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Technology Stocks : e.Digital Corporation(EDIG) - Embedded Digital Technology -- Ignore unavailable to you. Want to Upgrade?

To: 24601 who wrote (17315)	1/29/2001 9:22:14 AM
From: bob	Read Replies (1) \| Respond to of 18366

Universal Plans Trial for "Locked Content" CDs by Mark Lewis As the first part of an experiment in new formats, Universal Music Group plans next month to distribute three "locked content" CDs, discs containing about 150 compressed songs that can be sampled and purchased online without waiting for time-consuming downloads. The songs on UMG's locked CDs are encoded in the company's Bluematter format, which is based on AAC, an audio compression format developed by Dolby Laboratories, AT&T, Fraunhofer and Sony. With the disc in a computer's CD drive, a consumer can hear 30-second samples of all the tracks and choose three complete songs to hear for free. Any of the tracks can be purchased with a credit card, but instead of downloading or streaming, the songs transfer to the consumer's hard drive in an encrypted form. The tracks may cost $1.99 each, the same as UMG's Bluematter downloads. The immediate advantage of locked content is that consumers don't have to wait for downloads, while UMG can still obtain impulse sales, said Larry Kenswil, president of UMG's new media incubator eLabs. Locked content may also be viable in the U.K., where high-speed Internet infrastructure is developing slowly, and commercial download systems are considerably inconvenient for consumers. For the forthcoming trial, UMG created three types of locked content discs: "Motown," "Nashville" and "Digital Music Lounge." The latter contains singles from various decades and popular genres. UMG is cutting distribution deals with three major retailers, portals or content web sites, which will probably offer consumers the discs through targeted Internet promotions, a UMG source said. Each distributor will receive 3,000 discs, with UMG paying the manufacturing and distribution costs, the source said. But the discs foreshadow UMG's much grander format scheme, Kenswil said in December. UMG is an investor in Boulder, Colo.-based DataPlay, which makes a 500 megabyte rewritable disc the size of a quarter. UMG wants to release DataPlay discs that contain locked song collections, multiple albums or even an artist's whole catalog -- a project the company has contemplated for two years, the UMG source said. Samsung Electronics and SonicBlue plan to sell portable music devices that use DataPlay discs later this year [see 10.12.2000 Storage Formats Battle for Consumer Buy-in]. Theoretically, a consumer who unlocks an album on a DataPlay disc could listen to it without having to transfer files from the disc to a hard drive. The initial CD version of locked content isn't that flexible, however. Once the Bluematter tracks are written to a hard drive, they can't be moved to a portable device, though that is planned for the future, the UMG source said. Consumers will also have to pay for tracks using an electronic wallet, a payment application developed by InterTrust Technologies that hasn't proven popular in the U.S., the source said. The retailers or portals that distribute UMG's first locked CDs will get 20% to 25% of transaction revenues, the source said. The CDs will also contain direct links to the retailers' respective web sites. By including retailers in the scheme and sharing revenue, UMG hopes to avoid the business and litigation pitfalls Sony Music Entertainment faces. Sony sold CDs in 1999 that contained hyperlinks to retailers it owned or operated. In January 2000, retail trade group the National Association of Recording Merchandisers sued Sony, alleging the music company was taking potential sales away from retailers [see 01.31.2000 Retailers Charge Sony Music with Unfair Trade Practices]. A federal court heard the case but hasn't issued a decision yet. UMG could have a problem convincing retailers to stock DataPlay discs. Some retailers already stock limited quantities of music DVDs and Sony's Super Audio CDs; forthcoming DVD-Audio discs and DataPlay will add to the jumble. UMG likes the DataPlay format because it supposedly can't be pirated as easily as CDs, but one UMG source was concerned the format could go the way of Sony's pre-recorded MiniDisc, which caught on in Japan but not in the U.S. Kenswil, who was appointed to DataPlay's board of directors last July, said that price will stimulate consumer demand for the locked format. "It will be cheaper," he said. "It has to be, or there's no incentive. The fact is we don't have to press ten discs to sell ten albums." The consumer should also see a lower cost because fewer discs would have to be shipped to stores. Still, digital distribution is also supposed to reduce costs, but music companies contend that the high costs of download and streaming systems mean that digital music should cost nearly the same amount as CDs.