Music labels team up, launch MusicNet - online music subscription services - Brief Article

DSN Retailing Today, April 16, 2001 by Doug Desjardins

On-line music subscription service could make freebies thing of past

NATIONWIDE DSN REPORT -- With the Napster era drawing to a close, the major music labels are preparing new platforms to sell their music on the Internet.

The latest example of this trend comes from none other than AOL Time Warner, EMI Group and Bertelsmann AG, which announced on April 3 that they'll be teaming up with Internet media delivery firm RealNetworks to form an online music subscription service called MusicNet. As part of the deal, all three labels will license their music to MusicNet on a non-exclusive basis. The service will be made available through several Web outlets, including RealNetworks and AOL.

Music giants Sony Corp. and Vivendi Universal also announced plans to form their own on-line music subscription service called Duet, with a launch planned for sometime this summer.

Just how these music services will work is still an unanswered question. No details have been released on how much the services will cost or how they plan to secure their content. One thing that seems certain is that the days of unlimited free music downloads on the Internet are coming to an end. Napster was recently issued a court order to stop users from making unauthorized copies of songs from the major labels and is expected to transition into a subscription model during the next few months.

Analysts say the new on-line services will help the major labels tap into an audience that's become accustomed to downloading music and is willing to pay for it. "It's a good first step," said Lee Black, director of research at Webnoize in Cambridge, Mass. "It shows the labels are coming to terms with the fact that music on-line is about a service, not a product."

Though a billing system for the on-line services has not been announced, Black expects it will be based on a tiered system similar to cable TV, with a monthly fee of about $10.

"From our research, that's about as much as consumers would be willing to pay for something that's similar to a cable company's basic plus service," Black said.

The big question for retailers is how the new services will impact music sales. Most analysts agree that traditional retailers should expect to lose a good chunk of their CD sales to on-line servers in the future.

But the losses may not be that significant, said analyst Tom Adams of Adams Media Research in Carmel, Calif.

"It's likely to take away any future growth in sales in the long term, but I don't buy into the idea that it's going to cause a precipitous decline in sales," said Adams.