Media Giants To Sell Music Online
By SETH SUTEL
* 04/08/99
AP Online
Financial/Business
Copyright 1999 The Associated Press. All Rights Reserved.
NEW YORK (AP) - Hoping to beef up their presence online, media
conglomerates Seagram Co. and Bertelsmann AG are banding together to
sell music over the Internet. Their efforts will face tough competition
from the likes of Amazon.com and CDnow, however.
The two companies, through their respective music subsidiaries
Universal Music Group and BMG Entertainment, plan to leverage their
relationships with hundreds of musicians to attract Web surfers with
access to stars, video and audio clips and other proprietary content.
The joint venture announced in New York Wednesday would add
Universal
artists to five existing Web sites run by BMG which cater to specific
musical tastes, such as peeps.com for hip-hop artists and twangthis.com
* for country music.
The sites are linked to a new online music store, getmusic.com,
which
would also offer CDs from other labels. All the sites are currently
running, but the companies expect to launch revamped versions this
summer.
Publishing under labels such as Geffen, A&M, Arista and RCA, the two
companies control about 40 percent of the American music market,
representing artists across many genres including Beck, Kenny G, Motley
Crue, Shania Twain and TLC.
Record companies have been scrambling to come up with online music
strategies as it becomes easier to download bootleg music from the
Internet. They are hoping to agree on a digital standard that would
allow them to control the downloading of music and ensure that the
companies and artists receive royalties.
So far the companies are not talking about letting users download
music themselves, although the move to establish a platform in
cyberspace could clearly set the stage for such efforts in the future.
The announcement of the project received lukewarm views from
industry
analysts, who say that the effort may need to evolve before finding
success with new consumers.
"In terms of building an online sales site around specific music
genres, record companies may be putting the cart before the horse,"
said
Melissa Blane, an analyst with the Yankee Group consulting company in
Boston. "First-time online music shoppers are more likely to go to a
general music site."
"If I were Amazon, I wouldn't be afraid right now," agreed James
McQuivey, a senior analyst with the consulting group Forrester
Research.
One challenge for the companies is to make sure their online sales
efforts don't hurt relations with their traditional sales outlets.
Leading music retailer Musicland Stores Corp. said it didn't
necessarily
see the BMG-Universal project as a threat, but Tower Records vice
president Mike Farrace said: "We're never happy when a supplier goes
into competition with us. We think it's a bad idea."
BMG already runs a mail order music club, which competes with the
Columbia House direct sales unit run by Time Warner Inc. and Sony Corp.
The online operations of BMG's music club would not be affected by the
arrangement with Universal.
In addition to BMG, Germany-based Bertelsmann also owns the
publishing houses Random House and Bantam Doubleday Dell, and has a
half
interest in Barnes & Noble's online bookstore.
The Montreal-based Seagram, traditionally known as a whiskey maker,
has been building up its entertainment holdings, which include the
Universal movie studio.
