The Viacom unit today said it will join forces with Diamond Multimedia subsidiary RioPort to expand its online offerings to include secure music downloads, the companies said.
Under the terms of the deal, MTV Networks will get what president Fred Seibert characterized as a "significant" stake in RioPort, which builds hardware and designs software for music downloading and also operates RioPort.com, a download and information site. Seibert declined to specify the size of the stake, though he said it is a minority.
MTV Networks Online will provide content to RioPort and will promote RioPort's site and products on all its sites, the firms said. MTV Networks Online also will get a cut of revenues from the sales of music downloads; the firms declined to give further financial details. RioPort, for its part, will create the infrastructure for MTV Networks Online's properties to offer secure music downloads.
The move comes as MTV Networks parent Viacom and its big media brethren are beginning to leverage their offline properties such as cable television to offer a wider array of content and services to consumers.
MTV Networks Online includes MTV.com, VH1.com, SonicNet, and Nick.com--as well as Viacom's impending destination sites: the Buggles Project, the working title for a music hub site, and Project Nozzle, the working title for a children's hub site. Both are scheduled to launch in the fall, Seibert said. Viacom executives have said they plan to spin off the hubs.
But Viacom and others are faster to embrace the Web and music downloading than most of the so-called Big Five record companies--Sony, BMG, Universal, EMI, and Warner Music. Although those companies are involved in music download technologies in one form or another, they have yet to launch wide-ranging music download offerings.
One exception is Sony's move to offer music downloads in retail stores under a partnership with a firm called Digital-On-Demand. The service launched in a new Virgin Megastore last week. EMI today said it also will offer music for download in retail stores via Digital-On-Demand's Red Dot high-speed network.
For its part, RioPort will "build with MTV Networks an infrastructure to allow consumers to download content--taking our capabilities and integrating them into MTV Networks' Web sites," RioPort president David Watkins told CNET News.com. In addition, content from MTV Networks, such as MTV News, will be available on RioPort.com.
"The more content that is available in more places, the bigger this business will be for everyone," Watkins said.
The deal also comes on the heels of research released by Jupiter Communications yesterday, which predicted that music sold by downloading off the Internet will achieve just $147 million in sales by 2003. Rather, Jupiter said music content on the Net is more likely to drive sales of physical CDs.
Still, downloading via the unsecure MP3 format has taken off in popularity. Both companies said they wanted to wait to do this deal until specifications for secure music downloading were published by the Secure Digital Music Initiative (SDMI), a consortium of music and technology firms brought together by music industry trade group the Recording Industry Association of America. Those specifications were published last week, and Watkins said RioPort's products will be compliant by the time the "next-generation" of them are shipped, scheduled for next month.
With SDMI on the minds of both RioPort and MTV Networks, the two have signed on their first major record company: Universal, which will offer access to its content for download using the RioPort technologies on MTV Networks' sites, Seibert said. He added that the two firms are "in discussions with all the major labels to provide their content," and they plan to offer content from independent labels as well.
Along with offering music downloads, the firms plan to offer sales of concert tickets and other merchandise, in what Seibert said will be a "dizzying array" of offerings.
"We want to be there to help consumers have the experience they have been asking for," which includes all manner of sales as well as downloads. He added that with MTV Networks' purchase of streaming Net radio firm Imagine Radio in February, the sites will offer content in every way consumers are demanding it.
The online music space is crowded, however. The Buggles Project--for which Seibert said names are being tested now and a beta will be launched over the next few weeks--joins other media companies large and small that are attempting to be all things to all music fans.
Tunes.com, for example, launched in March, and offers content from Rolling Stone and the Source magazines, concert Webcasts, and music videos, among other content. Launch Media also operates a music destination site, which just yesterday entered a deal with RealNetworks in which it will be a default site for Real's G2 streaming media players.