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Aussie firms fight to take biggest loss for music downloads

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A price war between online Australian music sellers has pushed per track download costs to record lows.

Aussie ISP Teltstra last week slashed the price of songs downloaded from its BigPond Music service to 99 cents (US$0.75) each from A$1.49 for subscribers and A$1.89 for the rest of the plebs. Rival Destra, which proudly bills itself as Australia's DRM (digital rights management) pioneer, did Telstra one better by cutting its per track cost to 89 cents, vowing it "not be undercut by Telstra or any other new player to the marketplace.” Both companies have limited the price cuts to April at this time.

"Wal-Mart in the United States recently attracted world-wide attention by offering downloads for US88 cents (A$1.18) undercutting Apple's US$99 cents (A$1.34) iTunes," said Justin Milne, managing director at BigPond. "Now BigPond Music is offering music fans in Australia a chance to join the music download revolution at the price of 99 cents for April."

The two companies appear willing to take per song losses in the hopes of attracting more consumers to "legal" online music stores. Leading online song seller, Apple has said in the past that it loses money as a result of bandwidth costs and the cut taken by the record labels at US$0.99 per song. Apple, however, does make money of the pricey iPod music player.

But the Australian sellers do not have lucrative hardware to fall back on. Still, they justify the April promotions as a way to up interest in online music and their services over the long haul.

"This is just a promotion for April," Domenic Carosa, CEO of Destra, told The Reg,. "It has already encouraged more people to try legal music downloading and encouraged more people to go online."

Carosa declined to detail how much money Destra losses per track at the promotional rates or otherwise.

At the end of April, Destra plans to up its prices to between A99 cents and A$1.99 per track. At the low-end, this would still make Australia the cheapest place to buy music online in the world. Of course, millions of consumers download music for free with the help of peer-to-peer services.

One might think that direct delivery of music via the Internet would be more efficient and, dare we say, profitable than sending trucks full of CDs to record shops. The labels, however, seem intent on making sure per track song sales prove less attractive to vendors than pushing more palatable subscription services that make sure consumers shell out at least $9.99 per month for entertainment - see Napster and Real Networks.

It's nothing short of astonishing to see technology companies outbid each other to fit in with these rigid pricing models backed by the recording industry. ®

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