MP3.com Begins Fee Locker Service

MP3.com Inc. relaunched its online music locker service Tuesday with a twist: a $50-per-year fee for consumers who want to store and play more than a few dozen CDs.

The fee reflects the legal drubbing that San Diego-based MP3.com took this year after it briefly offered the My.MP3.com locker service without licenses from the record labels or music publishers. The new version is licensed by the five major labels and music publishers, which will collect small sums from MP3.com each time a song is played from the lockers or a new CD is added.

With the relaunch, MP3.com gets back into the intensifying battle over online music storage, which could be a cornerstone for music distribution in the future. To make the storage process even easier, MP3.com plans to announce a deal today with Tower Records, the leading independent music retailer, to automatically copy any CDs bought at the retailer’s Web site to the buyer’s My.MP3.com account.

Some analysts praised MP3.com for being ahead of the music industry’s gradual shift from selling plastic packaged goods to distributing music through online subscriptions. But they questioned how many consumers would be willing to pay to listen to music they already own.

Online locker services are appealing to many music fans because they let users listen to their collections on any computer connected to the Net. But those services have been free.

In its new version, MP3.com will give users two options: a free basic locker limited to 25 CDs, or a $49.95-per-year locker for as many as 500 CDs. In either case, users can play songs from the lockers but not download copies of them.

“We see it as being similar to the difference between network TV versus cable: No matter what your wallet size is, you have an option,” said Michael Robertson, founder and chief executive of MP3.com.

Analyst Phil Leigh of Raymond James Financial Inc., an investment bank, estimated that no more than 5% of the My.MP3.com subscribers would be willing to pay for the service. Still, Leigh said, there might be a “fair number” of users who find a way to make the service work to their economic advantage, even at $50 a year.

Unlike its leading competitor, MyPlay.com, MP3.com doesn’t require users to transmit digital copies of their CDs to their lockers--a process that can take hours over a dial-up modem. Instead, MP3.com automatically loads users’ lockers with copies of any CDs they put into their computers.

A federal judge ruled in May that MP3.com’s approach violated the labels’ copyrights. MP3.com ultimately resolved the labels’ and publishers’ claims by agreeing to pay more than $160 million, plus per-song royalties each time a CD is played or stored.

Robertson said the locker service is trying to tap into a market that is emerging as a hot spot: pulling digital entertainment off the Net and distributing it to electronic gadgets.

“People are demanding music everywhere, whether they’re on their PC at work or with a laptop in a hotel room,” Robertson said.

Mark Mooradian, a senior analyst for Jupiter Research, said Robertson is on to something, but the market might not be ready for it.

“In a world that has all these enabled devices, and where portability is pretty much a given, $50 I think is quite inexpensive,” Mooradian said. But he added, “It’s going to be more of a challenge right now.”