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Vying for a bite of Apple's musical win

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CIOL Bureau
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LOS ANGELES: The record industry is looking to return to the online music stage in a very big way in coming months.

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Spurred by the runaway success of iTunes, Apple Computer Inc.'s online music store, competitors are readying their own music download services in a surge of activity that record executives see pulling the music industry out of a three-year slump.

A crowded field is gearing up to offer single songs for sale, including retailers Amazon.com and Buy.com, and leading Internet service providers like AOL.

Others likely to compete are a re-launched Napster, the song-swap pioneer that was idled by copyright infringement litigation in 2001, and Apple itself, which even competitors credit with demonstrating the power of an easy-to-use system and competitive pricing.

"There's going to be a gold rush in the fall, with a whole bunch of services eyeing the a la carte download market," said Lee Black, analyst with Jupiter Research. "Everybody wants to get it going for Christmas."

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Apple's service, which enables music fans to download songs for 99 cents each, sold 5 million tracks within its first eight weeks, outpacing subscription-based services launched by the record labels in their struggle to compete with free unauthorized services like Kazaa and now-shuttered Napster.

Now, analysts say, the race is on to copy Apple's success for the much larger market of Windows-based PC users.

Online retailer Buy.com may be the first to the finish line when it announces the launch of a new music download service in New York next Tuesday, a source familiar with the matter said.

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Buy.com, which made its reputation as discount Web site for electronics and consumer goods, will position itself as an alternative to Apple's iTunes, although it has not yet secured licensing from all five major record labels, according to a record industry source.

WINDOWS OF OPPORTUNITY

Industry sources and analysts said other competitors are also keen to launch download services before Apple introduces its promised Windows version of iTunes later this year.

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Analysts expect Apple to launch that expanded service by Thanksgiving to spur holiday sales of its popular iPod digital music player. The current version of iTunes is restricted to Mac users, about 3 percent of the overall computer market.

"I think Apple definitely struck a chord and one has to assume the success of Apple is not going to be left standing alone," said Mike McGuire, analyst with GartnerG2.

Analysts say Amazon.Com Inc., the online bookseller, might collaborate with Apple, while Microsoft Corp is well-positioned to step in if it chooses because it has been working with all five major music labels for years developing online offerings and because it provides Web access to millions of users.

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"We fully intend to have a digital music offering when we feel that we have a great customer experience," said Kristin Schaefer, a spokeswoman for Amazon.

Microsoft declined comment.

America Online has said it planned to launch an expanded online music store later this year. AOL now lets fans sample and download as many songs as they want through its MusicNet service. Premium members can burn 10 songs to a CD a month. But later this year, it said it plans to let users burn as many songs to CDs as they want on an additional fee basis.

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Meanwhile, Roxio Inc., which bought the assets of song-swapping pioneer Napster at bankruptcy auction as well as the industry-backed Pressplay service, is working toward launching a test version of a new legal Napster this fall, record industry sources familiar with the matter said.

"We have said that we would launch Napster by no later than March of this coming year," said Napster spokesman Seth Oster, declining further comment.

Roxio Chief Executive Chris Gorog is expected to unveil details about the new Napster later this month at the Jupiter Plug.In conference, a source familiar with the company's plans said.

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Additionally, online radio company MusicMatch plans to add paid music downloads to its service by the fall, making it a direct competitor with iTunes and other services.

"Everyone is charging down the path as fast as they can and are looking at the fall timeframe," said Christopher Allen, senior vice president of marketing and strategic planning at MusicMatch. "The labels have generally viewed Apple as a test experiment and I think its helped pave the way for huge consumer demand. We're in a very good position to capitalize on the other 98 percent of the market that are not Mac users."

© Reuters

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