Subscription Music Symphony
Flurry of announcements point to pay-to-play world
By Karen Brown
from the April 16, 2001 issue of Broadband Week
In true accelerated Internet time, a subscription music renaissance blossomed with the coming of Spring. During a three-day period this month, a quartet of online distribution announcements from major media players allied with top record labels made noise in the music industry. If the services can find market traction, it may signal the Enlightenment of pay-to-play and the Dark Ages for free music file-sharing services such as Napster.
MusicNet
First out of the chute was RealNetworks, which announced an online music subscription service in partnership with three top record labels--EMI Group plc, Bertelsmann AG and AOL Time Warner Inc.
The deal calls for each to take a minority stake in MusicNet, a Real subsidiary that has been up and running for about a year. Now it will become an independent company, with Real retaining 40 percent ownership and remainder split between AOL Time Warner, Bertelsman and EMI.
MusicNet will operate as a wholesaler, offering online portals a license to offer the service as a private label platform--and that includes a stable of licensed music from record labels and the purchasing and billing technology to drive the service. Not surprisingly, the first two distribution deals are with Real and AOL.
RealNetworks CEO Rob Glaser will serve as interim CEO, while retaining his duties at Real. Glaser says gaining the support of the record labels as direct owners was an important step in the evolution of digital music distribution.
"The goal of MusicNet is something we have been thinking about and working (at) for a very long time--to make the dream of digital music subscription service into a reality," Glaser says. "We think now that the combination of streaming media and download on demand is really poised to take off."
Strong evidence can be found in the 175,000 paying customers MusicNet has already racked up. "It has demonstrated consumers will pay for value-added content when it is priced and packaged in an attractive way," Glaser says.
With three of the "Big Five" record labels on board, Glaser says the goal now is to gather support from the rest of the music industry. Music Net will also try to build its stable of distribution partners beyond its parents.
The distribution partner list may also include Napster, if the embattled music file sharing site can satisfy federal regulators and the music industry as to security and copyright protection for the titles it distributes. "In a way, Napster is an important example ... in that we want to sign up as many content partners as possible," Glaser says.
MSN Music
Not to be outdone, RealNetworks streaming rival Microsoft Corp. has unveiled a beta version of its new streaming music service. Called MSN Music, the service stems from the software giant's September acquisition of Mongo Music.
MSN Music will allow listeners to tap 20 music style groups and 200 sub-style groups. Guided by "Groovers"--virtual DJs specializing in particular genres--listeners can choose programming formats ranging from classical to hard rock and adjust the lineup to feature specific artists. It uses "sounds like" technology to help users try new music based on the musical attributes of songs they already like--such as tempo or acoustic instrumentation. The site also will provide biographies and music information on artists and links to music e-tailers.
The free service will depend on advertising revenue, but it isn't your standard banner ad. MSN will add an ad to the lineup after every fourth song, with a maximum of eight ads in a two-hour period. Eventually, plans are to create a premium pay service allowing users to program individual songs for replay.
MTVi download service
Cable music outlet MTV's online unit plans to team with streaming music device maker RioPort.com Inc. to offer paid music downloads through affiliated radio sites Radio MTV.com and VH1at Work Radio.com.
Under the deal, RioPort's existing PulseOne Media Service platform will gather content plus provide the software application and technology for the online service. At the same time, PulseOne can boast that it is the first service to have forged deals with all of the Big Five labels--Bertlesmann's BMG Entertainment, EMI, Sony Music Entertainment, Universal Music Group and Warner Music Group. Starting this month, the service will offer some 8,000 titles from the major labels and a couple thousand titles from independent labels, according to RioPort CEO Jim Long.
"It's a pretty cool first step, not Nirvana, but a pretty good first step," Long says. "We're talking 10,000 tracks and we want to get to 100,000 as soon as we can. That's going to take some time, but once you start getting up to that level now you are beyond the local record store, whereas right now we are not as good as the local record store."
Prices will range from 99 cents to $2.49 for singles and from $9.99 to $17.99 for albums.
Yahoo! Chimes in
And finally, Yahoo! announced the same week it would become a distributor for the Duet online digital music subscription service. Duet is a joint project between Universal Music Group and Sony Music Entertainment due to launch this summer.
Along with offering music titles on a subscription basis, Duet will allow users to compile personal playlists and share them with other Duet users. The plan is to start with streaming media format first and add a download service soon after. No pricing for the titles or playlist services has been set.
The service will not be limited to just Sony and Universal playlists; Duet will seek deals with other record labels.
This flurry of subscription music announcements has fueled speculation that the Napster days of free music on the Web are over. RioPort's Long thinks that demise may be greatly exaggerated.
"Let's face it, there is going to be music swapping and stealing and free music ... that's going to be around forever," Long says. "But as far as is that going to be the predominant way that kids and other consumers get music? No, there is no question that will not be the predominant way. Today on the Internet it is definitely the predominant way, and I think obviously we are betting and there are telling reasons why in some amount of time--a year from now or whatever--it won't be the predominant way even on the Internet."
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