Seagram About to Launch Digital System

Setting the stage for an Internet format battle, Seagram’s Universal Music Group, the world’s largest record company, plans to launch its own digital distribution system within months.

The architecture for the system--which is not compatible with formats being developed by Seagram’s competitors--grew out of its costly Project Nigel technology, which was developed over the last year with AT&T; Corp., BMG Entertainment and Matsushita Electric Industrial Co.

“In the future, we’ll be selling songs, albums, multi-song packages, compilations, services, subscriptions, streaming and on and on,” Seagram chief Edgar Bronfman Jr. said Friday in a speech at the Jupiter Consumer Online Forum.

Seagram also originally intended to sell its own digital music player to consumers, but scrapped plans for the unit in December because of technical problems. Initially, music delivered by Universal’s new digital system will be able to be played only on Real Network’s jukebox.

Universal plans to launch the system with about two dozen songs before June, making about a dozen new tracks available each week throughout the year, sources said.

Universal hopes to license its downloading technology to competitors, but so far only Bertelsmann has consented to test the system, sources said. Sony, Warner and EMI are developing their own technologies and plan to begin downloading music on the Web before year-end.

Universal’s announcement is almost certain to heighten tensions between the world’s largest music company and the traditional bricks-and-mortar retail outlets that distribute its products. Universal’s system, which incorporates digital rights management and security technologies developed by InterTrust and NatWest Bank’s Magex, has already encountered resistance in retail circles, sources said.

Retailers are said to be unhappy about Seagram’s new business model for online sales, under which the music giant would collect money directly from consumers and pay retail outlets a commission on each sale, sources said.