Penn State Gets ‘Napsterized’

As Roxio markets its commercial Napster 2.0 online music service, the company has struck a deal with Penn State University that will allow students free, limited access to its library of songs for downloading.

Under the terms of the deal announced Thursday by the university, students at Penn State will be allowed to access a library of free streamed music and limited downloads. Any songs actually burned onto a student’s hard drive or compact discs will cost 99 cents per song.

Penn State is the first U.S. university to strike a deal with Roxio for the legal Napster service, and is widely seen as a way to avoid legal issues it might encounter from students using the university’s network to download songs illegally.

Roxio’s re-launched Napster 2.0 is one of several commercial efforts to challenge Apple Computer’s wildly successful iTunes music downloading service.

On Thursday, Apple said that consumers purchased and downloaded 1.5
million songs from its iTunes Music Store compared to the 300,000 songs
Napster reported selling after its first week after the launch of Napster
2.0.

Napster has a collection of close to a half million songs, which will be available to 18,000 Penn State students beginning in January.

Roxio is expected to strike similar deals with other colleges, universities
and schools in the future, but other vendors with licensed music download
services are also expected to bid on those contracts, as well.

It remains to be seen whether students will utilize the free, yet limited
features available to them through the Napster 2.0 service.

On October 29, Roxio formally launched Napster 2.0, which combines an
extensive library of song, as well as access to 40 radio stations, and other
music-related content.

Since launch, Napster has sold more than 300,000 songs and thousands of music fans have joined Napster’s Premium subscription service. Premium members have downloaded or streamed over 2 million tracks during the first week of the new service, and the company estimates that it will have in excess of 80,000 Premium subscribers by the end of the year, according to Roxio.

While Roxio has ambitious plans for Napster 2.0, Apple cited Nielsen
SoundScan data that shows Apple’s iTunes online music store has more than 80 percent market share of the legally purchased downloaded music market. Apple
charges 99 cents for music listeners to download each song with no
restrictions. The company said that more than 17 million songs have been
downloaded since it launched the service back in April.

Both Apple and Roxio are going to be facing increased competition in the
sanctioned downloaded music market. According to published reports, Wal-Mart
Stores is expected to debut a pay-per-song music
downloading service before the end of the year. Wal-Mart is said to be in negotiations with the music companies about licensing arrangements.

The music industry has been feeling the hurt from the rapid rise of free peer-to-peer music downloading services, including Kazaa. Global music sales fell 11 percent to $12.7 billion in the first six months of 2003, after steady declines in 2002 and 2001, according to the International Federation of the Phonographic Industry.

Jupiter Research, a division of Jupitermedia , the
parent company of internet news.com, said the market for legally downloaded music will be $35 million this year, a miniscule portion of the overall music retail sales market. Jupiter Research does expect the legally downloaded music market to grow to $100 million in 2004 and reach close to $700 million by 2008.

Besides Apple’s iTunes and Roxio’s Napster 2.0, Real Network’s Rhapsody and Musicmatch are also among the legal music
downloading services hitting the market. Other entrants are expected,
including Dell Computer and Time Warner’s America Online unit. Sony Corp. said this week it would debut a new music player, which will compete with Apple’s iPod for a loswer price.

There are also published reports that MTV, a unit of Viacom will soon entered the legal downloading music market, but few details are available about the planned service.

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