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Last Updated: Monday, 19 January, 2004, 10:13 GMT
Online scramble for music downloads
Alfred Hermida
By Alfred Hermida
BBC News Online technology editor

A headlong rush is taking place in cyberspace to grab a slice of the potentially lucrative market for legal music downloads.

Coca-Cola music service logo
Coca-Cola's music service offers more than 250,000 tracks
Coca-Cola is the latest to join the fray, launching its own branded online music service with more than 250,000 tracks costing from 80 pence each.

It seems that everyone from record labels to software companies is trying to cash in on the success of Apple's iTunes music store which has sold 25 million songs in just nine months.

To those in the music business, it reflects a shift in how the industry sees the internet.

"The tenor of our discussions has entirely changed," said David Ring, Vice President of Universal Music technology arm, eLabs.

"We went from zero revenue as an industry to $30m by the end of last year for legitimate digital downloads."

'Absolute sea change'

Over the past 12 months, the big record labels have realised there is an untapped demand for online music.

Everyone has accepted that you can compete with free, offering something that is better than free
Ken Hertz, Goldring Hertz, Lichtenstein and Haft LLP
Now singles can be downloaded over the net for just under a pound, as well as whole albums by chart-topping artists.

"There has been an absolute sea change in the last year," said Scott Kauffman, CEO of the online service, MusicNow.

"There has been a complete shift in emphasis and philosophy in getting this content out to the public."

The shift in the record industry did not come overnight. The widespread online sharing of copyrighted songs and the vision of Apple forced the hand of the business.

"People used to bitch that you can't compete with free," Ken Hertz of Goldring Hertz, Lichtenstein and Haft LLP, which represents artists and has lobbied for the universal licensing of content for use on the net.

"Now everyone has accepted that you can compete with free, offering something that is better than free."

Carrot and stick

At the discussion on digital downloads at the recent Consumer Electronics Show in Las Vegas, most panellists agreed that the key to success providing a better alternative to unauthorised file-sharing services.

Apple iTunes' Steve Jobs at launch
Apple's iTunes has shown there is demand for online music
"This year it is about making sure that legitimate content works better than pirated content," said Universal's David Ring.

"We have to make sure the experience is always good."

In the past, the record industry has focused its efforts on using the law to shut down illicit services and scare computer users who share music online.

Despite the controversy surrounding these tactics, music executives still see a role for the courts.

"We cannot underestimate the influence of the law," said Sean Ryan, Vice President of the media software firm, RealNetworks.

"Enforcement has had a significant impact in the quality and risk of dealing with pirated content."

Taking control

The legal music download industry is still in its infancy. One of the key issues remains the amount of songs available online.

At the moment there are four or five incompatible standards. This is going to be a real issue
Sean Ryan, RealNetworks
So far the record industry has been slow to open up music licensing agreements.

This has proved a protracted and complicated process, with the five major labels having their own way of licensing their back catalogue.

It means that only around 500,000 tracks are available legally, whereas millions can be found on file-sharing networks.

"If you fast forward to one year from now, this issue is going to be off the table," said Mr Kauffman, confident that the licensing problem had been more or less resolved.

Perhaps a greater challenge facing the many legal download services is balancing the need for control with ease of use.

Most services place restrictions on what consumers can do with the music they have legally purchased.

The aim is to prevent them from sharing this with others or offering it on the net.

But the downside is that consumers can face all sort of limitations on how and where they can listen to downloaded tracks.

Music alphabet soup

"At the moment there are four or five incompatible standards," said Mr Ryan of RealNetworks, "this is going to be a real issue."

Most people are dumbfounded when faced with this alphabet soup of standards, be it mp3, wma, ra, or aac.

They simply want to listen to their music, on the computer, home stereo, in the car or on a portable music player.

"If we can make music services better than free, then demand is certainly out there," said Mr Kaufmann of MusicNow.

"The key drivers are interoperability and the ease of transition from one device to another.

"The extent to which these services can port music to a portable device will be a key driver," he said, adding that consumers simply wanted their music to play everywhere and they wanted it now.

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