Universal to Put MP3 Songs Online

In the major record companies’ largest experiment to date with MP3 files, Universal Music Group is expected to make 1,000 older albums available online in that format today through its EMusic subsidiary.

It’s the first time a major record company has allowed any of its albums to be released as unscrambled MP3s, a format the labels have shunned because it can be freely pirated over the Internet. Aside from a few singles from AOL Time Warner’s Warner Music Group, the five majors have released downloadable songs only in copy-protected formats that deter piracy but sacrifice flexibility and portability.

It’s also the first time any major-label music has made its way into a subscription service that lets consumers acquire an unlimited amount of music for a flat monthly fee. EMusic lets its 50,000 subscribers download an unlimited number of songs from 900 independent labels for $9.99 to $14.99 a month.

The move reflects the growing willingness by Universal, an arm of Vivendi Universal and the world’s largest record company, to compromise on security in the hope of boosting online sales and weaning consumers from piracy. For example, it recently disclosed plans to make tens of thousands of downloadable songs available in a format that could be burned onto CD, effectively removing the songs’ electronic locks.

Larry Kenswil, president of Universal’s ELabs, acknowledged that the deal with EMusic was a compromise on security. One of the benefits, though, is providing an outlet for albums that are increasingly hard to find in stores, he said.

The albums provided through EMusic will be older rock, pop, jazz and blues records by the likes of Chuck Berry, Neil Diamond, Billie Holiday and Sonic Youth. “We have this catalog of great music that’s not getting the audience it should,” he said, partly because retailers don’t have the space for the tens of thousands of CDs still in print.

Founded late in 1997, EMusic rode the Internet-stock surge to a peak value of more than $250 million. But its inability to win licenses from the major labels stopped the company from building much of a following, and Universal snapped it up in April 2001 for only $22 million.

Bob Kohn, an EMusic founder who now runs the online comedy outlet Laugh.com, said the main stumbling block for the major labels has always been the MP3 format and the fear of piracy. But “all of the major record companies’ music has already been available in the MP3 format by users who rip [MP3s] from CDs,” Kohn said.

EMusic and Universal declined to release the financial terms of their agreement.

If EMusic has to pay Universal a fee for every song downloaded, as is typical in such deals, heavy downloading could conceivably cost EMusic more than it collects in subscription fees.