Sony online music service debut sets up market-share brawl with Apple

Wednesday, May 5th 2004, 11:35 am

By: News On 6

LOS ANGELES (AP) _ Sony Corp. has made a foray into the burgeoning digital music market with an online music download service that the electronics and media conglomerate is banking will also generate sales for its line of portable audio players.

The service, dubbed Sony Connect, offers more than 500,000 tracks from artists on major and independent labels. Like Napster 2.0 and the iTunes Music Store from Apple Computer Inc., Sony Connect sells individual tracks starting at 99 cents and full album downloads beginning at $9.99.

Sony's entry Tuesday into the online music market comes more than a year since the launch of iTunes and months behind about a dozen other pay music sites and subscription services. Like Apple, which used its online music sales as way to drive sales of its iPod digital players, Sony hopes to turn a profit for its own array of audio players.

But doing so will depend largely on whether Sony can draw music fans who have not already invested in iPods or other music players _ which cannot play song files in Sony's ATRAC3 format _ to buy its own brand of audio devices.

``They're behind the curve already and they have to play catch-up on two fronts, on selling their audio players and getting people to use their music service,'' said Michael Goodman, senior analyst with the Yankee Group in Boston. ``There's roughly three to four million people that have already placed that bet.''

Officials at Santa Monica-based Sony Connect Inc., which runs the service, say the online market is still developing and there is room for Sony to scoop up market share.

``Apple did an excellent job in cultivating this new market,'' said spokesman Mack Araki. ``We believe we can expand the market to a much broader audience with a broader line of devices and an easy to use service.''

Apple has about 30 percent share of the overall portable digital music player market, which includes players that play protected content sold by the online services and players that can only play MP3s or other unsecured song files, Goodman said.

Apple's share of portable players that can play legally purchased music files is between 80 percent and 90 percent, he said.

Sony touts it has sold more than 2.5 million audio players in the United States alone, and projects it will have sold more than 7 million by year's end. But the company doesn't say how many of those devices are portable CD players and how many are digital file or mini disc players.

``There are more than enough devices in the market,'' Araki said.

Still, Sony doesn't appear to be taking any chances. The company says it plans to roll out upgrades to the service over the next few months, including changes that will make it more compatible with devices from other manufacturers.

Users of Sony Connect need to download its SonicStage interface and player to play the songs. Araki said the software can convert MP3 files to the higher-quality ATRAC3 format. The program also enables users to burn audio CDs that can play on any CD player.

Sony Connect adopts the same copy restrictions that most other services do, allowing songs to be transferred to up to three PCs and transfers to compatible portable audio devices. Up to 10 audio CDs can be burned with the same track listing.

The company marked the launch of the service Tuesday with help from singer Sheryl Crow, who performed onboard a United Airlines flight from Chicago to Los Angeles.