Universal, Sony to trim download prices

Universal Music Group and Sony Music Entertainment plan to cut prices for digital music downloads and add new features, including CD burning and the ability to transfer songs to portable devices.

The moves are aimed at reaching out to consumers who have continued to flock to free file-swapping services while turning a cold shoulder to paid music subscription services launched by the major record labels in recent months. Single downloads have been sold for years online, but high prices and built-in anti-copying technology have ensured lackluster sales to date.

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Universal Music Group will be offering tens of thousands of digital music downloads from its U.S. catalog this summer, according to UMG sources. The tracks, which will cost 99 cents for singles and $9.99 for albums, will include both new releases and older titles. Moreover, UMG sources said the record label plans to offer portability capabilities, allowing people to play songs on devices such as MP3 players.

Universal's songs will be offered through its partnership with Liquid Audio, which uses so-called digital rights management technology to control copying and transfers of songs to portable devices. Redwood City, Calif.-based Liquid Audio distributes secure digital music through its network of retailers, including Amazon.com, BestBuy.com, CDNow, Sam Goody, Barnes & Noble and Sony Music Club.

Meanwhile, Sony Music Entertainment, which has already been offering a la carte digital music downloads for two years via its partnerships including RioPort, said Wednesday it will be offering not only burning capabilities, but it will drop its prices from $1.99 to $1.49. A Sony Music Entertainment representative said "the change will be happening shortly."

"The labels are making content available at reasonable prices, but more importantly, they're making them available in ways that consumers can use them, and that's where burning comes into play," said Jim Long, chief executive officer of RioPort. "If you don't offer burning, (consumers) will not buy it. It's simple as that."

Wednesday's news comes as major record labels are struggling to sell subscription services to consumers that include only minimal ability to transfer songs to portable devices. Pressplay, a joint venture between Sony and Vivendi Universal, lets subscribers transfer a limited number of songs to CDs each month. But rival MusicNet, backed by record labels AOL Time Warner, Bertelsmann and EMI Recorded Music, does not provide burning capabilities or allow for downloads to MP3 players and other portable devices.

Another service by RioPort allows people to download music onto MP3 players. Liquid Audio and a division of EMI also allow subscribers to burn tunes onto a CD or transfer them to a portable device through a new service named BurnItFirst.com.

A representative for Warner Music Group said the record label expects to offer more downloadable singles that can be burned onto a CD, but said the idea is more "experimental, rather than a strategy."

Last month, Maverick Records and Vivendi Universal's online division began offering an unprotected MP3 version of a new single by Meshell Ndegeocello. People can purchase the file for 99 cents and then burn the song to a CD-ROM disc or transfer it to a portable device.

"What we're seeing is that major labels are still experimenting with business models for online music distribution," said Susan Kevorkian, a research analyst at Framingham, Mass.-based IDC. "Music labels have different personalities or different approaches to getting music online."

While the major record labels are testing paid subscription services, they face a backlash from traditional retailers who fear they will be left out of the distribution process. Retail outlets such as Tower Records, Wherehouse Music and Best Buy are fearful of being cut off from the consumer as people purchase music over the Web from services run by the labels themselves.

Moreover, the record labels still face an ongoing battle with free file-swapping services. In a report released Tuesday, the International Federation of the Phonographic Industry estimated that in May 2002, there were approximately 3 million people and 500 million files available for copying at any one time on all of the peer-to-peer services worldwide.

Analysts agree that one of the key ingredients to the success of online music is portability. They said people would be more willing to sign up and buy music over the Web if they have the capability to burn songs to a CD or export them to portable devices.

However, analysts said that it's going to be difficult for the record labels to sell music even at 99 cents and $1.99, the prices outlined Wednesday.

"It's probably going to take a comprehensive offering that can rival what you're seeing on the peer-to-peer networks for people to break down and pay for a digital music file," said Phil Benyola, a digital media research associate for investment company Raymond James Financial. "In order to entice people away from free (services) they have to have the same breadth of selection as the free services."