- The Washington Times - Tuesday, January 28, 2003

The recording industry finally has embraced digital distribution of music to counter online piracy and a two-year slump in compact-disc sales, and a small group of Internet companies is building momentum for a legal alternative to file sharing.
The companies are marketing digital music through subscription services for about $10 a month. Subscribers pay to download copyrighted music to hard drives and portable devices, and burn song files to CDs.
"I'm optimistic. I'm not going to say we will add millions of users in the next few months, but it is inevitable that there will be legitimate digital-music services," said Sean Ryan, chief executive of Listen.com, a venture-backed online music site that has marketed its service since December 2001.
Pressplay, MusicNet and EMusic are among the leading subscription music sites leading the record industry's attempt to develop a legitimate marketplace for digital music. The industry's top five labels BMG, EMI Recorded Music, Sony Music Entertainment, Universal Music Group and Warner Music Group have a stake in each company. The labels hold a 2 percent stake in Listen.com.
The new companies still face massive hurdles, but those associated with legal subscription sites say they believe this could be the first year they will compete on something resembling equal footing with Kazaa, Grokster and other peer-to-peer services that promote free distribution of music files.
That's because they now have licensing deals with the industry's top labels, giving them access to more music than they have had, and a recent legal decision could bolster the industry's effort to curb file sharing.
Even with licensing deals falling into place, subscription sites are at a disadvantage.
Not only do services such as Kazaa have millions more users, but they are free.
"This will be a better year for [the subscription sites]. But the question still is, how do you compete with free? I don't think anybody has the silver bullet yet," said Lee Black, senior analyst at Jupiter Research.
A study by Arbitron and Edison Media Research in September estimated that 16 million Americans are willing to pay a small fee to listen to music online.
Analysts estimate that subscription services have 300,000 subscribers combined. EMusic says it has 75,000 subscribers. Jupiter Research estimates that Pressplay has 50,000 users and that Listen.com has 40,000 subscribers, but the companies don't reveal statistics.
An estimated 160 million people have downloaded Kazaa's software.
But the message from the Recording Industry Association of America is loud and clear: Record labels must work harder to offer consumers an online alternative to peer-to-peer sites.
The recording industry has spent millions of dollars in court trying to defeat music piracy, which it says is largely responsible for a 10.7 percent decline in sales of recorded music last year.
The industry shut down Napster in July 2001 and has filed suits against Kazaa, Aimster, Grokster and Morpheus.
The industry also got a boost last week when a federal judge ordered Verizon Communications Inc.'s Internet service to turn over the name of a subscriber suspected of illegally sharing music files.
The labels must make progress outside the courts, too.
Listen.com plans to announce deals beginning this week with high-speed Internet providers that let people sign up for its service when they subscribe to a broadband Internet service.
The companies will emphasize that their sites are easier to navigate than peer-to-peer sites when searching for song files, which aren't always well-organized and aren't known for offering customer service to confused downloaders.
"We have to make music easier to buy than to steal," said Steve Grady, general manager at EMusic Inc., a subscription site owned by Vivendi, the entertainment group that owns Universal.
Some want to see subscription sites include information about artists and links to sites that sell concert tickets.
"They're going to have to do more than just put song files online. The medium, the Internet, is being underutilized right now," said Chris Amenita, senior vice president of the American Society of Composers, Authors and Publishers, which represents musicians.
Pressplay Chief Executive Michael Bebel said his company, a joint venture of Universal and Sony, will hold concerts at its Los Angeles studio and make the songs available to subscribers.
"We've learned consumers respond to reliability, convenience and customer service. We really feel now that we have a proposition they are willing to pay for, and the biggest challenge we face is building awareness," he said.
Not everyone wants to break the law by illegally swapping files, Mr. Black said, so there is a market for paid music services.
Research firm Ipsos-Reid found that among the 60 million Americans who download music, the number of people engaged in file sharing fell from 71 percent in July to 67 percent in September. The company said that could be a result of improved services at subscription music sites or a result of the recording industry's aggressive efforts to shut down Web sites that accommodate file sharing.
People who run subscription sites say they believe they will benefit from the recording industry's efforts to curb piracy, but they also know their success depends on their own efforts.
"The problem will be solved by providing a good business, not by filing lawsuits," Mr. Grady said.


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