Connect Boosts Euro Market

With Sony Connect's early-July launch in Europe and the recent arrival of Napster and Apple's iTunes Music store, the European music industry has the feeling that the market for music downloads has reached a new critical stage.

"We warmly welcome the launch of Sony Connect music download service—yet further evidence of the rise in popularity of legal online music in Europe," says Jay Berman, chairman/CEO of the International Federation of the Phonographic Industry. "I'm convinced that the momentum built up by the legitimate online music business so far this year is now unstoppable."

From a label's perspective, Peter Jamieson, chairman of British industry body the BPI, says, "This year will be the year when online music begins to generate significant income streams."

Rebecca Ulph-Jennings, senior analyst at Forrester Research Europe, agrees that France, Germany and the United Kingdom, are catching up with the United States in making legitimate downloads available to consumers.

"We don't have as many people yet, but we have many iPod and iMac owners that have not been able to buy iTunes, so there's pent-up demand," she says. "And while home broadband has taken longer to grow in Europe, it has started to grow rapidly."

Connect, the online music store operated by Sony Corp.'s Sony Network Services, kicked off with a soft launch in the United Kingdom, France and Germany this month (connecteurope.com), shortly after opening for business in the United States. The service is available in English, French, German, Italian and Spanish.

Although SNS had previously announced a June launch (billboard.biz, April 10), the company said it finally chose early July to coincide with the 25th anniversary of Sony's pioneering portable player, the Walkman. A full commercial launch will follow at the end of August.

CONNECTED TO INDIES

A Berlin-based Connect spokesman declines to say how many tracks will be on Connect's European sites. But in May, it signed significant deals with Europe's leading independent label organizations (billboard.biz, May 27) and has clinched 500,000-plus songs from the majors and independents for the U.S. site.

Barney Wragg, VP of Universal Music Group's eLabs division, says, "Licensing repertoire to Sony Connect confirms our commitment to developing legitimate online services, regardless of who's providing the service and the technology. As long as it makes commercial sense, we're up for it."

The European launch will be supported by a pan-region advertising campaign in September to market not only Connect, but all of Sony's compatible Walkman listening devices. These include the new Network Walkman NW-HD1, which can store up to 13,000 songs and is positioned to compete against Apple's iPod. It launches this month in Japan, followed by the United States and then Europe later in the year.

Connect plans to enter Switzerland, Austria, the Nordic markets and the Netherlands by year's end. Spanish and Italian sites will open in early 2005.

In just a few weeks, Europe's music online offer has received a massive boost. Connect joins iTunes and Napster 2.0, two other major U.S.-originated legitimate digital music stores, in Europe. iTunes is in the United Kingdom, France and Germany, where Apple says it has sold more than 1.5 million tracks in its first two weeks. Napster is in the United Kingdom with plans to expand to the rest of the region soon.

UNIQUE EUROPEAN HURDLES

But industry experts warn that the short time between U.S. and European launches will be exceptions rather than the rule. Inconsistent range of repertoire, the local language differences, plus clashing digital-rights-management systems could still make Europe a tough market to crack.

Experts say that outside of the United Kingdom, France and Germany, there are more barriers to overcome for international online-music service providers.

"You will need local content plus international repertoire, which brings you across new copyright issues," Forrester's Ulph-Jennings explains. "You also need [a Web site] interfaced with the local language and payment systems. And many Europeans still don't use credit cards."

Simon Dyson, music analyst at London-based Informa Media, is concerned about what he feels is a still-inconsistent message being sent to digital music fans.

"With Connect joining Napster and iTunes and probably even more services before the end of the year, it's a good thing with consumers being offered more [legitimate] choices," he says. "But if people go to Connect today and find there isn't as much choice there as there is on iTunes, it's going to be . . . difficult to get them back.

"The content has got to be compelling straight away," he adds, "or you'll scare people away, and you can't afford to do that."