[ARSCLIST] NYT: AOL Offering Music Catalog for Downloads

[Premise Checker <checker@xxxxxxxxxxxxxxxxxxxxxxxxxxxx>]

AOL Offering Music Catalog for Downloads
NYT February 26, 2003
By SAUL HANSELL

In the strongest attempt yet to create a legitimate
alternative to free music-trading sites, America Online
will introduce a service today that lets users download and
listen to a large catalog of songs.

For $8.95 a month, users will be able to listen to a
catalog of music, now at 250,000 songs and growing, on
their computers. Moving songs to CD's or portable players
will cost more.

AOL is selling a version of a service from MusicNet, which
is a consortium of RealNetworks; the BMG unit of
Bertelsmann; EMI; and Warner Music, which like America
Online is a unit of AOL Time Warner. AOL refused to
introduce MusicNet's first product a year ago, arguing that
it was too hard to use and did not have enough music.

Now AOL says that the service has improved enough to offer
it to its 27 million members. That represents the most
important test yet for the concept of selling music as a
subscription service rather than as discrete discs.

For AOL, MusicNet also represents a crucial part of its
strategy to increase its tiny share of the market for
Internet users who connect over high-speed, or broadband,
connections. AOL is already promoting its free music
content, which includes hundreds of songs, videos and
original recordings of musicians.

In the next few weeks, AOL is going to introduce an
improved $15-a-month service, with a bundle of content and
services meant for people who already buy broadband
connections from their cable or telephone companies. That
offering will include a limited version of MusicNet that
will let users download 20 songs a month and listen to
another 20 one time. Others can buy this limited version
for $3.95 a month.

The standard $8.95 version of the service will allow users
to listen to an unlimited number of songs on demand while
they are connected to the Internet through a technology
called streaming. They can also download the songs to their
computers for higher sound quality and the ability to
listen to them when not on the Internet.

Unlike music downloaded from Napster, the defunct free
music sharing service, and its successors like KaZaA, a
subscriber can listen to MusicNet's downloads on no more
than two computers. They also cannot be copied to other
devices or sent to other people.

But a premium version of the service, for $17.95 a month,
gives users the right to burn 10 songs a month onto a
recordable CD. These will be in the standard, unprotected
format used by all music CD's, and thus those songs could
be copied, converted to a popular format like MP3 and sent
over the Internet at will.

So far, legitimate music download services have not been a
success with consumers, not only because they charge a fee
but also because the first versions had very limited
numbers of songs and even more draconian rules about what
users could do with them.

MusicNet initially had songs only from its owners and some
independent labels. Its main rival, PressPlay, was formed
by Sony Music and Universal Music.

By late last year, MusicNet and PressPlay each reached
agreements with all the major labels and many independent
labels as well. An independent service sold by Listen.com,
called Rhapsody, also allows users to listen to songs from
all the major labels and to burn some of them to CD's for
$9.95 a month. Rhapsody is trying to attract attention with
a limited-time offer that allows users to download
individual songs at 49 cents, half its regular price.

With its $8.95 standard tier, AOL is undercutting the $9.95
basic price of PressPlay, which is mainly sold by Yahoo and
Microsoft. The only other version of MusicNet, offered by
RealOne, costs $4.95 a month for 100 downloads and 100
one-time streams.

So far, none of these services have attracted more than a
few tens of thousands of subscribers. Somewhat more popular
are online radio services that let users pick the style or
even artist they want to listen to but not the actual song.
MusicMatch, for example, has 120,000 subscribers to its
radio service at $2.95 to $4.95 a month.

Kevin Conroy, the AOL senior vice president for
entertainment, said its version of MusicNet would be far
more popular because it would be integrated into the AOL
service. Users will simply add the MusicNet fee to their
existing AOL account and credit card numbers. And for those
who subscribe to the MusicNet service, AOL's music
programming, which attracts 12 million users a month, will
be laced with links that will start songs playing.

Mr. Conroy added that he thought that even some users of
KaZaA would be attracted because AOL's service downloads
faster and does not have the errors and delays of the free
music trading services.

" Right now it takes 8 or 10 searches to find what you are
looking for on services like KaZaA because so many files
are mislabled," he said. "We have forced people to do
illegal things because we have not offered an easy,
convenient mainstream way for them to do what they wanted."


AOL said that it had rights to another 80,000 songs that it
would add to the service in coming months. This represents
about half the popular music that is now in circulation.
Much of the most popular material, from artists like
Madonna and the Beatles, has not been made available on
these downloading services, however.

But new artists generally sign deals that give labels the
electronic rights to their works. For example, "Come Away
With Me'` by Norah Jones, which won the Grammy for album of
the year on Sunday, is available on the service for
listening and downloading, but it cannot be burned to a CD.


The labels, artists and music publishers are paid a share
of the monthly fees on all of these services in proportion
to how much their songs are listened to. They also get a
share of the fee paid when songs are burned to CD's.

Paul-Jon McNealy, the research director for media at
Gartner G2, said that with the latest releases of MusicNet
and PressPlay, the music industry has eliminated most, but
not all, barriers to creating an online service that will
attract music fans.

"This is close to what people will find palatable," he
said. The MusicNet on AOL service, he said, will be a good
introduction to online music for a mainstream audience, but
the limitations are still significant.

"People want to buy their music once and own it forever,"
he said.

http://www.nytimes.com/2003/02/26/technology/26MUSI.html