• by May 10, 2004

Online music services are sprouting like weeds after a hard rain--again.

Viacom's MTV is the latest player to announce that it will throw its hat into the online music ring. MTV's service, launching later this year, will be supported by MusicNet. A little more than a week ago, Sony Corp. said it's launching a branded online music service called Sony Connect. And prior to Sony, a raft of brands including Wal-Mart and Best Buy, and Virgin Group said they will also be in on the action. Microsoft Corp. intends to launch an online music service in the fall.

Apple Computer via iTunes, Roxio's Napster, MusicNet, MusicNet@AOL, and Real Networks' Rhapsody are already in the online music game. Yahoo! has a premium music service called Launch. CNET just relaunched MP3.com, a sophisticated and packed music library that can be used as a resource to compare the various services. How many players can make it in a nascent market in search of a business model? It's a slippery slope.

Marketers flocking to associate their brands with the latest flavor of the month--whether it's branded entertainment programs, product placement in reality TV shows or videogames, or tie-ins and sponsorships with online music stores--will need to consider the fact that there is no business model for online music distribution--not yet. The margins are thin and the hardware, the portable digital devices used to listen to music, are key.

Pepsi's bottlecap promotion with Apple's iTunes fell short of its goal. However Apple has said that its iTunes store has sold 50 million downloads; Roxio's Napster has sold 5 million. But where are the advertisers?

Creative business models and tiered packages are needed to build a viable business. The services will need to segment various offers and subscription packages to different demographic audiences. Sampling and trial periods are absolutely necessary.