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BMG and Universal team up on Web

Market-defining e-commerce pact signed weeks ago -- anouncement comes at last

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Two of the world's 'big five' music companies, Bertelsmann Music Group (BMG) and Universal, today combined their online music ventures into a single operation, GetMusic.com, as predicted here. The deal, while initially merely an attempt to provide artist information and flog CDs, nevertheless paves the way for full-scale digital distribution of music. Much of what the two companies discussed at a New York press conference focused on the promotional content GetMusic.com will offer. Behind the "unparalleled fan access to artists" and "lifestyle content" (urgh) hyperbole, what's really being discussed here is a unified Internet presence that's about artist control. There's nothing Machiavellian here -- it's essentially taking what labels already do for many bands (fan clubs, merchandise licensing) who haven't contractually taken control of that kind of thing themselves. However, the really important side of the agreement is the e-commerce pact. Selling CDs might not seem too much of an issue -- after all, GetMusic will only offer BMG and Universal discs, whereas online retailers like Amazon and high street chains like Virgin and Tower offer everyone's' recordings -- but it sets in place the e-commerce basis for the sale of the music itself. Here's the 'nightmare' scenario: GetMusic develops an e-commerce infrastructure for the sale of CDs. Then, when the Secure Digital Music Initiative (SDMI) comes up with a definitive digital music format that protects against piracy, GetMusic begins to offer downloads -- and it does so exclusively. Sure, you can still buy Sheryl Crow CDs from anyone, but if you want MP3s -- or their equivalent, you have to go to GetMusic. Of course, GetMusic is unlikely to be quite to restrictive -- the example of the software industry suggests that most companies who use the Web to sell direct to customers don't eliminate other channels. That said, the big difference between the digital distribution of music and of applications is that Office 98 takes rather longer to download than the latest Boyzone album, and the latter requires no support (counselling for distressed teens when the band splits, yes; support, no). And since together BMG and Universal control only two-fifths of the music business, there's no monopoly issue here. EMI and Sony are working on a similar agreement right now (see Sony, EMI team up on Net music development), and it's not hard to predict many smaller labels taking the same approach, partnering with each other or major sites like GetMusic. Fortunately, the real losers will be the local retail chains who control album pricing and ensure that a $15 CD in the US costs $20 in the UK and $30 in Germany. Music is a global business, and hopefully moves like today's will lead to global pricing, which can't help but benefit the consumer. ®

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