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Business

Music Downloading Goes Legit

German Chancellor Gerhard Schröder inaugurated a new Internet platform for music by downloading the first song on Thursday. The German music industry hopes "Phonoline" can help reverse its sagging fortunes.

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Phonoline will offer up to 700,000 songs for download.

Internet file swapping sites like Kazaa and Gnutella have become the archfiends of the music industry, blamed for the plummeting sales of pre-recorded CDs and said to be driving a global business sector close to collapse.

Now the industry in Germany is fighting back, or at least offering an alternative to people who want to get their music digitally. Downloading Kate Ryan's "Only if I," the German chancellor launched "Phonoline" at the CEBIT computer trade fair in Hanover.

Phonoline is the German answer to iTunes, the successful American pay-per-download site run by Apple computer. It offers browsers 250,000 songs from a spectrum of different genres for download. Its operators say they hope to expand the catalog eventually to some 700,000 songs and say all the big industry labels, from Universal Music to BMG to Sony, Warner and EMI, will have their artists represented.

MTV Preis mit Britney Spears Madonna und Chrisina Aguilera

Britney Spears Madonna and Christina Aguilera

The cost of a song ranges between €1.19 to €1.99 ($1.49 to $2.50), more expensive than the iTunes price, 99 cents a song.

"The [Phonoline] download is still more attractive than buying a whole CD," Klaus-Peter Schulenberg, head of CTS Eventim, one of Phonoline's partners, told the Frankfurter Allgemeine Zeitung newspaper. If the computer user wants the whole CD, he said the service will offer song package deals running between €9.99 and €16.99 ($12.50 and $21.25).

Repeated Delays

Phonoline was presented with great fanfare at last year's PopKomm music trade fair in Cologne. It was touted as a way to bring downloading lawbreakers back into the fold of legality and clip the wings of sites like Kazaa. Then, there was much talk of Phonoline being the first German site to offer a comprehensive platform including the music from both major and independent labels.

Stand der Popkomm Messe in Köln Musikmesse Popkomm 2003

The Popkomm

The launch date was initially set for shortly after PopKomm closed it doors last summer. But months passed and the service remained offline. A new date set for fall also came and went, since it hadn't been decided who would be responsible for the technical side of the site. Phonoline missed the crucial Christmas season as more details were ironed out.

"Now there won't be any more delays," said Schulenberg. He hopes, despite the late start, to sell some five million songs online this year. He admits it's an ambitious goal.

An industry in trouble

That kind of optimism, however, is needed in the German music industry, which had one its worst years ever in 2003, with sales down 20 percent from the year before. The ratio of bought CDs to those burned on home computers flip-flopped in just two years' time.

In 2000, 191 million pre-recorded CDs were bought in Germany, 133 million were burned by consumers. By 2002, the number of pre-recorded CD sales had sunk to 166 million and the number of burned CDs had exploded to 259 million--a jump of 94 percent.

Worldwide the numbers are similar. Global sales of CDs, cassettes and records in 1993 amounted to $31.2 billion. After climbing to a high of $39.8 billion in 1996, the numbers began to plummet in 1999. By 2002, worldwide sales stood at $32 billion, just above the 1993 figure.

Frau im CD Laden

Buying CDs

A study by the International Federation of the Phonographic Industry (IFPI) found that last year some six million internet surfers swapped more than eight billion songs on file swap sites like Kazaa.

But industry officials say they may have turned a corner, and say sites like Phonoline play an important role in their survival strategy. According to them, 66 percent of consumers around the world know that unauthorized file-swapping is illegal. The music catalog available to those who want to download their music legally is expanding; it grew 30 percent in the last three months of 2003. IFPI says the demand for pay-per-download sites rose sharply last year.

Competition from iTunes In the U.S., consumers have had the ability to pay for their music downloads for a year now. According to Apple Computer, its "iTunes Music Store" offers 30 million songs. The company plans on bringing its successful model to Europe and rumors have it that Apple could be planning a launch date as soon as this spring. If it does launch soon, and keeps its songs priced at 99 cents a piece, it could prove stiff competition to Phonoline.

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