Sony Music to Sell 'Virtual Singles'
Using Technology From Microsoft

May 12, 1999

Sony Corp.'s Sony Music, using technology developed by Microsoft Corp., plans to begin selling new hit "virtual singles" over the Internet at the same time the songs are available in record stores.

The Internet singles will be available this summer and are expected to cost about $3.49 a piece, the same price as in stores. The Internet versions will take about five minutes to download.

"Sony Music is now starting the business of digital distribution," said Fred Ehrlich, a senior vice president of Sony Music. "For the first time, we are going to be allowing our content to be distributed to the public" over the Internet.

While most major labels are testing digital-downloading plans, Sony Music is the first to announce plans to begin commercially distributing music over the Internet on a continuing basis. Because of the uncertainty of record-release schedules, Sony said it didn't know which songs would be released over the Internet first, but Sony's roster of artists includes Mariah Carey, Will Smith, Celine Dion and Ricky Martin.

The pact with Sony is a coup for Microsoft, which just last month was shunned by record companies that felt Microsoft's digital-delivery system lacked adequate safeguards to protect music sent over the Internet. Sony executives said Microsoft recently made concessions on security matters, enhancing its software's ability to protect content on the Internet. Sony's Mr. Ehrlich said that given Microsoft's increased cooperation in the past several weeks, "It's important to support their effort by allowing content to be released."

'Enhance Final Version'

Microsoft said it hasn't yet altered its software but added Tuesday that it will "enhance the final version" to meet the requirements of the music industry. The music industry is working to establish guidelines to have secure products, such as portable digital music players, in the market by Christmas.

Microsoft executives concede that in unveiling its pact with Sony, the software company is making a much stronger statement in support of music-industry concerns. In the past, music executives said that Microsoft had been vague about whether it planned to comply with the requirements of the Secure Digital Music Initiative.

The pact with Sony gives Microsoft a boost in the hotly contested battle among big technology companies to develop a platform for delivering secure content on the Internet. AT&T Corp. is working with Seagram Co.'s Universal Music and BMG Entertainment on a rival system and International Business Machines Corp. is conducting a test with the five major labels. There are also a host of other competing companies, such as Liquid Audio Inc.

The relationship between Microsoft and Sony isn't exclusive. Sony's consumer electronics unit has developed a separate digital delivery system, called Super Magic Gate, that Mr. Ehrlich said would also be evaluated by Sony.

Test Version

Last month, Microsoft introduced its Windows Media Technologies 4.0, a test version of its new compression software that is the core of its digital delivery system. The system includes copyright protection and technology developed by Reciprocal Inc., that allows record labels to charge users and set conditions for use before music is delivered.

Microsoft estimated there are 35 million installed copies of an earlier version of its software that plays music and videos. The launch of the new Microsoft software is expected this summer and Sony Music plans to release its content at the same time the software is released.

Sony also will begin using the Microsoft software on its promotional Web sites so that fans can sample songs and watch videos. Currently, Sony says RealNetworks Inc. provides most of the software for its sites.

Will Poole, a Microsoft executive, says that Sony's content will encourage widespread downloading of the Windows software so people can listen to the music.

Michael Nathanson, Sanford C. Bernstein & Co. music-industry analyst, said the pact has benefits for both companies. Sony can get started working on consumer electronics products, such as a portable digital player, now that it has a good idea of what the software platform will look like. And Microsoft, by signing up one of the world's largest record companies, has gone a long way toward alleviating concerns that the software giant isn't taking the music industry's piracy concerns seriously enough, he said.

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