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Online Music's Silence?

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By Rick Aristotle Munarriz (TMFBreakerRick)
July 28, 2003

Given Apple's (Nasdaq: AAPL) success with the early results of its iTunes Music Store, one might come to the logical conclusion that after years of piracy and peer-to-peer MP3 swapping, online music is on the verge of becoming a viable business model.

Unfortunately, no one is telling the sector's heaviest hitters. Earlier this month, Vivendi's (NYSE: V) MP3.com announced that it would be shutting down its MP3.com Europe subsidiary. Last week, Tonos.com stopped accepting new applications and announced that the site -- which has aimed to connect independent songwriters and performers with commercial opportunities -- may close in a month if deep pockets aren't found.

The cacophony is creating mixed signals. With the Recording Industry Association of America cracking down on file-trading by going after even the casual end-user, one would think that many fans who have been living off the free music hog are about to be scared straight. That should mean a revival for fresh music -- and that's exactly what Tonos and MP3.com have been peddling for years.

Yet Roxio (Nasdaq: ROXI) has been able to acquire Napster's shell and Vivendi and Sony's (NYSE: SNE) pressplay subscription service on the cheap. Meanwhile, streaming giant RealNetworks (Nasdaq: RNWK) announced a wider second loss for the June quarter.

The companies that stand to gain if online music becomes legitimized are either struggling financially, cashing out, or folding. It's sad, really. It's a lot like fans who leave a concert when the band exits the stage, completely unaware that the musicians are about to regroup and return for an encore, saving the best for last.

Don't have an Apple but want to know what's driving the Mac minority to purchase 6.5 million song files? Thinking of switching from the Wintel ranks and seeing how the Apple faithful live? All this and more -- in the Apple User's Group discussion board. Only on Fool.com.

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