iLounge

Record labels are considering a move towards finally offering unrestricted MP3 music files, according to industry insiders. The New York Times reports that executives of technology companies, in attendance at the annual Midem global trade show for the music industry, are apparently aware of “at least one of the four major record companies [that] could move toward the sale of unrestricted digital files in the MP3 format within months.” Even with solid sales on the iTunes Store and other online music services, it is reported, digital sales of restricted music has seen slow growth. Physical CD sales have likewise continued to take a hit.

Microsoft CEO Steve Ballmer claims that his company’s Zune media player took 20% of the high-end digital audio player market—those devices priced $249 or above—following its debut in November. Ballmer’s estimates compare to those of the NPD Group, which said this month that the Zune accounted for only 2.8% of the total digital audio player market in the five-week period from Nov. 19 to Dec. 23.

“We came into the market, a market in which they are very strong, and we took, I don’t know, but I think most estimates would say we took about 20-25% of the high end of the market,” Ballmer said in a CNBC interview. “We weren’t down at some of the lower price points, but for devices $249 and over we took, you know, let’s say about 20% of the market. So, I feel like we’re in the game, we’re driving our innovation hard and, uh, okay, we’re not the incumbent, he’s the incumbent in this game, but at the end of the day, he’s going to have to keep up an agenda that we’re gonna drive as well.”

Characteristically, Ballmer also laughed at Apple’s iPhone and its premium pricing. “$500 full-subsidized with a plan! I said that is the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard which makes it not a very good email machine,” Ballmer said. “Now, it may sell very well or not, I, you know. We have our strategy, we’ve got great Windows Mobile devices in the market today. You can get a Motorola Q phone now for $99, it’s a very capable machine, it’ll do music, it’ll do Internet, it’ll do email, it’ll do instant messaging. So, I kinda look at that and I say, well, I like our strategy. I like it a lot.”

While U.S. album sales continued to decline in 2006, total music sales were up nearly 20 percent thanks to a large increase in digital downloads. Approximately 588.2 million physical albums were sold last year, down 4.9 percent from 2005, according to Nielsen SoundScan. Digital music sales, however, increased by 65 percent over the previous year. Some 582 million tracks were sold, and digital album sales more than doubled, with nearly 33 million sold. Overall music sales—which includes all albums, singles, music videos and digital downloads—increased by more than 19 percent in 2006.

Mogopop has been announced as a new free online service and website that lets users create, publish and download content for iPods. “Mogopop is a free web-based service where members and visitors can create, publish and download multimedia content for iPod,” the company explains. “This content that can incorporate audio, video, pictures, podcasts, text—whatever our members’ minds can imagine, they can create. Mogopop downloads are like mini-Websites for iPod that anyone can enjoy.”

After years of selling digital music with restrictive copy-protection technology, major music labels are beginning to make some songs available as unrestricted MP3 files. “The releases are part of an experiment to gauge demand for tracks that can be played on any digital music player capable of playing MP3s,” reports the Associated Press. “Normally, copy-protected tracks are only playable on certain devices. By selling MP3s, recording companies can ensure they can be played on Apple’s market-leading iPod players without going through Apple’s iTunes Music Store.” The latest unrestricted MP3 tracks come from singer Norah Jones and rock band Relient K, both signed to labels operated by Britain’s EMI Music. Their songs went on sale for 99 cents each this week on Yahoo’s online music service.

Microsoft said today that it expects to sell 1 million Zune media players through the first half of 2007. While that figure pales in comparison to iPod sales, Microsoft claims it would be a good start. “We think that’s actually pretty awesome,” said Bryan Lee, corporate vice president for Microsoft’s entertainment group. Lee said that Microsoft expects to eventually “be the leader” in the category, especially once the company releases more Zune models and starts selling them internationally. According to The NPD Group, the Zune ranked No. 2 among all portable MP3 players in its first week of availability, but has since slipped to No. 5.

Salespeople are not consistently recommending Microsoft’s Zune player, and are overwhelmingly suggesting the iPod to customers, according to Piper Jaffray analyst Gene Munster. “We recently spoke with 40 big-box retailers to gauge which MP3 players salespeople were suggesting for more than $200 (i.e. the 30GB iPod, Zune or others),” Munster wrote in a report today. “We found that store clerks only recommended the Zune 8% of the time, while they recommended the iPod 75% of the time. In fact, some MP3 player salespeople had not even heard of the Zune, despite the fact that they sold it in their store.”

Munster also noted that the Zune has fallen down Amazon’s top-selling MP3 players list. “During the Zune’s launch week (on 11/16) the black model reached the 7th spot on Amazon’s top-selling MP3 players list,” Munster wrote. “But by 11/20 the player fell to the 13th spot, with the brown model at 22nd and the white model at 42nd. By 11/27 the black Zune was ranked 18th. The buzz that Microsoft was able to generate for the Zune’s launch clearly helped the player in its first week, but much of the publicity took the form of Zune/iPod comparisons… Due to the less than favorable reception, we believe the Zune will not materially impact iPod sales in the December 06 quarter.”

Paramount Pictures has sued Load ‘N Go, a small business that loads DVDs onto video-enabled iPods on behalf of customers. The Electronic Frontier Foundation reports: “According to the suit, Load ‘N Go sells both DVDs and iPods and loads the former onto the latter for customers who purchase both. The company then sends the iPod and the original DVDs to the customer. So the customer has purchased every DVD, and Load ‘N Go just saves them the trouble of ripping the DVD. The movie studios’ suit claims that this is illegal, because ripping a DVD (i.e., decrypting it and making a copy) is illegal under the DMCA. The suit also claims that this constitutes copyright infringement.”

Music fans will soon be able to download digital versions of classic songs by the Beatles. David Munns, head of EMI Music’s North American division, said at a web industry conference in San Francisco that the Beatles’ catalog would be available for download “soon.” Munns did not offer specifics such as a timeframe or which online music stores would be selling the Beatles tracks. Following its legal win earlier this year against the Beatles’ Apple Corps, Apple expressed interest in selling the band’s music on the iTunes Store. “We certainly will do everything we can to get them on iTunes,” Eddy Cue, Apple’s vice president of iTunes, said in May. “The Beatles aren’t available in any digital format today but they are going to be one day. We certainly hope that happens on iTunes.”

The Wall Street Journal’s Walt Mossberg and The New York Times’ David Pogue, two of the most well known and widely read tech columnists, both give less than stellar marks to Microsoft’s Zune media player in their reviews of the device today. While both writers give the Zune credit for a handful of features—with Pogue even calling the device “excellent” at one point—they both offer up fairly damaging final reviews.

“This first Zune has too many compromises and missing features to be as good a choice as the iPod for most users,” Mossberg writes. “The hardware feels rushed and incomplete. It is 60% larger and 17% heavier than the comparable iPod. It has much worse battery life for music than the iPod or than Microsoft claims—at least two hours less than the iPod’s, in my tests. Despite the larger screen, many album covers look worse than they do on the iPod. And you can’t share music libraries between computers like you can with iTunes… Overall, the iPod and iTunes are still the champs. Still, I expect the Zune to attract some converts and to get better with time. And this kind of competition from a big company with deep pockets and lots of talent is good for consumers in the long run.”

“Competition is good and all. But what, exactly, is the point of the Zune?” asks Pogue. “It seems like an awful lot of duplication—in a bigger, heavier form with fewer features—just to indulge Microsoft’s ‘we want some o’ that’ envy. Wireless sharing is the one big new idea—and if the public seems to respond, Apple could always add that to the iPod… The Zune 1.0 player is pretty barren, too. It doesn’t have a single standard iPod amenity: no games, alarm clock, stopwatch, world clock, password-protected volume limiter, equalizer, calendar, address book or notes module. Incredibly, you can’t even use the Zune as an external hard drive, as you can with just about every other player on earth.”

In a move that could have a future impact on Apple, Microsoft has agreed to pay Universal Music Group a fee for each Zune media player it sells. “We felt that any business that’s built on the bedrock of music we should share in,” said Doug Morris, chief executive of Universal, owned by French media giant Vivendi. “We were very early in working with Steve on the launch of the iPod and he’s been a very good partner and done a lot for the industry,” Morris said in response to questions about Universal’s relationship with Apple. “We have a current contract with him and at the end of that I’m sure we’ll negotiate.” Apple currently only has revenue-share deals with record companies for music sold on the iTunes Store, and does not offer a portion of iPod sales to any company.

Update: The New York Times reports that Universal is expected to receive more than $1 for each $250 Zune sold, and that the deal “comes after weeks of tense talks and averts a standoff that might have crippled Microsoft’s attempt to compete against the iPod.” According to the Times report, Universal apparently threatened to not sell its music through the online Zune media store unless Microsoft paid a royalty for each Zune sold.

“Microsoft ultimately had plenty of incentive to make a deal with Universal,” reports the newspaper. “Microsoft is laying a huge wager on the Zune. If it had not struck a deal, it would have been left in the position of trying to mount a credible challenge to the iPod without Universal, which accounts for a third of new albums sold in the United States. Microsoft also stands to benefit by cultivating a fan-friendly image with the notion that artists—not just corporations—will share in the Zune’s sales.”

Microsoft has announced plans to sell TV shows and rent movies that can be downloaded onto an Xbox 360 through the company’s Xbox Live online video game service. Beginning Nov. 22, Xbox Live users will be able to choose from select shows distributed by MTV Networks, CBS, Warner Bros. Home Entertainment, Paramount Pictures, Turner Broadcasting System, and Ultimate Fighting Championship. The programming, which will come in standard-definition and some in high-definition, includes shows such as “South Park” and “CSI,” and movies such as “V For Vendetta” and “Superman Returns.” Pricing of the content was not announced, though it is expected to be similar to iTunes Store pricing.

In a move that would no doubt signal the end of its partnership with Apple, Cingular has reportedly teamed up with iTunes rivals Napster, Yahoo Music and eMusic to launch a new music service. The service, which could be announced as early as tomorrow, will work on music-playing cell phones and will eventually offer wireless downloads, according to The Wall Street Journal. “Cingular’s service initially will support transferring music from personal computers to cellphones using a cable. In a first for music-enabled cellphones, users will be able to transfer music acquired from ‘all you can eat’ subscription services like Napster to Go, Yahoo’s Y Music Unlimited or eMusic,” reports the Journal. “They will also be able to transfer songs ripped from CDs or downloaded in the MP3 and Windows Media formats. Next year, Cingular is scheduled to add an over-the-air downloading component that will feature a menu for compatible telephone handsets that takes users to a virtual store, similar to the ones customers already use to buy ringtones.”

Jon Lech Johansen, a hacker also known as “DVD Jon,” says he has cracked Apple’s FairPlay digital music copy-protection technology and plans to license the code to others. The Associated Press reports: “Unlike his previous work, which he usually posts for free, the Norway native plans to capitalize on his efforts through his Redwood Shores-based DoubleTwist Ventures, said the company’s only other employee, managing director Monique Farantzos. An unnamed client will soon use the technology so its copy-protected content will be playable on iPods, she said, declining to give any specifics.”

According to a new study, listening to loud music with earphones on an iPod or similar music player for more than 90 minutes a day will damage your hearing. “The study of 100 doctoral students concluded that people who listened to music at 80 percent of volume capacity, at which point the sound is considered loud, should stick to under 90 minutes a day,” reports Reuters. “The study also found no problems for people who listened to music at 10 percent to 50 percent of maximum volume for extended periods. It found, however, that anyone who listened at 100 percent for more than five minutes faced the risk of hearing loss.”

Target has sent a letter to movie studios expressing concern that Apple and other companies will get a better deal from the studios for digital movies than the retailer gets on wholesale DVDs. The sharply worded letter from Target President Gregg Steinhafel said the retailer didn’t object to competition but wanted “a level playing field,” and also said that if Target didn’t receive fair pricing from the studios it would reconsider its investment in the DVD business. Target accounts for about 15% of DVD sales in the U.S. The letter follows similar complaints to studios from Wal-Mart and comes just weeks after Apple added full-length movies from Disney to the iTunes Store for as little as $12.99 each.

MP3.com founder Michael Robertson believes the Zune media player will be a large failure for Microsoft. “At first glance the features seem compelling but my prediction is it will be the biggest flop of 2007 with less than 50,000 units sold worldwide,” he says. Robertson cites Zune’s disappointing wireless features and the device’s incompatibilities with “Plays For Sure” purchased songs. “Microsoft will likely spend nearly $100 million in marketing the Zune. The press will give them tens of millions of dollars in free marketing,” Robertson continues. “In spite of this publicity the Zune will be an expensive failure for Microsoft because consumers aren’t stupid. As the saying goes: Zune me once, shame on you. Zune me twice, shame on me.”

Microsoft has finally announced pricing and a release date for its much-hyped Zune media player. The company said it will charge $249.99 for the device—essentially the same as Apple’s 30GB iPod, which retails for $249. Microsoft will launch both the Zune and its companion digital music service on November 14th. The Zune music service will charge 99 cents for individual songs and $14.99 per month for a subscription service. Scott Erickson, senior director of product management for Zune, admitted that the Zune player will not make money for Microsoft immediately. “In total we won’t be making a profit this year, but we will of course work toward becoming a profitable business in the future,” he said.

Beleaguered subscription music company Napster said it is considering selling the company. “There’s been interest by third parties to acquire the company,” said Napster CEO Chris Gorog, adding that other proposals have included strategic partnerships or joint ventures. “That activity has heated up as we’ve gotten traction with a lot of our new products… There’s been a lot of speculation” about which companies or industries would be interested in Napster, Gorog said. “Any company that is executing at a high level in digital media will likely have at least a conceptual interest in looking at Napster.” Napster was originally an illegal music sharing site before being shut down in 2001. It was purchased by Roxio and relaunched in 2003. Napster said as of June 30, it had 512,000 paid subscribers, down from 606,000 in the prior quarter.

After persistent compatibility problems with Microsoft’s “Plays for Sure” format, RealNetworks has teamed up with SanDisk to offer a portable music player that works seamlessly with the company’s Rhapsody service. The Sansa Rhapsody will be based on SanDisk’s e200 player, which comes in 2GB to 8GB sizes and retails for $140 to $250. The player has a layer of RealNetworks’ own software, including copy-protection technology, to ensure compatibility.