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Music market winks at Loudeye

The digital media services company sees its stock jump after it signs a deal to encode music for The Orchard, an independent label distributor.

Music distributor The Orchard on Tuesday said it will use digital media services provider Loudeye Technologies to encode and distribute its catalog of music from independent labels.

Loudeye shares jumped following news of the deal, climbing 87 percent by late afternoon to 99 cents.

The deal is the latest win for Loudeye, which has struggled for years to sell its digital music services to a largely reluctant industry. Now, the Seattle-based company may be poised to capitalize on the sudden uptick in interest in commercial music downloads and other services following the launch of Apple Computer's iTunes Music Store on April 28.

Since then, Apple has sold more than 3 million tracks, priced at 99 cents for singles and $9.99 for complete albums. The rate of sales has declined to about 100,000 songs per day from 200,000 on the store's opening day. Nevertheless, Apple's store is seen as the most persuasive evidence yet that paid music services can compete with pirated content freely traded on peer-to-peer networks such as Kazaa.

Tuesday's deal calls for Loudeye to process more than 120,000 songs in The Orchard's music catalog, and underscores LoudEye's evolution from a company best known for encoding music files for promotional samples into a full-fledged music wholesaler, according to Loudeye CEO Jeff Cavins.

"The labels are looking for a content provider to handle digital distribution on a global basis to things like PDAs (personal digital assistants), cell phones...and Internet jukeboxes," said Cavins. "Loudeye has stepped into that role of being a wholesale distributor of content."

The company has archived more than 3.3 million tracks through agreements with some 3,000 record labels, including EMI Recorded Music, one of the world's largest music companies. The archive uses uncompressed files, allowing Loudeye to distribute content in any format or bit-rate demanded by its customers.

Like other digital music services companies, Loudeye has struggled. In March, the company said it would lay off 42 employees, or roughly 35 percent of its staff, following the group resignation of then-CEO and president Phil Gioia, then-Chairman Chad Waite and then-Director Gary Sbona.

In a few weeks, Loudeye will unveil new media player software that will allow retailers to offer music samples and digital downloads from their Web sites, Cavins said. The player will provide a branded skin for retailers such as Barnes and Noble, Cavins said, although he added that no customers have yet been announced. The player supports all major media formats and does not require Web surfers to download a separate application, he said.

Loudeye competes with companies including Madison, Wis.-based Sonic Foundry.

The deal should make it easier for The Orchard to make its artist catalog available for digital download and to other online music services.

"For decades, tens of thousands of artists and labels have faced challenges in tapping major distribution channels for promoting and selling their music to a worldwide audience," Richard Gottehrer, chairman of The Orchard, said in a statement. "Digital distribution removes many of these barriers, and today's distribution agreement with Loudeye reflects our commitment to leveraging this channel for our artists and labels as well as customers."