Music Swapping Online, For A Price

Responding to the rampant spread of unauthorized music swapping on the Internet, Universal Music Group plans to put a large chunk of its vast music library online through a subscription service beginning Tuesday.

UMG, the largest of the five major record companies, will make about 1,000 of its 11,000 albums available to subscribers who pay between $10 and $15 a month.

Unlike most other initiatives announced during the last six months, UMG's partnership with Emusic.com, a downloadable music subscription service, gives customers the same ownership rights as if they had bought the music on a CD.

That means users will be able to store tracks and transfer them to CDs or portable players using the popular MP3 file format.

But UMG is selecting the content it makes available selectively. Rather than offering the work of best-selling artists like Eminem and U2, UMG has chosen older, less popular content that doesn't sell quickly in stores.

UMG executives want to see if the music service can actually boost sales inside stores, or whether it ends up cannibalizing physical sales.

"Our feeling is people signing up are not going to say, 'Boy, I don't have to go out and buy the CD now,'" said Larry Kenswil, president of Universal Music Group eLabs. "We'll see what happens."

One of the challenges for music companies in putting material online is negotiating new licensing rates with artists and publishers.

Under UMG's latest arrangement, rates will be less for online sales than in-store sales, Kenswil said, although he declined to discuss specifics.

EMusic, a separate unit of Vivendi Universal Net USA, has cut deals with about 900 independent labels in its two years of existence. The deal with UMG, also owned by Vivendi Universal, marks its first deal with a major label.

Steve Grady, Emusic's general manager, said the firm is in discussion with other major record companies about providing similar subscription services.

Earlier this month, Warner Music Group gave online music distributor FullAudio the right to sell downloadable songs that can be burned onto CDs.

Peer-to-peer music exchanges like Morpheus, Kazaa and Grokster are forcing the record companies to change. CD sales fell 4 percent in the United States in 2001, mostly due to piracy, the industry says.

With 90 million consumers already downloading free music files, the industry has "no choice" but to adapt, Rep. Rick Boucher (D-Va.), co-chair of the Congressional Internet Caucus, told attendees of a music conference in New York Monday.

To battle the peer-to-peer sites the five major recording firms should offer their entire music libraries — some 80 percent of all recorded music in existence — to their customers over the Internet, the congressman said.

"Go on and take off the brakes," he said.