Universal, Amazon beef up MP3 sales space

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NEW YORK - While EMI will boldly go where no major has gone before and sell its catalog as unprotected digital files, other forces are coming into play that should bolster the potential for a commercial MP3 marketplace.

Amazon, which is considered the best bet to challenge iTunes' supremacy in the digital world, is shooting to launch its MP3 digital download store in May, a target date it has yet to publicly acknowledge. (Amazon declines comment.) Meanwhile, sources familiar with the situation say Universal Music Group plans to test the sale of unprotected digital music files, including some of its classical music catalog conceivably including titles by Andrea Bocelli, at the new Amazon store and other outlets.

Universal has previously tested the sale of some isolated digital rights management-free music, from Jesse McCartney in the United States and French acts Superbus and Emilie Simon in Europe. But now the company plans to expand that initiative significantly by selling classical selections through download stores and subscription services, in the DRM-free format of the retailers' choice. Universal is planning tests in other genres as well, sources say.

It's unclear so far whether iTunes is included among stores slated to sell unprotected Universal music, and the label could not be reached to comment.

Until recently, eMusic, which served up its 1 millionth download in December, has been the dominant player selling MP3s. A month ago, Universal's plans would have been big news. But the label's move was upstaged by EMI chairman Eric Nicoli's joint announcement with Apple CEO Steve Jobs that in May the major would release its catalog in unprotected digital files.

Meanwhile, executives within Sony BMG Music Entertainment and Warner Music Group say senior management teams at both companies are unwilling to embrace selling their catalogs in the MP3 format.

But whether or not the majors will be involved with Amazon or iTunes unprotected plays, they all say they are waiting to find out if the MP3 model will expand digital sales -- and conversely, if it will fuel unauthorized file-sharing or cannibalization of other digital formats such as ringtones.

Amazon last year abandoned its initial plans to launch a digital music subscription service and its own branded MP3 player (based on Microsoft's Window Media Audio software technology) when Microsoft undermined its DRM by using a closed digital music system for its Zune device.

At the time, executives at two of the four majors privately told Billboard they were disappointed that Amazon had switched to an MP3 model, because they felt the giant online merchant could successfully mount a challenge to iTunes, and were hoping that it would do so under the banner of DRM.

In December, a senior executive at a major label told Billboard, "Amazon underestimates the power of their brand" with consumers who shop by computer.

In moving to an MP3 a la carte download model, Amazon initially was pushing for lower wholesale pricing than the current marketplace provides -- 70 cents per track or 70% of retail price -- but pushback from indie labels has merchants talking about what those labels consider more realistic models, if not yet at that pricing level.

One indie player says his company is close to signing a deal, but is hung up on what kind of pricing should be applied to what kind of file. That company is willing to sell Amazon 128 byte-rate files at its conventional digital price points, but wants a higher price for better-quality 256 byte-rate files. Another says that, in fear of being shortchanged, his label has decided to sit on the sidelines until a major sets the wholesale floor price for a hit song in the MP3 format. Still other independent labels say that since Amazon changed its mind last time, they are waiting to see if the May date sticks and for Amazon to launch the store before beginning negotiations.
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