Pay-for-Music Web Sites Face Many Hurdles

For the major record labels, getting Napster out of their hair may turn out to be the easy part.

Having vanquished the upstart file-swapping Web site in court this spring, regaining legal control over their own music, the five biggest record companies — Warner, BMG, EMI, Sony, and Universal — have split into two alliances and plan to launch a pair of subscription-based music enterprises, MusicNet and pressplay, later this summer.

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In so doing, the Big Five would seem to have the inside track toward dominating a lucrative industry sector. But in the unpredictable world of Web music, there are few sure things. The popularity of MusicNet and pressplay remains to be seen.

And apart from the general willingness of Web users to pay for music, the fortunes of the two services will depend in large part on their success in at least three technological areas: Web-site design, reliability, and format.

Designer Labels

Both services are trying to fill the considerable void left by Napster, which was banned by a judge in March from making copyright-protected songs available for downloading, and has since seen an 85 percent decrease in song-trading in recent months. A whopping 360 million songs were swapped on the site in May, down from 2.79 billion in February.

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One way the pay-for-music sites can help develop a large audience is by replicating the simplicity of Napster, which made finding and downloading songs a straightforward task.

"The thing that everybody forgets about is ease of use on the consumer side," says Billy Pidgeon, an analyst at Internet research firm Jupiter Media Metrix in New York. "Is it convenient? So far, it's been easier to use Napster than to buy a CD on the Web."

That, however, will be largely beyond the control of MusicNet, which is not a site but a service licensing its music to other sites. The company is a joint venture combining three major labels — Warner, BMG and EMI — along with Seattle-based Web media leader Real Networks. [ABCNEWS.com has a contractual agreement with RealNetworks and uses Real's products.]

So far, MusicNet has deals with Internet access king America Online and, yes, Napster, who will both carry its offerings. Napster will thus be responsible for re-designing its own look to incorporate the independent artists it currently features plus MusicNet's subscription offerings. AOL too will come up with its own look and feel for its music section while MusicNet powers the operation from behind the scenes.

Meanwhile, pressplay (formerly known as Duet) combines music from the other two major labels, Sony and Vivendi Universal, the latter of which bought Internet music technology company MP3.com for more than $300 million this spring. But to this point, pressplay has kept its plans for Web-site design and music format even more closely under wraps than MusicNet.

Reliability

For a potentially high-volume business like online music, the reliability of the services will also be crucial. But MusicNet's core technology will be very different from Napster's, which essentially allows users on computers to locate and swap MP3 files. As Napster head Hank Barry said earlier this month, his site employs "the architecture of moving things around the edge of the network and sharing with other people … That's not the fundamental architecture of the MusicNet service."

Instead, MusicNet, using RealNetworks' technology, will feature streaming audio files made available to users via central Web servers. That means the service could be more prone to delays or technical problems if usage is very high. Real Networks, even as the top streaming media provider on the Internet, will face new demands on its services.

"Any time you talk about streaming … content delivery, the more that it's centralized, the more that there is an opportunity for finding choke points in the network," observes Tim Smith a broadband analyst at consulting firm Gartner in New York.

However, RealNetworks CEO Rob Glaser said last week that he thinks "consumers will be very pleased with the experience," while other representatives of RealNetworks express confidence in their ability to accommodate the demands of the masses.

"With 200 million users of the Real Player technology, we have very proven experience in successfully providing streamed content to a mass audience," says RealNetworks spokesman David Brotherton. "From a technical perspective, Real Networks is more than equipped for the task."

Format

Then there are unresolved questions about the format that will be used to play the music. MusicNet is keeping its plans close to its vest, although industry observers figure it will use something like RealNetworks' RealJukebox. But pressplay has been in negotiations with Microsoft and might choose to use Microsoft's Windows media players, or even try to develop its own tool.

"Sony has a history of trying their own thing," says Ric Dube, an analyst at Webnoize, speaking of the company that developed the Betamax for playing videotapes, only to see it lose out to the VHS format. "There's a possibility that these two different services could work with different technologies."

But not having a universal application familiar to users could cut down on the popularity of each service — or could lead to a winnowing out of either one, as happened with the videotape.

Then too, industry observers wonder if the streaming format itself will be agreeable to habitual Napster users who are in the habit of accumulating music files on their hard drives.

"A streaming music service won't be as successful as a downloading one," adds Dube, "because right now the world is a downloading world."

All of which means the Big Five could have their work cut out for them.