Downloadable music shakedown

Downloadable music has been making the headlines, but how big a splash is it making with consumers? Major Internet players are choosing sides, startups are vying for brand recognition, independent labels are flocking to the Web and the recording establishment is waiting in the wings.

But where does the consumer card fall in this high-stakes game of corporate poker?

Downloadable music: still a niche

Despite recent moves by Microsoft, IBM, Sony, and other Internet juggernauts, downloadable music remains a specialised industry. "This is still a niche market that is largely dominated by enthusiasts," says David Kerley, a Web technology analyst with Jupiter Communications.

Shareware applications and audio utilities are proliferating on the Internet but they cater to the enthusiast rather than the mainstream consumer, Kerley says. "At this juncture, Winamp is probably the dominant tool for people who want to download and play."

Manufactured by Nullsoft, Winamp is a shareware audio player that supports MP3 (Motion Picture Experts Group, Audio Layer 3), MP2, CD, .mod, .wav, and other formats. Winamp is a flexible, high-fidelity audio player with a built-in spectrum analyser, drag-and-drop playlist editing, and premium controls such as an equaliser and position slider.

Consumers can download a free 15-day trial version of the Winamp player from Nullsoft's Web site and license a personal version of the application for $US10. Commercial versions cost $US25.

Other shareware applications popular with audio enthusiasts include Midisoft's Internet Media Player, The Beatnik Player 2.0 and Liquid Audio's Liquid Music Player 4.0.

"Download and play is gaining enough momentum, however, to start crossing the chasm to the mainstream consumer market," Jupiter's Kerley adds. And the Internet establishment is finally reacting.

Tech leaders catch on

While niche players captured the mindshare of the enthusiast market, they also scratched the surface of the $US40 billion music industry and the silicon establishment took notice. Enter the big fish: Sony, IBM and the biggest of them all, Microsoft.

Microsoft has made claims that its new Windows Media Technologies (WMT) 4.0 beta release will have smaller files and better quality compared to MP3. Now available for download, WMT includes a digital rights manager that prevents piracy. Microsoft officials hope to lure major record labels to their camp with copyright protection assurances. So far, there have been no takers.

"The major labels have a certain amount of trepidation about making Microsoft their core technology provider," says Lucas Graves, a Web technology analyst with Jupiter Communications.

IBM is hedging its bets by signing deals with RealNetworks, the reigning king of downloadable music on the Web. Announced at this month's Internet World exposition in Los Angeles, IBM and RealNetworks are developing an encoding/decoding application that leverages IBM's security architecture.

The recording industry's "big five" -- BMG, EMI, Sony Music, Universal Music and Warner -- are conducting market trials of IBM's Electronic Music Management System. The results could determine the scope of mainstream content available to consumers in the future, according to analysts.

Sony also partnered with IBM to configure its upcoming line of digital devices for IBM's EMMS technology.

Real is still king

While RealNetworks stands to profit from its alliance with IBM, Big Blue tagged the streaming-media darling. "RealNetworks still owns the market for streaming audio and MP3 still dominates the download-and-play format," says Kerley at Jupiter.

RealNetworks is poised to own the segment, based on MP3's current technical superiority and the company's acquisition of Xing Technology, Kerley says.

"Microsoft's package isn't quite as focused as Real's package," says Joan-Carol Brigham, research manager for IDC's Internet program. "Microsoft, despite its rhetoric, is not a "me first" company. It's a "me too" company."

RealNetworks has a better handle on the digital media and distribution industry, Brigham points out. RealNetworks is building partnerships more aggressively and improving its technology more steadily than Microsoft.

Hardware vendors pick MP3 -- for now

And as RealNetworks goes, so goes MP3, the preferred compression standard for most of the leading hardware vendors as well.

"MP3 is currently the recognised standard," says Christi Wilkerson, product marketing manager of portable audio for Creative Technology. There are "thousands of hours of MP3 content out there right now and Creative's primary focus is to satisfy consumer demand."

Nomad, Creative's latest portable audio player, comes in 64MB and 32MB versions with voice-recording capabilities, an FM tuner and a docking station. Nomad players also ship with MusicMatch software that can upload, download, sort and file content.

The Creative Digital Audio Center lets Nomad users convert their personal CD collections into MP3 files.

Market leader Diamond Multimedia recently announced a high-capacity addition to its popular line of portable Rio players. The special-edition Rio PMP300 includes 64MB of onboard flash memory and can store two hours of digital-quality music as well as 12 hours of voice-based audio.

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