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Music engines are tuning up

With companies gearing up - no pun intended - for the fall and the holiday selling seasons, midsummer is down time in the consumer electronics cosmos.

Not the case in the world of online music.

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Roxio, the company that refined the art of burning CDs, is preparing to launch its new service, called ... Napster! The roaring success of Apple's iTunes music service has opened the gate for other new Web players. There's BuyMusic, RealNetworks, AOL and Amazon in the distribution queue, and even Microsoft - surprise! - is exploring establishing its own store.

Meanwhile, one of the key figures in the online music wars, former Recording Industry Association of America chief executive Hilary Rosen, has been replaced by a Republican staff member from the U.S. Senate to head the group's lobbying.

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The labels have elected to go with an industry novitiate, one not yet scarred by the nasty copyright conflicts of recent years. Mitch Bainwol is former chief of staff to Senate Majority Leader Bill Frist of Tennessee. He began his career as a budget analyst in the Reagan administration and has served as chief of staff for the Republican National Committee and as executive director of the Republican National Senatorial Committee.

"I'm delighted to take on this role," Bainwol said in a statement. "What could be more rewarding than helping to promote two great American traditions: music and property rights?"

Indeed, it's just as well that Bainwol's strengths lie in the political rather than in the creative/cultural arena. Piracy remains a major obstacle for those who offer "legal" digital distribution of music.

In fact, the recording industry association has begun to levy charges and civil lawsuits against file-swappers and says it will continue an aggressive campaign to subpoena the Internet service providers of individuals who trade significant amounts of music on peer-to-peer networks. The association also has enlisted some high-profile artists, including Missy Elliott and the Dixie Chicks, to speak out against online theft.

The idea is to reclaim lost revenues, and the record industry, foundering for years without a logical plan or base of public loyalty, is grasping for a solution.

The reinvented Napster's name itself carries some magical, radical brand recognition, though the original went bankrupt and its assets were absorbed last year by Roxio. The new service, said company chief executive Chris Gorog, "will be very reflective of the key characteristics of the original Napster - independence, innovation and freedom of choice."

Napster 2.0, set to launch around Christmas, will stock more titles than any online service so far - about 500,000. No word yet on subscription fees or the cost to download a single tune "a la carte."

Meanwhile, as Apple moves forward with plans to market a version of its iTunes service - 99 cents per song - for Windows users, is it surprising that Bill Gates is reacting, too?

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The chief software architect of Microsoft said late last month that he was exploring a music store concept, which could be provided by one of the company's partners.

Two things propel Gates to act. One is the expanding number of fingers in the online music pie. The other is the acceptance of the Apple service by Mac users: More than 6.5 million tunes were downloaded between the April launch and July 22. Apple's market share is optimistically estimated at 3 percent.

How well will these adventurous business models fly in the longer term? Pretty well, say most analysts.

Last month, Jupiter Research cut its estimate of online music revenue for 2003, to less than $1 billion. But Jupiter forecast growth to $3.3 billion by 2008, when it said the Internet would account for 26 percent of U.S. music spending.


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