RealTime IT News

Pressure Mounts on Record Labels to Offer MP3s

Warner Music Group (WMG) and Sony BMG Music Entertainment are feeling increased pressure to follow EMI and Universal Music Group's lead in distributing music in the MP3 format, which forgoes restrictive digital rights management technology.

A yearlong download promotion planned between Pepsi and Amazon is among several developments forcing WMG and Sony to consider the format, Billboard has learned,

News of the Pepsi promotion, which is expected to be announced Feb. 3 during the Super Bowl, coincides with Wal-Mart's ultimatum that major labels supply walmart.com with their music in MP3, sources said.

Labels said they have been watching the success of an MP3 test that Universal Music Group (UMG) began in August. The major label continues to allow the sale of 85 percent of its current catalog as MP3s. Sources said UMG is on the verge of permanently embracing that digital format. But a source close to the testing insisted that the decision is still up in the air while the company awaits conclusive results from the trial, which are due in mid-January.

Meanwhile, Disney's Hollywood Records has joined the list of major-distributed labels testing MP3 at Amazon and walmart.com. The company has supplied 30 to 40 titles from its mammoth catalog in the MP3 format. A check of those sites shows the latest albums from Atreyu and Grace Potter & the Nocturnals on the Hollywood label available in the MP3 format, though they are not available at iTunes.

EMI began selling its music in MP3 format in June. WMG and Sony BMG Music Entertainment both declined to comment, but have continued to publicly maintain their separate stances in favor of using digital rights management for downloads.

Sources said Sony BMG is considering an MP3 test. The company initially was steadfast against MP3 and wouldn't allow its independent distributor, RED Distribution, to engage in negotiations on behalf of its labels with Amazon when the merchant was trying to set up its MP3 download store. But Sony BMG management relented and let RED become involved in those negotiations. The parent company, however, refused to supply Amazon with its catalog in the MP3 format.

Pepsi Free

Pepsi's track record with download giveaways may be motivating labels. According to sources, Pepsi will feature a download promotion on the inside of 5 billion of its soda bottle caps. Sources said Pepsi customers will need to collect five caps in order to exchange them for a download; this yields the potential for 1 billion redeemable tracks. A Pepsi spokesperson declined to comment.

Pepsi's first stab at giving away free music downloads, which was conducted in partnership with iTunes in 2004, was also promoted via a highly visible Super Bowl campaign. It resulted in 5 million people downloading free songs in the space of three months -- 5 percent of the 100 million tracks that were offered.

While the 5 million digital tracks redeemed in the campaign reportedly fell short of the 25 million target redemption rate, that was in the early days of digital distribution, when Apple was reporting selling digital tracks at a rate of 2.7 million per week.

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