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Liquid Audio signs with EMI

An IPO filing discloses a three-year agreement, as Liquid scores one in the race for music technology players to sign deals with the "Big Five" record labels.

    Liquid Audio disclosed a three-year agreement with EMI Recorded Music, scoring a point in the new race for music technology players to sign deals with the "Big Five" record labels.

    The three-year-old Redwood City, California, company disclosed the tie-up in a Securities and Exchange Commission filing that also describes its plans for a $36 million initial public offering.

    Under the agreement, signed this month, Liquid Audio will "create digitally encoded copies of designated EMI sound recordings using the Liquid Audio and Genuine MP3 formats," according to the filing. Genuine Music is an initiative aimed at developing a form of the MP3 format that "supports authentication functions," the company said.

    The filing does not give further details about the deal. Liquid Audio declined comment, citing the standard "quiet period" mandated by the SEC before a company goes public. EMI Recorded Music representatives could not be reached for comment.

    The deal underscores the growing pressure on the music industry to get ready for the demand for online music downloads, which has been growing by leaps and bounds over the past six months. According to a survey of college students by music and new media news and research firm Webnoize, awareness about the MP3 format (MPEG 1, Audio Layer 3) alone jumped from 7.9 percent in December 1998 to 59.4 percent in April 1999, a 750 percent climb.

    But the major record labels are reluctant to use the MP3 format because it lacks copy protection.

    "I'll distribute my music in an insecure format the same day I take all the locks off my doors when I go on vacation and hang up a sign that says, 'Crashers welcome,'" Larry Kenswil, president of global e-commerce and advanced technology for Universal Music Group, said in a speech yesterday at the MP3 Summit in San Diego.

    Still, a number of deals have cropped up of late in response to the growing demand for downloads. Last week, for example, Sony entered a licensing deal with Digital On-Demand to deliver much of its content to retailers via DOD's proprietary, high-speed "Red Dot Network." Brick-and-mortar retailers--beginning with Virgin Megastores--will have in-store kiosks store through which customers can purchase music that is not offered on the shelves. The kiosks will download the tracks onto a CD, DVD, MiniDisc, or a handheld device and print out the cover art and liner notes.

    In addition to the EMI deal, Liquid Audio said in its filing that it is working with kiosk and database service Muze "to jointly market and operate the Liquid Muze Previews service," which "will offer online music retailers a database of more than 1 million sample audio clips to enhance the promotion and sale of music." That service was launched in the second quarter, the filing said.

    Also on the kiosk front, Liquid Audio said in its filing that it is working with partners in Korea to develop "Total Music Centers where consumers can preview music through individual kiosks and then purchase songs, which can be transferred on-site to a compact disc. The first Total Music Center is scheduled to be opened in Korea in the second half of 1999."

    Liquid Audio also has an agreement with MTS, Tower Records' parent company, "to provide digital delivery of music titles to consumers through its online retail Web site, Through our Liquid Music Network, we will enable the Web site to offer for sale syndicated music content," the filing said. The Liquid Music Network is a searchable database of the content available in Liquid Audio's format, according to its Web site.

    The company is further jumping on the portable device trend, working with Iomega to "offer consumers a way to securely download music from the Internet directly onto Iomega's Zip disks," the filing said. "As part of this initiative, Iomega will be bundling the Liquid Music Player with selected Zip drives."

    Earlier this month, Web music firm Atomic Pop said it would release rap group Public Enemy's latest album using Iomega Zip disks.

    In addition, Liquid Audio is working with Toshiba and Sanyo "to develop portable digital music playback devices," according to the filing.