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Microsoft turns on fee-based Net radio

The software giant charges ahead with plans to turn MSN's free content services into fee-based subscription services, and pledges more of the same later this year.

Microsoft charged ahead with plans to turn MSN's free content services into fee-based subscription services, and pledged more of the same later this year.

The launch Monday night of MSN's Radio Plus service, reported earlier, is hardly the first of MSN's paid services. The Web portal already charges for its MSN 8 online service, with or without Internet access included; for versions of its Hotmail Web-based e-mail service with extra storage; for its "The Zone" gaming site; for online bill payment; and for greeting cards.

But Radio Plus marks a significant departure for MSN in that it is the first entertainment content to get a paid version. That's an indication of things to come, according to Microsoft.

"We look at it as a first step in a much broader strategy that we hope to deliver in time," said Lisa Gurry, Microsoft's group product manager for MSN. "I can't go into details, but this is the first of an array of offerings that we hope to deliver in the subscription space--not just in entertainment, but across the board there will be more subscription services. This is an example of how we're going to deliver on that vision."

For $29.99 per year, MSN Radio Plus subscribers will be able to hear content without interstitial advertisements. Currently, listeners see a banner ad for every song they hear and an audio advertisement after every sixth song. MSN estimated that on average its paying listeners will listen five times longer each session than free listeners.

Paying listeners will also be able to search for different kinds of music based on criteria such as tempo, genre, artist and other favorites. That capability derives from technology Microsoft purchased in September 2000 with its acquisition of Internet music start-up MongoMusic.

A final bonus for paying listeners is technology that eliminates the buffering delay that usually precedes streamed audio content.

The fee-based radio from Microsoft comes as the market for online music undergoes a seismic shift. Services for paid downloads have stumbled, and the industry has reacted with a mix of celebration and panic to Apple's 99-cent download service, launched late last month.

While Microsoft's service is in streaming radio, rather than downloads, analysts said the company was nonetheless entering the paid radio business at an uncertain juncture in the market's development.

"We're in the middle of a period in which different companies, including Microsoft and Yahoo, are trying to generate new revenues through subscription services," said P.J. McNealy, analyst with the Gartner Group. "This comes at a time when we're in the middle of the experiment. Companies are trying to figure out what price elasticity there is for digital services--will people pay, and how much?"

Microsoft's competitors in paid radio include RealNetworks' RealOne RadioPass, which costs $5.99 per month; Yahoo's Launchcast Plus, offered at $3.99 per month or $35.99 per year; and Listen.com's Rhapsody Radio Plus, $4.95 per month or $9.95 per quarter. RealNetworks late last month agreed to buy Listen.com for $36 million.

In the market for online radio, Microsoft competes with itself, too--its Windows Media Player has a radio tuner that offers content through relationships with ad-supported, third-party radio sites.

Another competitor, MusicMatch, on Tuesday is launching Version 8 of its MusicMatch MX radio service and jukebox.

According to MusicMatch, the experiment of paid radio subscriptions has proven successful. The company, which launched its subscription service in June 2001, counts more than 138,000 active paying subscribers and nearly 2 million listeners to its free radio service.

"From the business model perspective, we've made it work well," said Christopher Allen, MusicMatch's senior vice president of marketing and strategic planning. "We've been competing with Microsoft for quite some time, and they have nowhere near the depth of personalization technology that we have."

MusicMatch charges $6.95, or $60 per year for its platinum level subscription. The gold level subscription costs $4.95, or $35.40 per year.

New features in the MusicMatch Jukebox, a software application integrated with the MusicMatch MX service, include a music center that collects commonly used features for easy access by new users, faster ripping than the previous version, and a revised interface.

As for Microsoft, Monday's launch is just the beginning of its fee ambitions.

"This is an area that's wide open with lots of interesting opportunities," Gurry said. "We're going to listen to communities and offer services that let us offer integrated and exciting online experiences to those consumers."

MSN expects to launch more paid subscriptions for other services by year's end, Gurry said. MSN will also promote the paid radio service more heavily in coming months, after this week's "soft" launch, with no press release or promotional events, she said.