Sony, Universal Reveal Online Music Plans

Will music fans willingly pay for what they've been getting free? With the shuttering of free music site Napster a strong probability, two giants of the music industry are moving forward with plans to roll out a subscriber-based online music distribution plan.

"Duet," as the service will be called, should appear next summer. The venture is the result of a "soft alliance" between Vivendi Universal SA and Sony Music Entertainment, who together control approximately half the world's market in recorded music. (French media conglomerate Vivendi is Universal Music's new parent company, after acquiring Seagram, Ltd. last year.) In May of 2000, Universal and Sony announced their intention to offer music fans a copyright-secure alternative to embattled Napster. The partners have invited other music labels to participate in the venture, something that would make Duet more attractive. "The key thing about Napster was that it was label-agnostic," Morningstar analyst George Nichols told the Wall Street Journal. "If Duet can get all of the labels on board, it would greatly increase its chances of success."

With the final stages of development taking place in New York and San Francisco, Duet is likely to be fully operational this summer, according to Vivendi Universal chairman and CEO Jean-Marie Messier, in an interview with the financial journal La Tribune in Paris on February 23. Duet will either be delivered directly to subscribers—who would be charged an undetermined monthly subscription fee and possibly additional pay-per-listen fees, similar to the business model of cable TV—or will be offered to distributors who will in turn deliver the service to consumers. Accessible pricing is critical for Duet to succeed. Napster has proposed a $5 per month subscription rate; digital satellite radio services set to debut this summer plan to charge around $10 per month. Cable-based music services like DMX charge less than $10 per month.

No details have been revealed about the transmission technology to be used or the type of copy protection Duet will employ. Jupiter Media Metrix analyst Aram Sinnreich cautioned that technology "wielded by copyright holders tends to be difficult to use."

Napster has offered the music industry a five-year, one billion dollar deal to settle the copyright infringement suits brought against it last year. So far, only Bertelsmann Music Group has agreed to a working alliance with its former nemesis. Messier dismissed such an option for Universal, saying his company doesn't negotiate "through interposed press conferences." Vivendi Universal will talk to Napster "the day Napster respects the decision of the California judge," Messier said.

A summer launch for Duet may be too late to catch the fallout if Napster is closed down, some observers have warned. Online music fans will quickly migrate to other free music services, such as Napigator, Freenet, and Gnutella. In late February, the music industry began an offensive against such services, with more than 60 "take down" notices sent out by the Recording Industry Association of America to companies operating server computers running "Open Napster" programs. About 350 servers nationwide run file-sharing software, but aren't associated with the Napster service.

The RIAA made its move in the wake of an anti-Napster ruling by a federal appeals court, which judged the case in the music industry's favor. (U.S. District Judge Marilyn Hall Patel will issue an injunction against Napster, possibly next week.) The Digital Millennial Copyright Act of 1998 requires Internet service-providers to block access, upon notification, to customers if they regularly abuse copyrights.

No amount of policing the Internet will eradicate file sharing completely, however. Servers located outside the US are beyond the RIAA's jurisdiction, and peer-peer systems like Gnutella do not depend on centralized servers. RIAA general counsel Cary Sherman acknowledged that it will be tough to enforce compliance with all shutdown requests. A continuing campaign of "containment" is likely the best the music industry will be able to manage in its war against online piracy.

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