US record companies follow Napster's lead

Universal Music Group, which this week will begin letting customers download and pay for music over the internet, is the latest record company to accept that a new model for music distribution is inevitable.

Music sharing website Napster and download site MP3.com are forcing companies to rethink their strategies as they adjust to a wholly different market. The result is a rush by major record labels into deals to produce downloadable formats of their music.

Gartner analyst PJ McNealy said record companies are finding themselves doing business in a world of smaller profits than they are used to - and they are struggling to adjust.

"The past business model has been built around full-sale CDs worth $15 each, but as you move to digital distribution you move to single track sales," he said.

"Companies are not going to sell tracks for $4 or $5 each as people cherry pick three songs off a CD. They're going to have to figure out how they're going to change their business model."

Almost every major record company has entered into at least one agreement with a content distribution company to make its music available for digital download as they adjust to the new reality.

Universal this week began to experiment with its own music distribution format known as Bluematter. The system was developed in partnership with a number of technology companies including InterTrust Technologies, a developer of distributed digital rights management technology; digital commerce service Magex; and internet media delivery company RealNetworks.

Songs in the Bluematter format come with enhanced multimedia content such as biographies, photographs, lyrics and credits, said UMG. From this week they are available at a number of websites including Lycos Music, Music.com and RollingStone.com.

Separately, Warner Music Group has reached a licensing agreement with MP3.com to make its catalogue available on MP3's website. Terms of the agreement were not disclosed, but Warner said it would share monies received with artists in accordance with the terms of their agreements.

BMG Entertainment has signed a similar deal with MP3.com, as well as one with Musicbank, which uses its own technology.

EMI has also reached an agreement with MP3.com, as well as making 200 singles and 100 albums available at more than 50 online retailers. The sites will use both the Liquid Audio and Supertracks secure delivery services.

The only major company that has yet to reach any partnership arrangements is Sony Music. The company has opened a website for the purchase of whole CDs and is expected to launch its own digital download site later this year.

See also:

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BMG, Lycos offer music over the web

Record label BMG Entertainment is letting customers pay for and download its music over the web and has struck the first in a series of distribution deals with Lycos Music.  11 Oct 2000

Sony Memory Stick Walkman

Sony's rival to MP3 is a technically superior, but more expensive, product.  09 Aug 2000

Intel, Matsushita team on web music tools

Intel and Matsushita Electric have developed a set of software products for online music distributors aimed at helping record labels gain better confidence in electronic distribution.  09 Aug 2000

MP3: making sweet music on the net

The music industry has been shaken up by the emergence of MP3-based music websites such as Napster. Critics accuse them of facilitating piracy while advocates say they make it easier for unsigned musicians to have their music heard. We look at what all the fuss is about.  08 Aug 2000

Napster mulls copyright-friendly system

Digital music firm Liquid Audio could hold the key to the future of embattled music sharing site Napster.  04 Aug 2000

Record companies risk Napster backlash

Research company Gartner has warned record companies that they will hurt only themselves by pursuing Napster, the music sharing website.  01 Aug 2000

Napster ruling creates MP3 frenzy

News that Napster was to be shut down sparked a stampede among MP3 music users looking to stock-up before the threatened injunction's deadline - and has cast the spotlight on other peer-to-peer file-swapping systems.  31 Jul 2000

Napster survives - for now

Napster was granted a reprieve on Friday just hours before the music-swapping site was due to be effectively shut down.  29 Jul 2000

Napster urges fans to join the fightback

Napster, the music sharing website, has asked fans to help it defeat a court verdict that could see it shut down later today.  28 Jul 2000

Napster verdict could sink UK pirates

British music industry officials today welcomed the decision by a US judge to pull the plug on the Napster music swapping system, saying it would help their fight against online music piracy in the UK.  27 Jul 2000

Napster ordered to suspend service

A judge in the US has effectively ordered that music-swapping site Napster be closed down.  27 Jul 2000

Napster dispute fuels online music boom

The controversy surrounding song-swap software Napster has been linked with a huge surge in the number of web surfers visiting online music sites.  21 Jul 2000

Napster founder gets copyright friendly

One of the founders of MP3 file swapping system Napster has set up an online music distribution system that is intended to protect copyright.  18 Jul 2000

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