Page last updated at 05:47 GMT, Friday, 28 September 2007 06:47 UK

Q&A: Virgin's digital shutdown

Retail group Virgin has announced the end of its internet music download site.

Announcement on Virgin Digital website
Virgin Digital was launched with a bang but closed with a whimper

Virgin Digital, launched in the UK two years ago, is shutting down its service in stages and will close completely on 19 October.

The move comes after Virgin boss Sir Richard Branson sold the group's UK and Irish record shops to a group of senior staff at the business.

It is the latest upheaval in the digital music market, following Sony's decision to close its Sony Connect online store from March 2008.

Why is Virgin Digital closing?

Virgin's UK record stores were the business that established Richard Branson as an entrepreneur. But now, after more than 30 years, he is getting out of music retailing altogether.

Last week, he said entertainment retail was "no longer viewed as core to the group's future".

The record shops - 125 of them across the UK and the Irish Republic - are to be rebranded as Zavvi following the management buyout.

However, Sir Richard remains active in UK cable TV, broadband and phone services as the largest shareholder in Virgin Media.

Virgin Digital customers are now being offered a one-month subscription to Virgin Media's digital streaming jukebox service, which will be launched soon.

What does it mean for Virgin Digital's customers?

Virgin Digital provided two different forms of access to digital music - either paid-for downloads or a monthly subscription service known as the Virgin Digital Music Club.

The Club was essentially a form of music rental, with all songs subject to rights restrictions known as DRM (digital rights management).

Customers could download as many tracks as they wanted, but the music remained tied to the host computer and could only be played as long as they paid the 9.99 monthly fee.

For an extra 5 a month, they could become Premium members and transfer the music to a compatible MP3 player.

Now, however, all Club members will be unable to play any of those tracks once the service expires, because they will be unable to renew the monthly licence that gave them access.

I've never downloaded music and all this makes me wary. What should I do to avoid the pitfalls?

You're not alone. Many owners of digital music players have never downloaded a single track, preferring instead to convert music from their own CDs.

But as a consumer, you are vulnerable if you sign up with a music service that involves DRM.

Any digital store that sells or loans you music in a copy-protected format makes you a hostage to that format's commercial success.

The only way of avoiding DRM completely is to sign up to a service such as eMusic, which offers tracks from independent record labels without copy protection that work on all digital music players.

However, the four biggest record companies will not work with eMusic precisely because the music is not protected from copying, so many Top 40 best-selling artists are not available.

If you have one of Apple's ubiquitous iPods, the only other fully compatible music download service is Apple's own iTunes, which has two-thirds of the digital market.

That may seem like a pretty safe bet, but no music service with DRM can be considered completely future-proof.

Are more companies likely to suffer the same fate?

We have been here before, most notably with the video wars between VHS and Betamax.

When Sony's Betamax format lost the battle, Sony threw in the towel and started making VHS recorders instead, leaving Betamax fans reliant on ageing machines.

History repeated itself last month when Sony abandoned its proprietary Atrac music system, meaning that consumers who bought music through its now-condemned Sony Connect store cannot play the tunes on Sony's newest players.

Virgin's store used DRM-protected Windows Media Audio (WMA) as its format, as do many other digital music providers, with the exception of iTunes.

Since iTunes is such a big player, some observers are predicting that it is only a matter of time before WMA goes the way of Atrac.

However, Virgin Digital would probably have loved to offer music compatible with Apple's iTunes and iPod music player.

The problem is that Apple refuses to license its technology to other companies, leading some analysts to allege that the firm is unfairly stifling competition.

What does the demise of Virgin Digital do to the market?

Well, it arguably leaves Virgin/Zavvi at a disadvantage compared with its main rival HMV, which is pursuing a twin-track strategy of traditional record shops combined with online music.

With even supermarkets such as Tesco now offering tracks for download, it is difficult to see how Zavvi can ignore digital distribution and retain the prominence that Virgin has had until now.

The closure of Virgin Digital is also likely to make it tougher for other subscription services based on the same model, as consumers become wary of getting stuck with hard drives full of unplayable files.

It may also encourage the music industry to come up with a better subscription model, of the kind that executives such as Columbia's Rick Rubin have been advocating.

But in the short term, it clearly reduces the amount of choice available to the consumer - and makes Apple's iTunes an even more dominant player in a more consolidated market.


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