Online music: Will users pay-to-play?

After months of hullabaloo over online music subscription services, it appears as though the industry big boys are finally ready to test the waters.

Subscription aspirants MusicNet, Pressplay and Napster Inc. took turns this week at Jupiter Media Metrix Inc.’s Plug In forum in New York, touting their wares amid promises that they would launch within the next couple months.

“We weren’t kidding!” Rob Glaser, interim CEO of MusicNet, declared upon showing the first public demonstration of the company’s long-awaited service. MusicNet was created by AOL Time Warner Inc., Bertelsmann AG, EMI Group PLC and RealNetworks Inc., and just added leading independent label Zomba Recording Corp. to its roster Tuesday.

And while the subscription cowboys may be ready to ride, the big question at Plug In this year was how these services will differ and whether or not they will give consumers enough of what they want so that they won’t mind paying after the era of free-for-all downloads.

“Nobody likes it when somebody takes away something they get for free and something they love,” conceded Edgar Bronfman Jr., executive vice-chairman of Vivendi Universal SA. Vivendi owns half of Pressplay, along with Sony Music Entertainment Inc.

The major labels’ entrance into online music subscription services has caused some chagrin among people who believe that these Goliaths have taken over the burgeoning industry at the expense of online music’s innovators like Napster Inc. and Inc.

While the Big Five record labels initially moved to defend their copyright properties, they have since gobbled up startup online music companies, deciding that they too want to play the game.

Pressplay in May acquired aspiring subscription service, and is now planning to use the technology made popular as the backbone for its own subscription service.

Universal, before its association with Pressplay, was also one of the labels that dragged the renegade Napster to court for infringing upon their copyrights.

In June, the upstart music file-sharing site signed a licensing deal with MusicNet, marking the end of Napster’s independent status.

Now that the days of free copyright music are over, consumers are waiting to see what these services will have to show for their still non-disclosed monthly fees.

At least in the beginning, consumers won’t have the same amount of major label content available to them in one place as they did with Napster, given that the labels have divided themselves between MusicNet and Pressplay.

MusicNet’s deal with number-one independent label Zomba, however, gives it access to music from such lucrative teenybopper artists as Britney Spears, the Backstreet Boys and ‘N SYNC.

Both MusicNet and Pressplay will launch with their services with music that is downloadable and streaming, and both are planning to offer added content such as video to their services.

While executives from both companies shied away from making announcements concerning whether their services would eventually offer digital rights management that would allow for users to download music and then burn it onto a CD, Bronfman did say that his company recognized consumers’ desire to control their music.

“Portability is going to be important to consumers,” Bronfman said.

Bronfman added that Vivendi Universal and Sony are going to be “very aggressive” in managing their subscription service.

Glaser, meanwhile, acknowledged consumers’ interest in moving digital music to devices other than the PC, but said that it would take a year or so to make sure that the technology was secure.

“It won’t happen right away,” Glaser said.

In terms of look and feel, Plug In attendees witnessing Glaser’s MusicNet demo Tuesday noting something familiar about the service.

“It totally looked like Napster!” said outgoing Napster CEO Hank Barry, who passed his mantle to former Bertelsmann AG senior executive Konrad Hilbers Tuesday morning.

Even though Napster jumped into bed with three of the Big Five labels, it still has its own brand name to worry about.

“Will Napster, like the Phoenix, rise from the ranks?” queried Jupiter Senior Analyst Aram Sinnreich.

Not surprisingly, Napster’s new CEO thinks that it will.

“I’m convinced that the Napster name brand cannot be killed,” said Hilbers. “(But) it is imperative for us to get the critical mass again.”

However, according to Barry, 800,000 users are still logging on to Napster everyday, even though they cannot share files. The site has been down since July 1 when Napster knocked itself offline to update its filters.

Both Hilbers and Barry seemed confident that they could regain a fair share of the site’s audience.

“Ninety million people have downloaded the Napster client and not all of those people are kids who aren’t willing to pay,” Barry said.

But, while MusicNet, Pressplay and Napster clamber to figure out what consumers want, there is still some industry speculation over whether or not consumers are truly interested in paying to play.

” 90 percent of Americans define themselves as music buyers, but only 15 per cent buy music,” Canadian rocker Alanis Morissette told Plug In attendees Tuesday.

However, research released by Jupiter Monday indicates that while digital music sales – through single paid downloads and digital subscription models – are only expected to account for three per cent of total music sold online in 2001, they will jump to 30 per cent by 2006, totally US$1.9 billion.

While consumers may not like the idea of paying for something they once had for free, most speakers at the conference agreed with Bronfman’s comment that one cannot make a viable business model out of giving their products away.

And in fact, consumers are due to benefit from having companies held responsible for the quality and security of their digital music, Jupiter analysts said.

“In music we have to get out of the mindset of selling round things,” Vivendi Universal’s Bronfman said, referring to CDs. “We are selling services and there is going to be an enormous opportunity for all kinds of pricing.”

In addition, because users have become accustomed to getting online music for nothing, there’s more pressure on the subscription companies to offer additional services and aggregated content to justify their fees.

“It’s all about giving consumers what they want,” Bronfman said.

Just not for free.

Jupiter’s Plug In forum ended Tuesday. Information about the forum can be found online at

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