2004 Gold Rush for Digital Tunes

Posts: 1695 · Posted: Tue Dec 30, 2003 11:27 am

"'This will be the year downloadable music ... goes legitimate,' says Dave Fester, general manager of Microsoft's digital media division. Those jumping on board the digital music bandwagon can thank Apple Computer for getting it rolling. Apple opened its iTunes online music store in April and was the first to let patrons download individual songs for 99 cents, without having to commit to a subscription service," Byron Acohido reports for USA TODAY.

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Posts: 1695 · Posted: Tue Dec 30, 2003 11:31 am

2004 may see 'bit of a gold rush' for digital tunes
By Byron Acohido, USA TODAY
December 29, 2003

SEATTLE — Three years ago, digital media company Loudeye began compiling its vast repository of digital music files. The idea of swapping music across the Web was new. No one had yet tried to get consumers to pay to download individual songs.
But with consumers fast getting used to the idea of buying songs online, scores of companies are readying launches of digital music initiatives.

Seattle-based Loudeye (LOUD) recently teamed with Microsoft (MSFT) to take advantage of the trend. The crosstown partners are offering companies a way to instantly erect their own music-download services by accessing Loudeye's music archive using Microsoft software.

Loudeye CEO Jeff Cavins says the partnership could spur the rise of upward of 100 new digital music offerings worldwide in 2004. "It's highly conceivable you're about to see a bit of a gold rush around digital music," Cavins says.

Looking for hits

Companies of all types have begun examining ways to make digital music downloads a centerpiece of online strategies, says Josh Bernoff, digital media analyst at research firm Forrester.

"The frenzy for music downloads is like nothing we've seen since the dot-com insanity," he says. Symptoms of mounting enthusiasm can be found in:

•A proliferation of music stores. Tech players Microsoft, Hewlett-Packard (HPQ), Sony (SNE) and Dell (DELL), among others, will open online music stores in 2004. RealNetworks (RNWK), which already runs a subscription music service, is also planning a song-download store.

Stores launched in recent months by Roxio's (ROXI) Napster 2.0, Musicmatch and BuyMusic.com will step up marketing and expand services. At the same time, Walmart.com is testing 88-cent downloads, undercutting Apple's (AAPL) leading iTunes store by 11 cents. And Coca-Cola (KO) plans a U.K.-based store to go after Europe's market.

•Use of songs to drive device sales. Sony plans to promote songs downloaded in a proprietary Sony file format, intended for playback exclusively on Sony devices, aping Apple's strategy. In terms of portable devices, its iTunes downloads play only on Apple's iPod.

Microsoft, meanwhile, will accelerate efforts to entice new music stores and device makers to embrace its Windows Media file format for selling and playing digital music.

•Pitching food and drink with music. Pepsi (PEP) will place codes for one free iTunes download inside 100 million caps of Pepsi, Diet Pepsi and Sierra Mist. The promotion will be backed by a 60-day ad campaign that kicks off during the Super Bowl. Miller Brewing next summer plans to give away thousands of credits for free Napster downloads and portable music players. And McDonald's (MCD) acknowledges that it is exploring a music download promotion, though it declines to discuss details.

"This will be the year downloadable music ... goes legitimate," says Dave Fester, general manager of Microsoft's digital media division.

Those jumping on board the digital music bandwagon can thank Apple Computer for getting it rolling. Apple opened its iTunes online music store in April and was the first to let patrons download individual songs for 99 cents, without having to commit to a subscription service.

That simple approach helped take the edge off the music industry's rising vexation over how to discourage file swapping on Web sites, such as Kazaa and Grokster, that generate no revenue for the record company or artist.

ITunes sold 1 million songs the first week and 25 million over the next eight months. Its meteoric popularity fueled sales of Apple's iPod portable music player, where the company makes most of its profit.

Finding a niche

While Apple was hitting a home run with iTunes and iPod, Loudeye was casting about for a way to make better use of its biggest asset. It had compiled master copies of 4.3 million songs, which should swell to 6.5 million in 2004.

But it wasn't making much profit supplying 30-second samples to companies including Amazon.com that used them to help sell CDs.

Now Loudeye, which has 80 employees and annual sales of about $13 million, has begun packaging its music archive with Microsoft's Windows Media software and is helping companies dream up ways to use downloads to promote other products and services. "This really is a tool to drive cross-merchandising," Cavins says.

The cost is a fraction of what Apple and Napster spent to build their respective music download stores from scratch, he says. Launch customers AT&T Wireless (AWE) and Gibson Audio show what's possible.

Seattle-based AT&T Wireless next summer will let subscribers listen to song samples, then purchase the song, all from a cell phone. A copy of the song then gets downloaded from Loudeye's archive to a place on the Internet, called a locker, accessible by the buyer.

At home, the buyer then uses a PC to download the song from the locker onto a hard drive. He or she can then burn the song to a CD or order a ring tone based on the song.

Blast from the past

Gibson Audio, a division of Nashville-based Gibson Guitar, plans to introduce the Wurlitzer Digital Jukebox, a sleek home version of the coin-operated record players once popular in cafes and soda shops.

Set to hit store shelves in summer, the Web-connected device can access 100 online radio stations and download songs or full albums from Loudeye's archive, storing them on a hard drive. It can also mix and match songs to burn onto a CD.

Many of the Digital Jukebox's functions can also be done by a Windows Media Center PC, a computer model designed to run home entertainment centers. Microsoft encourages the overlap.

The software giant aims to topple Apple as the early market leader by spurring the growth of a cross section of digital music suppliers and device makers all using the Windows Media format, it says.

"The best part about Windows Media is that it unlocks choice," Microsoft's Fester says. "You can buy from the store or use the device that gives you the best experience."

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iTunes

Musicmatch

Napster

Rhapsody

Wal-mart

Posts: 1695 · Posted: Mon Jan 05, 2004 10:36 am

iTunes
FILE FORMAT Copy-protected Advanced Audio Coding (A.A.C.) files.
PRICES 99 cents per song; album prices start at $10.
SUBSCRIPTION None.
FEATURES The site, an integrated part of Apple's iTunes jukebox software, offers 400,000 tracks, 5,000 audio books from Audible.com and allowance accounts for those too young for credit cards. Songs can be played on up to three computers, burned to a CD and downloaded to any portable player as long as it is an iPod. (For Macintosh OS X and Windows 2000 and later.)

Musicmatch
FILE FORMAT Copy-protected Windows Media Audio (W.M.A.) files.
PRICES About 99 cents per track or $10 per album.
SUBSCRIPTION Not required, but available for $5 a month for streaming and music-finding services.
FEATURES Catalog of 360,000 songs, which can be burned onto a CD and downloaded to many compatible Creative, Dell and Rio portable audio players. Three computers at a time can play the purchased tracks. (For Windows 98SE and later.)

Napster
FILE FORMAT Copy-protected W.M.A. files.
PRICES Tracks are 99 cents each; albums cost around $10.
SUBSCRIPTION Not required, but offered as a streaming service for an extra $10 a month.
FEATURES Once the first name in illegal downloads, it has been reborn as a legal service with half a million songs, which can be played on three PC's and burned to disc. Downloading to a portable player is easiest if you have the $350 Samsung Napster YP-910GS 20-gigabyte jukebox; otherwise you need Windows Media Player software. (For Windows 2000 and later.)

Rhapsody
FILE FORMAT No downloads; streaming music and CD burning only.
PRICES 79 cents per song to burn onto a disc.
SUBSCRIPTION Required; $10 a month, including unlimited streaming.
FEATURES Rhapsody is not so much an online store as a virtual concert hall where you listen to the company's 400,000 songs as often as you want. Not all songs are available for CD burning. (For Windows 98SE and later.)

Wal-mart
FILE FORMAT Copy-protected W.M.A. files.
PRICES 88 cents per song; about $9 for an album.
SUBSCRIPTION None.
FEATURES Relies on Windows Media Player 9 to play the music once downloaded. Songs can be played on three computers, burned to CD and transferred to compatible audio players. As with CD's sold in Wal-Mart stores, edited versions - songs with explicit lyrics removed - are often available. (For Windows 98SE and later.)