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Downloading: The Next Generation

As Digital-Music Market Grows, Services and Listeners Face Tough Choices

By David McGuire
washingtonpost.com Staff Writer
Monday, February 28, 2005; 8:16 AM

Kelly is the type of person who gives music industry executives hives. She arrived at college in 2001 having never downloaded music -- illegally or otherwise -- in her life. Within a week of her arrival, a classmate turned her on to Kazaa and she was well on her way toward building an illicit library of 500 songs.

"I've watched enough MTV to know that most of the rock stars whose songs are being stolen the most live so comfortably that I can't possibly feel sorry for them," said Kelly, a college senior in Maryland, who asked that she not be identified further for fear of legal reprisal.

The (Legal) Digital Music Marketplace
From washingtonpost.com at 8:53 AM

ITunes: Spurred by the runaway popularity of the iPod player, Apple's iTunes has grown to become the nation's most successful download store, selling more than 250 million tracks -- typically for 99 cents each -- since its launch in 2003.

RealNetworks: Best known for its ubiquitous "RealPlayer," the company offers one-song-at-a-time downloads as well as $10 monthly subscriptions to the unlimited-download Rhapsody service.

Napster: Named for the underground file-swapping service that started it all, the reborn Napster offers a subscription similar to Rhapsody, with a "To Go" service allowing transfers to approved portable players for an additional $5 a month.

MusicMatch: Owned by Yahoo, MusicMatch offers a range of services including a la carte downloads, Web radio and a subscription service.

MusicNet: Unlike its peers, MusicNet doesn't operate a retail store. Instead it provides the back-end download technology for companies like America Online and Virgin Digital.

Wal-Mart: The retail giant sells a la carte downloads at 88 cents a song.

Buy.com: The Internet retailer offers 79-cent singles from major-label artists.

MP3tunes.com: Launched by the founder of the now-defunct MP3.com downloading site, the service offers 88-cent downloads of songs from independent artists.

Emusic: This smaller service specializes in independent labels, offering bulk downloads for a monthly fee.

Peer Impact: Still in its testing phase, Peer Impact would allow users to share files while digital rights management technology automatically determines what fees they owe.

Ruckus Network: Ruckus specializes in the college market, offering music and movie downloads through arrangements with universities.

Cdigix: Another company specializing in the college market, Cdigix uses MusicNet's technology.

--David McGuire

_____Digital Rights_____
Artists Break With Industry on File Sharing (The Washington Post, Mar 1, 2005)
High-Tech Tension Over Illegal Uses (The Washington Post, Feb 22, 2005)
Disparate Cast Lobbies Court To Restrict File Sharing (The Washington Post, Jan 26, 2005)
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Dislodging Kelly and millions of her peers from services that give them all the copyrighted music they want, free of charge, is challenge enough, but the record labels realize that it's also only half the battle. Entertainment-industry leaders know they'll never stamp out illegal file swapping on the Internet, but they hope they can tarnish the experience enough to drive otherwise law-abiding users off of the underground peer-to-peer -- or "P2P" -- services and into the waiting arms of licensed digital services like the remodeled Napster, Rhapsody and Apple's iTunes.

Kelly, who said she has "absolutely no qualms" about downloading the major labels' latest releases, is a little uneasy about all the lawsuits that are being filed against song swappers, and about the nasty "adware" that's been gumming up her computer since she started downloading. For all the fun she's having, Kelly said she'd probably quit stealing music after college, in large part to avoid the mounting dangers and hassles that go along with it.

The entertainment industry is doing everything it can to encourage that sort of thinking. In a multi-pronged campaign against illegal downloading, the industry has taken on everyone involved with file sharing, from the companies that distribute the software to the people who use it.

Meanwhile, the options available for licensed downloading, including the size and quality of online music catalogs, are getting more attractive for potential users. Consumers can buy or rent their songs, pay as they go or in one lump fee, and pick from more than a million tracks, all for less than a dollar apiece. But as far as the licensed services have come, they still have to clear some major hurdles if they are going to evolve into the vibrant alternative to online piracy that the record labels need them to be.

"It's not realistic for anyone to think that they can eliminate piracy online," said Cary Sherman, president of the Recording Industry Association of America. "The ultimate success of the online marketplace is going to be, first and foremost, a matter of marketing and business models. Control of piracy is imperative to support that, but in the end it's the business model that has to work."

In a phone survey of 2,201 U.S. adults, the Pew Internet & American Life Project found that 11 percent owned digital music players. This means at least 22 million players are in the hands of Americans over 18 years old, while millions more are likely blasting tunes into adolescent ears. Spurred by the enormous popularity of its iPod players, Apple Computer Inc. has seen its iTunes Music Store sell more than 250 million songs as individual downloads for about 99 cents apiece since its April 2003 launch.

And while Apple is the nascent industry's undisputed 800-pound gorilla, other companies are posting impressive growth. Several competing services, including RealNetworks Rhapsody, the reformed Napster, Yahoo's MusicMatch and MusicNet, all of which offer unlimited "tethered" music downloads for about $10 a month, combine for more than 1.5 million subscribers.

That upward trend will continue, according to a 2004 report by JupiterResearch, which predicts that online music sales -- both subscriptions and individual downloads -- will top $1.7 billion in 2009, or about 12 percent of consumer music spending.

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