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DEBATING DOWNLOADS: Most digital music-subscription services haven't even launched yet, and already there are rumblings in the marketplace that the concept of for-rent, tethered downloads—downloads that do not offer permanent ownership and cannot move off the desktop—are a dead-in-the-water concept.

Liquid Audio, which was developing such a subscription business, has abandoned the idea and has instead inked a deal to develop what Liquid Audio senior VP of content development and label relations Dick Wingate calls a "full-ownership" subscription service for EMI.

The service will offer material from EMI Christian labels Sparrow, ForeFront, Worship Together, EMI Gospel, BEC, and Uprok and is expected to launch in first-quarter 2002. It will be the first by a major to offer permanent downloads that can be burned onto CDs or transferred to portable devices.

Further details are yet to be decided. Wingate says EMI has not decided how many times consumers will be able to burn the downloads onto CDs, but it is likely to be one or two. Pricing has yet to be determined, but the general concept is that consumers will be paying a bulk rate for a certain number of full-ownership downloads. The number of downloads available in a base package will be lower in a for-rent model because they allow for full ownership, and the rate will be lower than the cost of buying the downloads individually.

Liquid contends that while such targeted services may not offer the kind of variety that a broad-based subscription model could, it is a proposition the consumer understands.

Indeed, Listen.com CEO Sean Ryan has long contended that tethered downloads are a "non-starter." Instead, Listen is starting a streaming-only subscription service called Rhapsody, which is set to bow Dec. 3.

Ryan maintains that consumers already understand the concept of streaming radio and that, as a result, on-demand streams have a better chance for success in the short term, because they do not require a significant change in behavior. Ryan says Listen is all for adding downloads to its service, but not until portability is possible.

Jupiter Media Metrix research indicates that the ability to transfer and copy music files are at the top of the list in terms of what consumers want from a subscription service. As a result, fears that consumers will reject those download services that do not offer such options are causing some to wonder if the tethered concept will work at all.

Wingate notes that while the likes of MusicNet and Pressplay have the luxury of getting it wrong, his company and other Internet start-ups do not.



MORE LISTEN NEWS: In other Listen.com news, the San Francisco-based Internet firm has taken a page out of the Recording Industry Assn. of America's (RIAA) book and cut an agreement-not-to-sue pact with the Harry Fox Agency (HFA), the New York City-based licensing arm of the National Music Publishers' Assn. (NMPA).

Under the two-year deal, Listen will pay an advance of $500,000 for access to the HFA's entire repertoire, in lieu of an established royalty rate for on-demand streams. If a standardized royalty rate is not set within two years, Listen will pay a monthly advance of $31,250 thereafter.

Look for similar deals to follow. The NMPA is said to be using its October accord with the RIAA—which has cleared the way for the launching of digital music-subscription services—as a template for pacts it intends to cut with a host of subscription providers.



Growth OUTLOOK slows: With the economy slowing, Jupiter Media Metrix has slightly scaled back its growth projections for online music sales during the next five years. In its latest study of the music market, the Internet research firm now expects total online music revenue to grow to $5.5 billion by 2006. Earlier this year, it was calling for a level of $6.2 billion. In addition, it is now calling for total digital music sales of $1.6 billion five years on, vs. an earlier estimate of $1.9 billion. Subscriptions will account for slightly more than $1 billion in sales in 2006, with à la carte downloads accounting for the rest.