Indies Question Big Labels' Plan To Sell CDs For Download

But all agree delivery of music via Net will be part of music's future.

The five major labels are planning a study of marketing downloadable albums that some indie labels and retailers say misses the point of delivering music via the Internet.

"[The major labels] are basically assuming that the benefit [of online

music delivery] is saving you a trip to the record store," complained

Steve Grady, a spokesperson for the online label GoodNoise, which already is in the digital-distribution business.

The majors' plan, which will require customers to burn their own CDs after downloading files, will be "a pain in the a--" for record buyers, said Mike Ferrace, vice president of worldwide marketing for Tower Records, the retail chain.

And even one of the labels participating in the test said the price of albums may not drop at all for the test's 1,000 participants, even though the CDs will not be pressed, packaged or shipped by the labels. But the majors and the indies agree that the test does point to a future in which music will be delivered online instead of in traditional packages and by traditional methods.

The six-month trial, which the labels will conduct with computer

giant IBM, will give about 1,000 San Diego Internet users access to an

online store that eventually will have 2,000 full-length CDs and several hundred singles available for download.

IBM has developed a technology, EMMS (Electronic Music Management

System), that will allow the record companies to limit the number of

copies that can be made of a downloaded file. EMMS also will allow the

companies to put digital watermarks on the file so they can trace

unauthorized copies, according to Rick Selvage, an IBM general manager.

In the trial, set to start in the spring, participants will shop for CDs at an online store created for the trial. They'll be able to sample sound files and liner-note information before they buy. The labels have yet to say which artists' albums they'll include in the test, although they used the Dave Matthews Band's Crash (1996) to demonstrate the system at a press conference last Monday.

Participants, who all will use high-speed cable modems, will be able to download the albums they buy in about three minutes, the record companies claimed. Purchasers can then play an album directly on their computers or burn it onto a CD using equipment provided by IBM and the labels. The files will be encoded to be sure they can be copied onto a CD only once.

Album art and liner notes will be downloaded, too. Buyers will be expected to print out these elements onto standard-size paper, then cut them down to size to fit into jewel boxes, which they'll have to buy separately. They'll have to use their own printers, either color or black-and-white, because printers won't be provided for the trial, according to Ed Downs, an IBM employee who helped design EMMS.

The labels haven't said what the music will cost. But Larry Kenswil, an executive vice president at Universal Music Group, said the cost of "content preparation" alone, including the insertion of copy protection, might mean that online CD distribution won't lower prices.

This isn't the vision of music's future GoodNoise's Steve Grady has.

"Having to get the hardware [and] the right software, do the download, print the stuff out, and having to actually understand how to burn the CD -- it seems like more trouble than going to the store," Grady said.

Grady, whose label sells music by former Pixies frontman Frank Black and also recently licensed tracks by such rock acts as Morphine, Frank Zappa, Golden Smog and other artists from the indie label Rykodisc, said the larger companies are missing the point by assuming consumers will want or need to create their own CDs from the music they download.

"The main benefit of downloadable music," he said, "is that it empowers the user to have total flexibility in using it. Imagine having a hard drive in your car that has your entire music collection on it. ... Your music no longer [will be] tied to a physical object [such as a CD]."

Paul Vidich, executive vice president of Warner Music Group, said the major labels are taking the CD-burner route because they want to start by "giving a consumer an experience similar to the retail experience."

And the San Diego test, he pointed out, is merely a trial. "The parameters may be different" in future testing, he said. For example, customers may get the option of downloading individual songs from an album instead of the whole album, an option that won't be available in the first test.

Paul Stark, whose Minneapolis-based indie label, Twin/Tone, plans to begin distributing new albums exclusively via download later this month, said he remains unsure of the major labels' commitment to the Internet.

But "the more the merrier, at this point," said Stark, whose label also will offer such classic catalog albums as the Replacements' Let It Be and Soul Asylum's early LPs for download.

"I know what the future will be," Stark said. "Things like this can only speed it along."

The prospect of all this musical downloading prompted the National Association of Recording Merchandisers to release a statement last week urging record companies to keep retailers in mind.

"These download technologies ... are in essence a retail transaction," the statement said. "There are some in the supplier community whose vision of e-commerce for the music industry doesn't include retail. It's a vision which is short-sighted."

Warner's Paul Vidich said traditional retailers aren't being used in the trial because of its limited scope. In the long run, he said, "digital distribution will clearly benefit retailers."

In any case, said Tower Records' Ferrace, there's no reason to be scared yet.

Besides the difficulty of using CD burners, few people have access to the high-speed Internet cable connections that will be used in the trial, he said. Brant Skogrand, a spokesperson for the retailer Musicland, said digital delivery is "just another form of distribution, one that we'll have in some form on our own e-commerce website."

Skogrand added that physical retail outlets will always be needed because "Americans like going to the stores and malls to shop."

Ken Wirt, vice president of corporate marketing for Diamond Multimedia, whose portable Rio player allows fans to listen to downloaded MP3 files away from their computers, said "brick-and-mortar" stores will continue to have an important role.

But what people buy at stores might change.

In the future, Wirt said, consumers might bring to the mall portable music storage devices, which could be filled with digital information. "[Retailers] could sell bits," he said.