By Amy Harmon
New York Times
July 01, 2002
Increasingly desperate to woo customers away from an Internet music piracy party
that shows no signs of abating, several major record labels have resolved to
make more music legally available for less money online, even if it means sacrificing
lucrative CD sales.
The Universal Music Group plans to announce today that it has licensed its catalog
to Listen.com, making the site the first to provide customers access to the
catalogs of all five major labels over the Internet for less than $10 a month.
Other services are making individual songs cheaper to get and easier to burn
to CDs legally.
"We could be 100 percent correct morally and legally that it is wrong to trade copyrighted files, but from a business standpoint, it doesn't matter," said Larry Kenswil, president of the eLabs division of Universal. "We need to construct legal alternatives."
The chief driver of the music labels' new willingness to take more risks online seems to be the 5 percent decline in worldwide sales last year and a continuing slump this year, which they attribute in large part to digital piracy. As the successors to Napster multiply and file-sharing gains cultural acceptance, the record labels are beginning to fear that music will be permanently devalued.
Recorded music "will be used to promote the artist, and the labels will need to find other sources of revenue," predicted Starling Hunter III, an assistant professor at MIT, who studies the impact of technology on industries.
Industry executives are considering the paradox that to control music distribution more tightly in the long term, they may have to loosen their hold over it in the near term.
"This really represents a turning point in the approach and attitude of the major music companies toward digital distribution," said Chris Gladwin, chief executive of FullAudio, which plans to announce today that Warner Music has agreed to let it sell its songs for CD burning for around 99 cents a download. "They're beginning to see it as a big part of their future."
In the last few weeks, Warner has quietly agreed to allow the MusicNet subscription service it co-owns with the BMG division of Bertelsmann and the EMI Group and RealNetworks to let customers record the tracks they download onto CDs.
Warner is also selling songs from artists like the Red Hot Chili Peppers, Brandy and others for 99 cents through a "Digital Singles" pilot on America Online. Those songs are in MP3 format, which means they can be copied to portable players or over the Internet.
Universal, the biggest of the labels, said it planned to offer its catalog
for download later this summer at 99 cents a song, or $9.99 an album. And Sony
recently lowered the price of its copy-protected downloads to $1.49 from $1.99.
Still, critics argue that the recent steps are too little and that it may soon
be too late for the labels to rescue their position as the gatekeepers of popular
music if they refuse to more aggressively embrace online distribution.