Virgin announced a partnership deal with Spotify last week to offer the streaming service at discounted rates, as part of its bundle of tv, broadband and phone services. This deal may well be welcomed by the record industry as a further extension of the opportunity to consume music legitimately, and this is partly true.

However, there is an alternative point of view. Virgin has for 2 years been negotiating with the Majors with a view to launching its own paid for service. Although officially the company is still leaving open the possibility of launching this service, the Spotify deal must surely signify that it will be mothballed. From Virgin’s point of view it’s easier and less risky to license in another service which has already paid advances to the labels, than to pay high advances/minimum guarantees and agree other tough terms with the Majors for its own service.

Why is that a problem? Because if that decision is duplicated by other potential digital stores, then ultimately the only digital stores available will be those with deep enough pockets to consummate deals with the majors. There are not many of those (can Spotify can afford to be part of that group indefinitely?) and the services that are out there are not providing enough traction to make up for the dwindling of physical sales.

What the Industry needs is more legitimate services, not less. Confining the availability of content to a few services who can afford to get licensed reduces choice and is ultimately not good news for the Majors either, since it leaves them continuing to lose money overall and highly dependent on just a few major customers.