Napster beats iTunes to Europe

Bernhard Warner, European Internet Correspondent

LONDON: Digital download service Napster scored a major victory over archrival iTunes by launching in Britain, the first of high-flying Internet music stores to make their European debut.

In a move that surprised many in the industry, Napster announced that the music download and song-streaming service would be live to users in Britain only. It kept the launch date a tight secret, previously saying it would make its UK arrival by the end of summer.

Officials from Apple Computer, which runs the wildly popular iTunes service in the United States, declined to elaborate on their European launch plans, saying it will be only by the end of the year.

Cracking the European market before iTunes is considered crucial for Napster. Apple beat Napster by six months in the United States last year and has established a commanding lead in the small but growing digital music industry.

"The UK is a $2 billion music market. It is the third largest in the world. It's a very important market for us," said Christopher Gorog, CEO of Roxio Inc, the U.S. software company that owns Napster.

PRICE WARS BEGIN

Napster is launching in a brutally competitive European market. Its main rival, Britain's OD2, announced earlier it would cut download prices in half for its biggest retail partners in a bid to keep a lock on its market-leading position in Europe.

The increased competition and price-cutting was welcome news to a music industry battered by online music piracy. The proliferation of free songs swapped over the Internet has sunk continental Europe's once thriving recorded music industry.

"This is the latest evidence that our industry's Internet strategy is turning the corner, and we look forward to more legitimate online services being launched across Europe," Jay Berman, CEO of trade body the International Federation of the Phonographic Industry.

Gorog said Napster sealed licensing agreements with each of the five major labels, giving it a catalogue of 500,000 songs -- from artists ranging from Eminem to Miles Davis -- the biggest in Europe. Within 30 days, the service, located at www.napster.co.uk, would have a library of 700,000 songs, he added.

Napster said it will price downloads at 1.09 pounds per track, or 99 pence for monthly subscribers. Subscribers pay 9.99 pounds for unlimited song streams, in which music can be listened to but not copied.

OD2 announced on Thursday it would sell downloads for an average price of 50 pence per track on its five largest download sites including those run by partners Wanadoo, Tiscali, Coca-Cola, Virgin Megastores and Microsoft's MSN.

CONTINENTAL PLANS IN LIMBO

Napster, the one-time menace to the music industry that introduced online song-swapping to a generation of music fans, re-launched as an industry-backed service in the United States last October.

Its continental European rollout plan remains held up by licensing snags with the major music labels and music publishers, Gorog said. He added he was hopeful the UK launch would expedite negotiations in other European territories.

"We'll be looking to move into one or more European territories by the end of the year. That's the hope," he said.

A successful pan-European roll-out is important to Napster's ability to push into the black after spending a total of $150 million in infrastructure start-up costs, Gorog said.

"The faster we can roll-out across Europe the faster we can achieve cash break-even," he added.

Earlier this month, Napster's parent company Roxio said sales for the quarter ended in March topped $6 million (3.4 million pounds), bringing total sales to $9.7 million since Napster's commercial launch. Apple, meanwhile, has sold over $70 million worth of downloads since launching in April, 2003.

©Reuters