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New music services reach for slice of digital pie

After 2006 — a year when virtually no one managed to launch a digital music service in competition with Apple’s dominant iTunes — 2007 was a refreshing change of pace. Several fresh faces emerged onto the digital music scene this year, buoyed in part by record companies’ newfound willingness to experiment with different business models, but also by the departure of several high-profile competitors.

By far the most visible service to throw in the towel this year was MTV’s Urge; now, a new entity called Rhapsody America joins Rhapsody’s technology with MTV’s editorial and music curation staff.

Sony began the slow dimming of the switch on the struggling Connect music service. The company in August announced a gradual shutdown that will begin in March, laying off about 20 employees and reallocating the remainder to another division.

Zune, though, is hanging in there. This year, the Microsoft service was upgraded with a decidedly social networking-oriented strategy. The Zune Social initiative incorporates user profiles (called Zune Cards) that members can use to list their favorite artists, post widgets onto other social networking services and let others sample music in full-song fashion.

Meanwhile, a host of such companies as Snocap and Lala tried a more “distributed commerce” approach — where digital vending machines called “widgets” let artists offer downloads from their own social network profiles, as well as from their fans’ profiles, rather than forcing consumers to visit digital megastores like iTunes.

And the year ended with Radiohead’s monumental decision to sell its new album directly from its Web site and let fans set the price.

But neither the stumbles of MTV and Sony nor the experimental methods of Radiohead and others have kept the following services from entering the market with their own business models.


After years of “will-they-or-won’t-they” teasing, Amazon finally unveiled its much-anticipated digital music service — which, as promised, features iPod-friendly, digital rights management-free MP3s from EMI Music, Universal Music Group and a handful of independent labels. In addition to unprotected music, it promotes a variable pricing model that sells albums for between $5 and $9. In the short time it’s been active, the service is already considered the third-largest digital retail outlet on the Web, after iTunes and eMusic — and that’s without content from Sony BMG and Warner Music Group (WMG).


The poster child for the much-discussed “ad-supported” business model, Spiralfrog finally went live after a lengthy delay that saw its original CEO leave the company and millions in music licensing fees wasted while the service hovered in limbo. But launch it did, to a great degree of press and mixed critical reaction. It works much like any other music subscription service, complete with iPod-excluding DRM technology, only it requires that users view ads at least once per month rather than ask them to pay a monthly fee. All major labels and many independents are onboard.


Belying its name, Slacker actually worked overtime this year with two service launches. The first, in the spring, marked the start of its free, ad-supported customizable online radio service. It then followed up in November with phase two: transferring that service to a portable device that uses Wi-Fi to update channels, and a subscription service tier that offers users more functionality for a monthly fee. Now that all the pieces are in place, look for Slacker to pick up the slack during the holidays and into next year.


The digital music business model these days is much like a game of chicken. Start with a service that lets users stream free music, then hope to gain as many users as possible so that when the labels threaten to sue, you can turn it around into a licensing deal instead. That’s what Imeem did. After WMG initiated legal action against the playlist streaming service,

Imeem implemented filtering technology and an advertising system from Snocap to cut WMG in every time a user played one of its songs. It now counts all four major labels as partners.

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