Online Music Wars

By | June 11, 2003 at 12:00 AM

Tech’s big guns are wading into the online music business – and now the big question is whether Microsoft will squash its rivals like a bug, as it has so many others.

Industry watchers say this time Bill Gates has his hands full.

Microsoft, and Yahoo! are three of the players, along with AOL Time Warner and Viacom’s MTV, according to a story in The Los Angeles Times.

While Gates considers a digital music launch, his company will now likely have to face off with the almighty music industry, which he needs to win over if he’s going to succeed.

“The labels hold the keys to the kingdom,” said Phil Leigh, an analyst with Raymond James.

“The reluctance they have to enter the Windows arena is because they are concerned with privacy.”

As of yet, no music sites have the freedom the labels have granted to Apple’s iTunes store for Apple-computer customers. But those who own Macs can share the music with two other computers, move songs to a portable device and burn the singles as many times as they want.

However, industry insiders and analysts wonder if Apple’s iTunes will give PC users the same freedoms. Apple is developoing a PC/Windows Media version of iTunes, which the company plans to have ready by the end of the month.

Still, Microsoft has the brand recognition among PC users – or 97 percent of all computer users.

“AOL and Microsoft are the Internet and PC technologies for consumers,” said Michael McGuire, research director at Gartner G2. “Their view to the Internet is through these two companies. So you can’t dismiss their potential ability to drive people to music.”

Apple’s success so far has made music more interesting to the big-name Internet players like Not wanting to jeopardize its high customer satisfaction ratings, had been shy to get into music, where in its early versions, restrictions to users were high, said Leigh.

“It wasn’t until Apple provided unlimited portability that [there] was the breakthrough,” he said.

But if the labels don’t grant the same freedoms to a the PC version of the new service, Apple runs the risk of repelling customers again.

“If it’s not easy to use or not in depth or restrictive in how I can move the music or requires me to sign up to be on [Microsoft’s] Passport, than it’s not going to be attractive,” said McGuire.

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