March 3, 2003 1:44 PM PST

AOL dials in wireless music service

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America Online unveiled on Monday a cell phone version of its AOL Music retail service, hoping a mix of ring tone and entertainment downloads will ring up the profits.

The AOL Music Mobile Club is the company's attempt to cash in on the popularity of its AOL Music service, which it claims is the hottest music-selling service on the Web. Aside from offering music for sale, AOL Music features performances made specifically for AOL by popular artists including P. Diddy (formerly known as Puff Daddy), Mick Jagger, Alicia Keys and Moby.

Subscribers to the new service get three free ring tones a month, access to exclusively recorded music, and alerts about new music club offerings, according to AOL Vice President Dan Servos.

AT&T Wireless is now selling subscriptions to the new offering for $3.50 a month. Only the 21.8 million AT&T Wireless subscribers who also use AT&T's wireless Web service, mMode, can become part of AOL Music Mobile Club, according to AOL representative Jaymelina Esmele. mMode costs between $3 and $12 per month.

Borrowing a page from the broadcast TV model, AOL executives are returning to the idea that offering exclusive content--such as the special recordings offered through the music club--will give people a reason to join and stay on.

AOL is "at the forefront of the burgeoning mobile entertainment market with a wide range of wireless applications," said AOL Vice President Dan Servos.

AOL Music is also the latest of the company's offerings to go wireless. Most U.S. wireless carriers already offer access to other popular AOL services, like its Web portal and messaging programs. But snipping the wires off its popular products hasn't automatically translated into success for AOL or its competitors Yahoo and MSN. Only about 10 million of the 140 million wireless dialers used any kind of wireless data service last year, according to industry analysts IDC.

But ring tones, which will be sold through the music club, have sparked some interest among U.S. consumers. Carriers are notoriously secretive about how much they make selling these 15-second song snippets that replace a cell phone's prepackaged ring. But in one sign of growing success, artists earned $71 million in royalties from the sale of ring tones last year, according to IDC.

The new AOL music service comes at a dramatic time for the company. Subscriber growth at the Internet access provider has slowed--just 492,000 new customers signed up in the second quarter of 2002, compared with the 1.3 million who were added during the same period last year. Subscriber satisfaction also is ebbing. The University of Michigan recently released its latest American Customer Satisfaction Index, and AOL scored 59 out of a possible 100, the lowest of all companies measured in the Web portal category. Competitor Yahoo received 76, and MSN scored 72.

Parent company AOL Time Warner also has its hands full as it defends itself from investigations into its accounting practices and shuffles its executive ranks.


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