Online Music Drifts Further From 'Free' Roots

More signs came Monday that the days of free online music are drawing to a close.

Former digital download outlaw MP3.com (Nasdaq: MPPP) announced that offering a new licensing program and that it was expanding into Asia.

Additionally, eMusic (Nasdaq: EMUS) said that it has partnered with Hewlett-Packard (NYSE: HPQ) to offer personal computer buyers a free trial subscription to its digital download service, eMusic Unlimited.

The announcements follow last week's news that online music renegade Napster is going to roll out a subscription-based online music service this summer.

"Certainly, we think there have been a lot of signs of maturation in the digital download market," Webnoize analyst Matt Bailey told the E-Commerce Times. "More digital download companies are realizing you need to partner with existing companies."

Bailey added that Webnoize research has confirmed that online music download habits have become ingrained in users and are no longer just a fad.

Taking on Asia

San Diego, California-based MP3.com said that its new Asia Division will combine local language sites with digital music content and services specific to Asian markets. The company already has sites in Germany and France.

"Asia is one of the most rapidly growing markets in the digital music space," said Michael Robertson, chairman and chief executive officer of MP3.com. "We believe the best way to approach this market is by seeking to build relationships with music and technology companies that have exceptional and complimentary assets."

License This

MP3.com's expansion into Asia is not the only indication that the company is maturing. Thursday, the company rolled out its Music Licensing Program to help musicians license their music to publishers or directors.

Artists using the program pay a US$25 annual fee to have their music listed at the MP3.com site, where music publishers and directors can search by song style, tempo, or keyword. Interested publishers and directors can also post a request detailing what type of music they are looking for.

MP3.com said it would work with Enableyourmusic, Inc. to help artists negotiate fees and contracts and collect royalty payments.

'Free' Subscriptions

eMusic's new partnership with Hewlett-Packard affords it the opportunity to pedal its subscription services to new computer users. For the regular price of $9.95 a month, the eMusic Unlimited service allows members to download as much music as they want from the company's digital collection of over 150,000 MP3 files.

However, the free trial will allow purchasers of HP Pavilion personal computers to download 25 MP3 files of their choice from eMusic.

Bailey classified the partnership as a "step in the right direction," but said that to succeed eMusic needs to look at partnering with retail music sellers.

Last month eMusic announced that it would layoff one-third of its staff, about 66 workers, and let go three executives.

eMusic chief executive officer Gene Hoffman said the cuts came after content site RollingStone.com saw a steep decline in ad sales, and in the face of what he called "widespread illegal distribution of digital music."

Musical Mayhem

Last year marked a period of musical mayhem that pitted the major labels against digital download sites MP3.com and Napster. Lawsuits brought by the Recording Industry Association of America (RIAA) on behalf of the major labels against both companies allege that their services violated U.S. copyright laws.

MP3.com settled with the labels, and Napster brokered a deal with Bertelsmann AG that saw the German entertainment giant agree to drop its suit if Napster became a subscription-based service. However, the other major labels -- Universal Music Group, Sony Music, Warner Music Group, EMI Group -- have not yet dropped their suit against Napster.

Fast Forward

Now that Napster and MP3.com are turning to the subscription model, where will digital downloaders get free copies of the latest music? Research conducted by Webnoize in October reveals that 70 percent of Napster users said they would be willing to pay up to $15 for the service.

The Internet-music intelligence firm also found that few peer-to-peer file-sharing services are as easy to use or as quick as Napster.

For example, it took Webnoize researchers 47 minutes and 127 clicks of the mouse to download a 22-track CD from Napster. However, downloading the same CD from rival Gnutella would take 10 hours and over 1,200 mouse clicks.