Record labels' tepid Napster response

Record labels' tepid
Napster response

Pressplay and MusicNet cost $s and offer less

By Ronna Abramson

    Napster, with its nearly 70 million downloads, proved that the music-loving public was more than happy to download its music from the internet.
   The challenge for the major record labels these days is to persuade this same music-loving public to pay for the privilege of doing so.
    It has all the makings of a hard argument to win, and early indications are not encouraging.
    In the week before Christmas, Pressplay got off to a limited launch, a few months behind schedule, following the launch in early December of MusicNet, the first two services backed by the record industry offering music downloads for pay.
    Both Pressplay and MusicNet must overcome huge doubts about their ability to compete against the remaining free peer-to-peer file-swapping services such as MusicCity and Gnutella.
    Observers slam the new record label services for their limited libraries and restrictions on downloading music to portable devices, which distinguishes them from the once wildly popular Napster, which offered not just free downloads but an enormous catalog and portability as well.
    In defending their new services, record executives offer two separate arguments. First, they say the services are in their early stages, which suggests a more Napster-like future.
    Second, they seem to argue that consumers in time will have to accept what they offer, since they plan to shut down the remaining free services that might attempt to compete with them.
    Pressplay initially is available to only the first several thousand consumers who sign up through MSN Music, Yahoo and Roxio--a sign it may have some bugs to work out. The venture is planning a full-scale marketing promotion next year.
    MusicNet was launched by RealNetworks on Dec. 4 and is being beta-tested on America Online. RealNetworks would not reveal the number of people who have signed up for the new music service since its launch, which suggests those early numbers are not startling.
    Acknowledging its service will never be as popular as Napster, RealNetworks is betting that a more mature crowd will be willing to shell out money for a service that is more reliable and convenient than competing freebies.
    "The adult workforce, as opposed to college students, places a higher value on time," says Leslie Grandy, general manager of consumer marketing for RealNetworks.
    Pressplay spokesman Seth Oster makes a similar argument.
     "We hope and believe that most consumers will understand that it is better to use a legitimate service," says Oster, who believes that the Pressplay audience is 18- to 24-year-olds. "You know when a song is labeled a certain way that it's exactly what it says it is."
    RealNetworks is charging $9.95 per month for 100 downloads through its new Real One Music service, based on the MusicNet platform.
    Subscribers can pay $19.95 per month for 125 downloads and other premium streaming media from such companies as ABCNEWS.com, CBS Survivor Insider, and the National Basketball Association.
    In contrast to MusicNet--which limits the total downloads in a library to 125 per month under the $19.95 plan--Pressplay lets customers build a library. For instance, Pressplay's $9.95 per month service, with 30 downloads per month, means customers can download 30 different songs in the second month, to build a library of 60 songs.
    Pressplay offers four tiers of service, ranging from $9.95 for 30 downloads and 300 streams to $24.95 per month for 20 CD burns, 100 downloads and 1,000 streams.
    Another major difference between Pressplay and MusicNet is that Pressplay's more expensive pricing plans let consumers copy music onto CDs and thus keep it permanently and listen to it on portable players.
     "Nobody buys a CD, goes home, takes another CD off the shelf and throws it out to make room for the other CD," says Oster.
    But when users cancel their subscriptions with either service, their library of downloads vanishes. Consumers who do the math may find they'd rather buy 10 CDs a year and pay nearly $120 than spend at least $9.95 per month and have nothing to show for it when they cancel their subscriptions.
    There are other drawbacks, too.
   "They don't have all five labels and they don't have true portability," says P.J. McNealy, a senior research analyst with Gartner's e-Business Services group.
    In response to Napster, three major record companies--EMI, Warner and BMG--and RealNetworks created MusicNet as an independent joint venture to build a legal online music platform for the labels' libraries.
    The other two major labels--Sony and Universal--created Pressplay, whose library includes music from only those two labels, EMI and some independents. Pressplay and MusicNet have said they would cross-license but have yet to do so.
    Consequently, the bad news for music enthusiasts is that they have to subscribe to the two competing services to build a library with music from all five major labels.
   Portability is another problem for MusicNet.
    When they subscribe, consumers will only be able to listen to songs in that library from a computer because MusicNet does not let users copy music onto CDs--the other disadvantage McNealy refers to.
    And then there are the free peer-to-peer Napster-clones still offering music for free. Before MusicNet, RealNetworks already had 400,000 subscribers to premium content through its so-called GoldPass program. It's a prime target market for the music service, but there is a hitch.
     "Some GoldPass members may not go to music because they still have the perception that there's free music," Grandy acknowledges.
     But Grandy predicts the number of sites offering free music will shrink. The record labels spent millions on legal fees to win a preliminary injunction against Napster and since then have joined the movie studios in suing other peer-to-peer file-swapping services such as Aimster and MusicCity, which they charge with pirating music and movies.
    If anything, the new services are at least a start, say record label executives, who long resisted offering digital downloads in order to protect CD sales.
   "This is the beginning of the beginning as far as music distribution online," says Patrick Reilly, vice president of corporate communications at BMG, the music division of German media giant Bertelsmann AG.
    But Reilly seems to acknowledge it's a cautious beginning.
      "It [MusicNet] neither contradicts nor threatens our off-line distribution--our shipping of CDs," he says. "What we're hoping to achieve is to learn from the experience of online distribution."

-Ronna Abramson is a writer in Oakland, Calif., and a regular contributor to Media Life.

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