Air is alive with digital music

October 05, 2006|By Eric Benderoff | Eric Benderoff,Chicago Tribune

CHICAGO -- With another summer of catchy pop songs over, fall promises an array of new digital options for music fans.

That's because it was a summer of music deals, starting in July when Microsoft Corp. announced that it would build a software platform and digital music player dubbed Zune, to come out in time for Christmas. Last month MySpace.com said it would start selling songs from its pages.

In between, music services from makers of mobile phones and a new Web site called SpiralFrog have joined a suddenly crowded field.

And then there's Apple Computer Inc., the runaway leader in the digital music business, which has introduced a new generation of iPods.

"Now is the time to experiment," said consumer technology analyst Rob Enderle. "There is a window of opportunity. The fear is that once Zune comes out, there will be two camps: Apple and Microsoft. So now is the time to do something before Microsoft gets Zune fully cooked."

While it's too soon to predict a hit among the emerging choices, one thing is clear: It's not as straightforward as it was in the old days to buy music.

"You used to go to a store and buy a CD. It was pretty easy to figure out," said Albert Lin, an analyst with American Technology Research. "Now, you have very technically savvy consumers trying to figure out what they can and cannot do with their music."

Songs bought from Apple's iTunes store will play only on a computer or iPod, not a player from a rival company. Zune will have a similar "tethered" approach, and schemes coming from Nokia and Samsung to build their own music platforms could add to the confusion.

"Every time a new model is proposed, there is a tremendous amount of fragmentation," Lin said.

SpiralFrog, a startup, will offer free music downloads before the holiday season. Two major record labels, Universal Music Group and EMI Music Publishing, have agreed to offer free, copy-protected downloads on the Web site in exchange for advertising participation. The songs will play on digital music players that use Microsoft's digital-rights management software, but songs cannot be burned to a disc.

MySpace is taking a completely different approach.

Unlike Apple or Microsoft, MySpace will sell unprotected MP3 files. That means any user who buys a song from a band's page on MySpace can play the song on an iPod, a Zune player or any number of other MP3 players. Also, that song can be burned to a disc endlessly.

"We have a strong belief that our users want unprotected songs," said Amit Kapur, director of business development for MySpace. "We feel this is a big test in the market."

That test will begin without music from the major record labels, which demand that distributors put strict digital-rights management tools on songs to limit copying.

"It's clear to us we need to have major labels in the long run," Kapur said. "We will need to find a business model they will agree with."

Instead, MySpace will tap the estimated 3 million undiscovered bands that have profile pages and independent labels willing to waive digital rights restrictions. The artists and small labels will be able to sell songs from their own stores built into their MySpace pages. Fans, too, will be able to create a store on their pages to sell songs from their favorite bands.

"The music can spread virally around to the fan base," said Alex Rofman, a vice president with Snocap Inc., which is building the MySpace service.

Bloodshot Records, a Chicago independent music label, is in talks with Snocap, of San Francisco, about selling music on MySpace.

"The more services the better, as long as it is a reasonable model," said Nan Warshaw, co-owner of the record label she started in 1994 with Rob Miller. Nonetheless, "it is really confusing" to stay on top of the schemes to sell digital music.

With Zune, Microsoft is expected to sell songs and offer a subscription service, similar to eMusic, Napster and Yahoo, where users pay a rental fee for accessing songs. Those songs disappear once payment stops.

"The iTunes model is reasonable because the labels get 70 cents for each 99-cent song sold," Warshaw said. "That makes it workable because you can pay your expenses."

Bloodshot also sells songs at eMusic, where the label gets 21 cents to 25 cents a song. "It's a percentage-of-profit deal," Warshaw said.

Like MySpace, eMusic sells unprotected MP3s. Hence, those songs can be copied and traded numerous times, providing virtually no additional money to the artist or label.

Warshaw said eMusic is great for its promotional value because it promotes independent labels and their artists, but "if their model became the dominant model, I don't think we would survive."

Snocap will charge artists and labels 45 cents a song to run the MySpace music stores, Rofman said. The artist or label can charge anything they want after that. For songs priced at 99 cents, the artist or label would receive 54 cents.

"The model allows for variable pricing," Rofman said. "Rare content [such as concerts] can be sold at a higher price."

All of the digital music action is focused on what remains a small, but growing market: Roughly 90 percent of music purchased is still sold on compact disc.

Despite where one buys music, the players are likely to hold the key to who may eventually put a dent into Apple's dominant market share. And analysts still believe that mobile phones will one day be the music player of choice.

"All the parts that make up an MP3 player are pretty similar to the parts in an MP3-playing phone," Lin said. "There's certainly a reasonable market of people that want both a phone and music player in one device.

"With the Chocolate phone [Verizon Wireless, $150], people will look at that and say it's a good value even if it's a mediocre music player," Lin said.

Eric Benderoff writes for the Chicago Tribune.

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