BMG, Sony Music to sell digital music on Net

BMG Entertainment plans to start selling digital music on the Internet in the next few months, the company said today. And Sony Music, a unit of Sony, will announce Monday that it plans to offer digital downloads at the end of the month. The plans will allow customers to download music files onto their personal computers rather than having to buy CDs or cassettes.

To facilitate its plans, BMG said it has partnered with numerous technology companies, including IBM, Liquid Audio and Microsoft.

BMG, a unit of Bertelsmann, said it would begin sales of music singles in early to mid-June. The company did not disclose how much music it will offer initially or pricing information.

Sony Music plans to announce that it will offer music downloads that can be played on portable devices made by Sony's electronics arm. The downloads will be the first to hit the market carrying piracy safeguards.

The market for Net music has exploded in the past few years thanks to the widely available MP3 format, which compresses music into files small enough to be easily transferred on the Web. But MP3 has also helped launch a big market for pirated music, as people have copied music from CDs onto their computers in the MP3 format and posted them online.

BMG executives say the company is not going to offer music in the MP3 format because the technology offers poor sound quality compared with other formats.

Phil Leigh, Internet music analyst at investment bank Raymond James, said the music industry giants are missing the ball on MP3.

"While full details of the plans are unavailable, it appears that the major record label companies continue to be obsessed with copy replication restrictions and encryption," he said. "Although their concerns are understandable, we continue to have serious doubts about the consumer acceptance of such impediments.

"In the PC-centric entertainment environment we envision for the future, consumers will want to freely transfer files among a variety of devices and recording media," Leigh added. If the record labels adopt a standard that places significant limitations on their ability to transfer files, the consumer may prefer to continue buying conventional CDs instead of purchasing restricted audio files.

Although independent labels have been the most prominent online music providers, the "Big Five" record companies--Warner Music Group, Sony, EMI Recorded Music, BMG and Universal Music--have promoted digital tracks by artists such as Jewel, Tom Petty and David Bowie. Other well-known artists, such as Public Enemy, circumvented the big labels by releasing whole records independently in the MP3 format through sites such as Atomic Pop.

In addition to consumers' interest in MP3, Wall Street's growing infatuation with digital music has been a thorn in the side of music industry executives. MP3.com, which offers more than 250,000 songs by mostly independent artists, had a stellar initial public offering in July, closing up more than 126 percent on its first day.

The recording industry sued MP3.com in January, alleging copyright violations stemming from the company's service that gives consumers access to digital copies of their CDs. MP3.com filed a countersuit.

Seagram's Universal Music Group plans to start offering digital downloads in June, and Time Warner's music division has said it will start offering downloads in the second half of the year. EMI Recorded Music also is expected to make an announcement about its digital music plans.