ad hoc basis but it hasn't renewed its formal long-term contract, thus giving it leeway to explore other relationships.

Such as the one announced last week, which saw Universal form a joint venture company with BSkyB to launch a download service that may, in time, rival iTunes. It's not exactly a me-too, though. For a start, it will be underpinned by a far less restrictive mindset, offering downloads compatible with mobile phones as well as iPods.

But more importantly, it will feature a new (or newish) business model In a word: subscription. Napster tried to reinvent itself on a subscription basis a few years back but Sky's involvement could - and should - take the subscription proposition into a different league.

Sky, after all, has a peerless track record in building and maintaining customer relations and this will, presumably, be fundamental in developing the new service. There will be plenty of scope for cross-promotion too - airtime and promotional opportunities on the Sky-owned TV channels plus the ability to drive traffic directly from the Sky online portal and via its broadband access operations.

Matt Jagger, the managing director of Naked Ventures, maintains that this is terrific news for anyone with the best interests of the music industry at heart. 'This is the empire striking back,' he asserts. 'The major labels allowed themselves to be excluded from iTunes - they are not shareholders. That's not good. And this promises to be a better distribution system than iTunes. For the music industry to set up its own purely online business to rival iTunes was never going to work. This is an entirely different proposition.'