December 18, 2003 8:40 AM PST

Wal-Mart, Amazon fine-tune online music plans

The online music trend is continuing its spread to two big-name retailers.

Internet retailer Amazon.com extended a contract with digital media services provider Loudeye on Thursday to supply music samples on its Web site. Meanwhile, retail giant Wal-Mart Stores announced that it has begun testing its own online discount music download service.

Amazon and Loudeye did not detail terms of the deal other than to say it is a multiyear pact that will allow Amazon to offer site visitors audio samples for many of the musical artists and products it markets. Loudeye currently lays claim to a catalog of more than 4 million tunes and hosts the samples available on Amazon.

The Seattle-based digital media specialist, whose services include an online music store and Internet radio network, continues to increase its standing as an emerging player in the world of Web-based music sales and distribution. Earlier this week, Loudeye said it would partner with Microsoft to build infrastructure and distribution capabilities for online music services branded by other companies.

Loudeye's growing clout highlights the rapid acceleration of legal music download services, which have proven to be a hit with consumers, most notably in the form of Apple Computer's iTunes store, which has sold more than 25 million songs for 99 cents apiece. In establishing the pay-per-song business model with iTunes, Apple appears to have found the right recipe for both consumers and the music industry, which is battling to have file-sharing sites shut down, based on copyright claims.

Another company looking to capitalize on the trend and create competition for Apple's iTunes is massive chain retailer Wal-Mart, which said it has begun testing a downloadable music system, with plans to introduce a service early next year. Wal-Mart's offering, which will be created as a section of its existing e-commerce site, is being developed through a partnership with Loudeye rival Liquid Digital Media, formerly Liquid Audio.

One of the more compelling aspects of the Wal-Mart service will be its goal to undercut iTunes by offering downloads for only 88 cents per song. Individual iTunes downloads cost 99 cents. The company said visitors to its site can begin buying tunes for that price during the test period and that it will officially take the service live, after gauging customer feedback.

A recent study indicated that consumers continue to flock to the digital media format for music. Jupiter Research reported that demand for MP3 players, often used to listen and transport downloaded tracks, is poised to grow at a steady rate of 50 percent a year through 2006.

 

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