America Online Inc. of Dulles made its largest foray yet into the online music business yesterday, announcing that it has acquired Spinner Networks Inc. and Nullsoft Inc. for a total of about $400 million in stock.
AOL said it will use the two companies' technologies to create customized music services -- Internet radio, downloadable music and online compact disc sales, for instance -- for people who visit its various sites.
Eventually, AOL plans to extend those services to offerings in its "AOL Anywhere" services, through which people will be able to tap into the Internet by means other than a computer -- such as television, "smart" phones and small portable devices.
Many analysts predict that with the rising popularity of MP3 file-compression technology, delivering -- and selling -- music over the Internet will be a growing and profitable corner of the Internet market.
It's AOL's latest move into American pop culture. In late May, the company completed its purchase of MovieFone, a film ticketing and listing service.
AOL watchers had expected an online music deal. "We waited long enough to find the players that are getting some traction," AOL President Robert Pittman said in an interview yesterday.
Pittman said that AOL -- the largest online service, with 17 million subscribers -- will help popularize music over the Internet because it will make it easier for people to use.
"You have to be fiendish to use it today," said Pittman, who, as one of the early executives at MTV, helped bring music videos to the mainstream. AOL's goal in delivering music, he said, is "You just push a button and it works."
Pittman would not say when these customized services would be available to AOL users.
Spinner's online music service, Spinner.com, broadcasts 2 million songs daily and serves about 1.5 million users each month. The site's content includes 175,000 selections from 350 record labels. Spinner's users can download MP3 versions of songs and can purchase CDs at the site.
Nullsoft sells Winamp, an MP3 player for Windows that has 5 million users, and Shoutcast, an MP3 system that lets people broadcast their own content online. AOL said that two-thirds of Winamp customers are under age 26 and that 43,000 people download the Winamp application every day.
As access to online music has grown, however, so has the proliferation of illegal copies of songs on the Internet. Pittman said that because AOL will sell music legally, it will help legitimize the use of these technologies and make more money for record companies and their artists.
"They need somebody like us that is responsible," Pittman said.