Virgin Media’s unlimited music download subscription service is under threat as record labels EMI and Sony Music express fears about the model.

The service, which was announced in June by Virgin Media and launch partner Universal, allows subscribers to download an unlimited number of tracks which can be kept permanently.

But insiders at EMI and Sony Music have expressed concerns that the model is fundamentally flawed and will cannibalise existing digital sales rather than successfully converting persistent file-sharers.

Warner Music is also yet to agree terms and remains in consultation with Virgin Media.

The concerns from the labels throw the launch of the service, scheduled for later this year, into doubt as it’s unlikely to launch without all four majors on board.

The news comes as ISPs struggle to find a viable business model to offer digital music services to subscribers despite fierce pressure from both the government and record labels.

Media company BSkyB, which announced its own music service in July 2008, is yet to launch, although it’s understood to be imminent.

A Virgin Media spokeswoman said it’s committed to launching a “comprehensive” service this year. “We’re making good progress in developing the service and are on track to launch before Christmas,” she said. “We’re in talks with both major and independent labels and are committed to launching a comprehensive service.”

However, while record labels are keen to work with Virgin because of the reach it offers via its 3.7m broadband subscribers, they argue the music download service needs to make commercial sense.

A label executive involved in the negotiations said the labels support Virgin Media’s music plans in theory, but any service must deliver both feasibility and scale.

“We want to work with Virgin Media as a partner but any deal has to sit comfortably with how we value our assets against how it values its customers,” he said. “We have to evaluate each deal as it comes in and make sure we’re happy with the overall value of the proposition.”

A senior Universal source said it was vital for all record labels to embrace innovative services and that any fears they had over cannibalising their existing services were misplaced as Universal’s research indicated download levels would average 35 tracks a month.

All the record labels are conducting research into how consumers will use unlimited download services and the ways in which this affects spend on music via existing channels.

But one source pointed out that Virgin Media’s current marketing strategy focuses on super-fast broadband connectivity, which is likely to encourage customers to make heavy use of any unlimited download services.

Steve Mayall, director of music consultancy Music Ally, said that if the record labels are to reduce piracy by working with ISPs, then it’s vital they convert illegal file-sharers rather than simply cannibalise their existing consumers.

“The labels don’t want unlimited music services marketed to the regular music buyer,” said Mayall. “What Virgin is trying to do is groundbreaking so it’s complicated to set up and the problems could be seen as speed bumps rather than road blocks. But it does need to find a way past them.”

He added that Virgin Media is well known for the simplicity of its marketing messages and would be reluctant to dilute this by not offering content from all the major labels.

The Virgin Media spokeswoman defended the unlimited download model as necessary to wean people away from illegal file-sharing. “We’re forging new ground and want to provide a truly compelling offering for consumers and industry,” she said.