Online Music Goes Legit - Industry Trend or Event

Industry Standard, The, April 16, 2001 by Ronna Abramson

In addition, nobody knows whether a subscription model will work any better than the largely unsuccessful pay-per-download approach. Listeners, after all, got used to Napster, which, until a federal judge reined it in a month ago, let users download for free just about any song they could imagine. It also remains to be seen how much users will be willing to pay for such services -- and whether record companies will really make their entire catalogs available online for a small monthly sum.

Given all that uncertainty, some online music companies are reluctant to license music from MusicNet or Duet. "We'd love to offer something if it made sense," says Dave Goldberg, CEO of online music company Launch. "But until you know what the consumer value proposition is, it's impossible to judge whether you can actually offer something that consumers want."

Webnoize analyst Ric Dube predicts online music will increasingly mirror traditional record stores. Labels will distribute their music online through a few major outlets, akin to Tower Records in the brick-and-mortar world, that appeal to the lowest common denominator of music devotees, and other smaller players will have to find a way to appeal to a niche market.

But don't write off the early entries, counters Greg Wilfahrt, a spokesman for MP3.com. "We've been in this space for a couple of years and have an incredible lead," he says. MP3.com, whose stock is trading at just less than $2, has 15 million registered users and has reached agreements with the five major labels to offer downloads of their music on a single platform. MP3.com has also signed a deal with Harry Fox Agency, which represents the vast majority of American music publishers. The publishers' participation in online distribution is essential because they also hold copyrights to the music that the labels release.

Harry Fox CEO Ed Murphy says the agency has not been contacted by either Duet or MusicNet. Sony and Warner say they're in talks with publishers; the other three major labels are keeping mum about their plans to secure the publishers' clearance. However, Murphy says there's still plenty of time to iron out details, and the labels can bypass the agency to go directly to the publishers. The Duet music service "will have all of the licenses necessary to be able to offer those services online," says Yahoo's Mandelbrot. "Those licenses will exist between Duet and the publishers."

Maybe, maybe not. Until the music starts playing this summer, no one will know for sure whether the slew of announcements last week was anything more than a lot of noise.

                           Joining the Chorus
                   Last week, against the backdrop of
                     a congressional hearing on Net
                   entertainment and copyright, some
                  big players announced new ventures.
WHO       WHAT                                 WHEN
Duet      The Universal/Sony subscription      Summer
          service will be distributed
          initially through Yahoo. It is
          planning to license its vast
          catalog to other Web outlets.
MSN       The company launched MSN Music,      Beta launched last week
          a streaming radio service, and
          is negotiating with record
          companies as part of a plan to
          offer a download-subscription
          service.
MTVI      The site signed deals with all       "In the near future"
          five major labels to sell digital
          downloads while the songs stream
          on Radio MTV.com and VH1 at Work
          Radio.
MusicNet  With music from BMG, Warner and      Late summer
          EMI, the clearinghouse and
          platform will be licensed to
          RealNetworks, which owns the
          venture jointly with the three
          labels and America Online.
Napster   The song-swapping service urged      Who knows?
          Congress to enact a compulsory
          license for music delivered over
          the Internet. The company is being
          pursued by MusicNet, which wants it
          as a licensee.
SOURCE: COMPANIES LISTED