Big record houses go digital this summer

From...

March 9, 2000
Web posted at: 8:30 a.m. EST (1330 GMT)

by Michael Learmonth

(IDG) -- After years of stewing on the sidelines, two of the five major record labels now appear ready to dive headlong into digital distribution.

EMI last month signed a deal with electronic music distributor Supertracks to distribute music from EMI's 1,500 artists in offline retailer Musicland's virtual stores, SamGoody.com, OnCue.com and Suncoast.com.

"This is the first step toward a retail distribution channel for digital music," says Supertracks CEO Charles Jennings, a former TV and movie producer and cofounder of online privacy group TRUSTe. Portland-based Supertracks is angling to become a major digital intermediary among record labels and music stores.

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Supertracks plans to distribute content to the retailers, fulfill orders and handle credit card transactions. Its partner, Preview Systems, provides digital rights management technology, licensed from Intel and Microsoft, that prevents people from infinitely copying tracks once they are on a hard drive. The deal follows Universal's selection of InterTrust's DRM system last May.

While MP3s have proliferated on the Internet for years, the Big Five labels, which control 85 percent of U.S. music sales, have held back from distributing music on the Web until they could be sure the music would be paid for and protected. The labels have used the Web mainly to offer sample tracks as an incentive for consumers to purchase the CD online or in a record store.

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The road to establishing a secure digital-distribution channel is littered with abandoned experiments. BMG and Universal embarked on an effort with AT&T in May to create an electronic distribution system --code-named Nigel -- only to kill it a few months later. And all five major record labels teamed up with IBM on the year-long Madison Project, which was declared a success last month and then promptly dropped.

Universal, the world's largest record label, now says its digital-distribution system will be ready in the second quarter of this year.

The labels consider "persistent" DRM technologies, which enables them to control how a song is used long after it's purchased, critical to the release of music online. Standards for such technologies are under development by the Secure Digital Music Initiative, a consortium of some 160 record labels, device manufacturers and software makers.

The default setting for an SDMI-compliant technology allows for no more than three copies to be made of a music file for personal use.

The first two SDMI-compliant devices -- Sony (SNE) 's Memory Stick Walkman and Vaio's Memory Clip -- have already hit the market this year.

"The winner in all this is going to be the consumer," says Bob Nell, VP of personal digital products at Sony. "They are going to be able to purchase new music" not just the garage bands and the classics -- and they are going to be able to do it very easily."

Independent labels and individual artists are already offering digital music online. Now, some of the major labels are moving ahead with their digital distribution plans.

Warner Music is owned by Time Warner, the parent company of CNN.com.

LABEL	DIGITAL MUSIC INTIATIVES
BMG	Technology VP Kevin Conroy says BMG will announce its plans for digital distribution within the next few weeks. Bertelsmann, BMG's corporate parent, established a digital rights company, Digital World Services, which licenses InterTrust DRM technology.
EMI	EMI has partnered with Supertracks to distribute downloads this summer to Musicland's online properties. Preview Systems will provide clearinghouse and security functions.
Sony	Sony has released promotional downloads using Microsoft technology and the Reciprocal clearinghouse, but a spokeswoman says the company is "looking to work with as many formats as possible, as long as they are secure formats."
Warner	Paul Vittic, Warner Music's VP of strategic planning, says the company will make an announcement regarding DRM technologies "in 60 days," and will release downloadable music in the second half of this year.
Universal	Months after abandoning Nigel, a joint project with BMG to distribute digital downloads, Universal is back on track with DRM company InterTrust and the clearinghouse Magex, which is owned by National Westminster Bank of London.

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Supertracks.com
BMG.com
Sony Corp.
Warner Bros. Music
Universal Music Group

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