HITS Daily Double


Proprietary Download Service Launches; Can It Compete?
Sheryl Crow played on a United Airlines jet from O’Hare to LAX to help get the party started—a Branson-esque move designed to trumpet the arrival of Sony’s new Connect online music store.

The Connect store, which like Apple’s iTunes Music Store, sells single song downloads for 99 cents and albums for $9.99 and up, is Sony’s attempt to squeeze some synergy out of its music and electronics divisions, which have often been at odds over the years.

Sony would like online music to drive sales of its digital players, as Apple’s iTunes has driven iPod sales, or Sony’s own video game software has helped sell its PlayStation 2 consoles.

But as always, it’s an uphill battle. Sony’s coming late to the party, following not only the far-and-away paid-download leader Apple, but also Roxio’s Napster 2.0 and a handful of other online vendors. Sony is also using its proprietary ATRAC3 format (as opposed to MP3, Windows Media, or AAC, which Apple uses), meaning other store’s tracks won’t play on its players, and non-Sony players won’t play its tracks.

“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,” Yankee Goup senior analyst Michael Goodman told the Associated Press, saying three to four million people have already bought players and signed onto a music service.

But Sony believes there’s still a large, untapped market for legitimate downloads and players. The company hopes to expand the current base of users by offering a variety of players—starting with a souped-up version of its MiniDisc player that will play ATRAC3 files—at prices well below the cost of an iPod or most other download players.

Connect chief Jay Samit told the L.A. Times that connect isn’t really trying to compete for the still-small number of people using iTunes and Napster, but would rather convert into customers the millions of people downloading music for free.

Meanwhile, some analysts say that since Sony is invested in a proprietary file format, it has a bit of a chicken-and-egg problem on its hands, in that the company needs to win users of its online store to drive sales of its devices, but it also needs people to buy its devices to spur people to use its store. But Sony says 2.5 million people have already bought ATRAC3-enabled Walkman devices (whether they know it or not) and it expects to sell 7 million by the end of the year.

Connect, which has about the same level of restrictions (called Digital Rights Management, or DRM in nerdspeak) as Apple’s iTunes and most other services at this point, can be accessed using Sony’s SonicStage software, which serves as both jukebox for storing and organizing music files and portal to the online store—again, much like iTunes. Though SonicStage won’t play other file formats, it will convert MP3 files to ATRAC3 for users willing to take the time to do so.

Sony devices that can play Connect tracks have names like Hi-MD Walkman, Net MD Walkman, ATRAC CD Walkman and Network Walkman MP3. Sony has already sealed marketing deals with McDonald’s and, of course, United. Connect is a subsidiary of Sony Corporation of America.