This action is being taken in response to the UK government's brokered agreement last month among music companies and six major ISPs to work out reasonable legal services, under threat of regulation if they do not reach accommodation. 

Back around 2004, PlayLouder had sought to become a "walled garden" environment in which users could freely share music files using whatever P2P applications they liked.  Acoustic fingerprinting technology from Audible Magic would ensure that only authorized files could be shared among subscribers.

In 2005, PlayLouder got a license from SonyBMG to use its catalog in the service, joining various indie labels.  PlayLouder appeared to be on track to achieve a real-world, private-sector implementation of the flat-fee model that has been touted by the Electronic Frontier Foundation and several prominent ideologues, most notably Jim Griffin, whom Warner Music Group (WMG) hired to make the model happen, and Gerd Leonhard, who calls it "music like water."  In this model, all consumers pay a flat monthly fee for unlimited access to all digital music. 

Yet as it turned out, the other three music majors (EMI, WMG, and Universal Music Group) did not follow SonyBMG's lead and license PlayLouder.  It lost momentum and appeared to be headed for the mountainous scrapheap of failed online music business models.  But the UK government's recent actions have served as a catalyst to PlayLouder to embrace a slightly different model.  As a result, the company has a new lease on life, and this impending launch will become a pivotal moment in the development of the flat-fee model.

The big difference between PlayLouder's new model and the previous one is that the garden walls are disappearing.  PlayLouder's fingerprinting technology will purportedly detect any music that a subscriber downloads from any Internet site.  It will correctly identify most tracks and thereby ensure that royalties are paid, but it will not restrict any use of the files.

The majors may well be compelled to go along with this scheme under the agreement through the UK regulators.  What do they have to lose?  More of the same thing that they would have lost by going along with PlayLouder's previous scheme: the perceived value of music.  The price of music will effectively "disappear" into the price that PlayLouder's ISP partner charges for broadband access, in the same way that ISP services like email and web page storage space are now routinely bundled in.  PlayLouder currently charges GBP 18 (US $34) per month in what it calls a "beta deal"; subscription fees through the major ISP partner may, of course, be different.  It will remain to be seen whether other ISPs in the UK follow the same model, or charge less for ISP access without unlimited legal music, or offer other premium features. 

In other words, PlayLouder's experiment may make it clear to the music industry just how much the UK public values music, and how much it fears legal reprisal for obtaining it illegally. Just how much will "Unlimited legal music" be worth as a bullet point on an ISP's features list next to "9 email accounts" and "10MB web space" and "free antivirus software"?  The answers to that question, and to the question of how many of the UK's other five major ISPs will agree to a similar arrangement, will determine the future of the flat-fee business model.