BMG Inks Digital Download Deals

BMG Entertainment announced Tuesday that it will begin offering digital downloads of its albums and singles through a network of partner Web sites.

The company, a subsidiary of Bertelsmann AG, said its initial offering will consist of more than 100 singles and albums from a variety of BMG artists, including Christina Aguilera, Toni Braxton, Whitney Houston and Santana. BMG also plans to add to the roster of digital downloads over time, and hopes to have as many as 2,500 albums and singles available before the coming holiday season.

“In addition to our digital downloading activities, BMG is actively exploring a number of new digital commerce models, including subscription services and secure peer-to-peer distribution,” said Kevin Conroy, Chief Marketing Officer and President of New Technology at BMG Entertainment.

Sound of Music

BMG’s announcement means that music lovers can now find digital downloads online from all of the “Big Five” music labels: BMG, Universal Music Group (UMG), Sony, EMI and Warner Music. The other four labels had previously announced that they would be selling digital downloads through either their own Web sites or through partnership agreements.

The first site to offer BMG’s digital downloads will be Lycos Music. Other sites slated to offer the digital downloads include online music stores Artistsdirect, GetMusic and RollingStone.com. The Web sites of major retailers to offer BMG’s downloads include Best Buy, Musicland and Tower Records.

BMG Entertainment said it is providing its network of e-tailers with a specially tailored shopping cart solution developed by Digital World Services (DWG) and based on the Digital Rights Management (DRM) Platform from InterTrust Technologies. The integrated shopping cart will let consumers pay for both digital and physical purchases at the same time, eliminating the need for a separate check-out process for digital purchases.

DWG said that its technology will also let consumers listen to their digital downloads through a variety of music players. Future releases of the shopping cart will support download subscription models and will allow consumers to give digital downloads as gifts.

Pricing Problems

Pricing for digital downloads will be between $1.98 and $3.49 (US$) for singles, between $9.98 and $14.98 for single CDs and between $11.98 and $20.98 for double CDs.

There are indications that BMG will be hard-pressed to find buyers or profit at those prices. A survey released in August by Gartner Group concluded that consumers are probably no longer willing to purchase an entire CD for just one song.

The report also found that in order for the labels to recoup the same amount of money as if a consumer purchased a full CD, consumers would have to be charged up to $5 per track. Unfortunately for the labels, Gartner predicted that consumers would only be willing to pay between 99 cents and $1.99 per track.

The Revolution

The music industry is in the middle of a digital download revolution as people turn in ever-increasing numbers to the Net to download music without paying for it. The digital download frenzy is being fed by a host of Web sites that allow users to download or share files for free.

A recent report by the Pew Internet & American Life Project found that about 22 percent of all Net users have downloaded music files. The report also found that 53 percent of all American Internet users — and 78 percent of those who have downloaded music files — do not believe that downloading and sharing music files for free is stealing.

BMG, along with the other Big Five labels, has taken both MP3.com and Napster to court for alleged copyright infringement. All of the labels except UMG have settled with MP3.com and have entered licensing agreements.

The battle between the labels and Napster is still ongoing.