Digital Media

Sony is planning a new online store a la Apple's iTunes, but with a few twists.

Announced at a strategy meeting in Tokyo on Thursday, the new service will hawk music, movies, books, and other downloadable content geared for its various electronics, including TVs, mobile phones, music players, and computers.

The service, which Sony aims to launch next year, will link the company's devices and digital content that it produces--setting it apart from other online stores.

"That's the kind of combination that I think is not seen anywhere else," Kazuo Hirai, Sony executive vice president for networked products and services, said in an interview with the Associated Press. "That I think is where our core competence lies, and that's a differentiator for Sony."

Hirai also spoke about the new service with BusinessWeek, saying that it won't just sell products but also tap into social networking by letting people upload their own photos or videos and connect with each other.

"It's not just access content, stream it, and enjoy," Hirai told BusinessWeek. "What are your friends watching right now? There's a screen that says all the programming that's available. It highlights all the things that your friends are watching, for example. It's a community experience."

Called the Sony Online Service for now, it will model itself after the company's successful PlayStation Network, a free service that has captured 33 million registered users who download movies, access social networks, and grab games for the PS3 and portable PSP console. Hirai said that gamers will be able to access the new online service directly through their PlayStation Network accounts.

Of course, Sony has been down this road before in 2005 with its late Sony Connect music service. The aborted iTunes clone was done in by internal politics and a failure to connect with consumers, forcing the company to shut it down in 2007.

But with a new, more cohesive management team put in place by CEO and president Howard Stringer, Sony is hoping to avoid the in-fighting that helped kill Connect.

Sony needs a shot in the arm at this point. Though the company pioneered the portable music concept 30 years ago with its Walkman, it has struggled to compete in the Digital Age. Continuing a string of quarterly losses, Sony took a $292 million net loss in its recent second quarter. Despite cost cuts and layoffs, the company is projecting a total loss of $1.3 billion for the full fiscal year.

Sony Music Entertainment's catalog is coming to indie music retail site Amie Street, in the New York-based start-up's first major label deal.

But here's the catch: Sony's catalog will not be participating in the "dynamic pricing" model that's been Amie Street's trademark--unpopular songs are the cheapest, and the price rises as a song is downloaded more. Instead, Sony songs will be available for a flat 69 cents, 99 cents, or $1.29 based on popularity.

"It wasn't a hard decision for us," Amie Street co-founder Josh Boltuch told CNET News. "This isn't affecting all the other dynamically priced music on the site." He noted that RED, the indie music distribution company owned by Sony, already offers its songs on Amie Street through the dynamic-pricing model. "Sony Music obviously has the option to experiment with dynamic pricing at their discretion," Boltuch added. "Clearly we would love to do that with them."

This isn't the first time that an indie music retailer has had to compromise to ink a major-label deal. Sony was also the first major label to bring its catalog--well, its "classic" back catalog--to subscription site eMusic. But the deal resulted in eMusic raising some of its prices in tandem.

Amie Street, which pitches itself as a way to discover as well as purchase new music, made major headlines last year when it was the only place on the Web to buy songs recorded by Ashley Alexandra Dupre, the call-girl-slash-aspiring-pop-star at the center of the Eliot Spitzer scandal.

Universal Music Group and YouTube have answered the question of whether any of the major labels will be interested in joining the new all music video Web site, Vevo.

Sony Music Entertainment has joined the venture, the companies said Thursday in a statement. Vevo will launch sometime later this year featuring video content from at least the two largest recording companies. (Universal is the largest.)

Some of the acts represented by the two labels include Amy Winehouse, U2, Bruce Springsteen, Duffy, Alicia Keys, Beyonce, Eminem, AC/DC, Kelly Clarkson, Lady Gaga, Carrie Underwood, Mariah Carey, Akon, The Killers, Mary J Blige, Black Eyed Peas, and Justin Timberlake.

Warner Music and EMI have yet to sign up, but music industry sources say that talks between the companies continue. Vevo is the brainchild of Universal Music CEO Doug Morris, who has long dreamed of a standalone video site where his artists' music videos would be the marquee product.

MTV turned music videos, which were once considered little more than a promotional tool for the labels, into a gold mine 30 years ago. Since then, music videos are far and away the most popular content on YouTube.

Vevo will not only feature traditional music videos, but possibly also present reality shows, video blogs, and other content built around artists. Universal said in the statement that it is also looking for outside investors.

While the labels will supply the content for Vevo, YouTube will look after all the back-end chores. Vevo will likely name former Universal Music exec Rio Caraeffas president.

Universal Music CEO Doug Morris partnered with Google's Eric Schmidt on Vevo. Now Sony Music Entertainment is joining the venture.

(Credit: Universal Music Group and Stephen Shankland)

Subscription music site eMusic has inked a deal with Sony Music to bring selections from the label's catalog--"classic" recordings that are at least two years past their release date--to the online retailer starting in a few months.

eMusic hasn't had the biggest footprint in the digital music retail space of late, falling well behind iTunes--and some say that Amazon MP3 has grown bigger as well. eMusic was one of the first players in the space to offer music free of digital rights management (DRM) restrictions, which a few years ago more or less meant that the big labels wouldn't go anywhere near it and that its offerings were largely limited to independent music.

Now, eMusic has been trying to brand itself as the music outlet for people who know and appreciate quality music. Calling itself the "Internet's corner music store," it uses a combination of editorial and "crowd-sourced" methods to sift out and recommend new music picks. In other words, this is not where you buy party music by Katy Perry or the Jonas Brothers.

"The site, geared to adults over the age of 25, will contextualize albums and songs from Sony Music's renowned artists," a press release explains, "drawing meaningful connections between 'major' and 'indie' artists, and featuring in-depth discographies and collections built around genres and themes."

Free, on-demand streaming music is a rising tide: since the start of 2009, I've covered relatively new services like Spotify and Just Hear It, and there are plenty of established players like MySpace Music, Imeem, and Grooveshark.

Listen to Michael Jackson's music on Michael Jackson's official Web site. What a novel idea!

(Credit: Sony Music, Michael Jackson)

Instead of trying to stop the tide, Sony Music has wisely embraced it: starting today, the company will introduce streaming music players on the Web sites of its most popular artists, including popsters like Kelly Clarkson, John Legend, and Jacko himself. It makes perfect business sense: instead of letting some third party like Imeem sell advertisements against high-demand music, Sony can sell or display its own ads.

Of course, they couldn't make it too easy--finding the audio on Michael Jackson's site took a few clicks, including one that forced me to identify my country, and the songs were embedded in the Sony-specific MyPlay player, which is an interesting piece of technology but only lets you create playlists with songs from other artists with MyPlay players. More generally, I wonder if it's too late for these label-specific initiatives--I'm sure plenty of hardcore Britney fans have her Web site bookmarked, but most music listeners probably prefer to use services that let you compile lists from multiple artists on multiple labels.

Sony is also adding lyrics to these artists' sites, provided by the company's own Gracenote subsidiary. Excellent move. I can't believe it's taken this long, given the lack of decent lyrics sites out there. In fact, I still don't understand the reluctance to publish lyrics online--what are people going to steal? What money is the artist or copyright owner losing? Kudos for Sony for taking a baby step toward ending this silliness.

The struggling music units of Sony Corp. and Bertelsmann AG merged in 2004 so that a combined company could better fend off illegal file sharing and shrinking CD sales.

(Credit: Ellen Ng/CNET Networks)

The new recording company, named Sony BMG, was expected to wield the kind of resources that could challenge Universal Music Group as the largest of the four top labels. Sony BMG would own a chunk of U.S. music sales almost as big as Universal's.

To say the deal failed to deliver on the promise is probably an understatement. More than four years after the merger, there isn't a more troubled major label around.

In fairness, Sony is trying to regroup after buying out Bertelsmann late last year. It remains the second-largest recording company and currently has the No. 1 album in the country: Bruce Springsteen's Working on a Dream. Sony Music could also become the first major to renew its music licensing agreement with YouTube, according to sources close to the deal. For the recording industry, YouTube represents a potential new market.

But in recent weeks, Sony's woes have taken center stage, overshadowing at times the accomplishments of its stars. Last month, Sony Music reported a 22 percent decline in revenue from the previous year. In December, the Federal Trade Commission fined the label $1 million for collecting information on 30,000 children without obtaining parental consent. The New York Times recently reported CEO Rolf Schmidt-Holtz was steamrolled in negotiations with Apple's Steve Jobs. There is the unflattering press about the unorthodox managerial style of Rick Rubin, the record producer hired to run Colombia Records--he doesn't wear shoes or show up at the office--and the controversial hiring of Amanda Ghost, a songwriter with little administrative experience, to run Epic Records. A Sony spokeswoman declined to comment for this story.

As for Sony Music's digital efforts, the news isn't any less gloomy. The company's market share of digital album and song sales has plunged from 28.6 percent at the time of the merger to 22.5 percent, according to Nielsen SoundScan.

The setbacks at Sony's music division were a hot topic in Los Angeles last week as the industry gathered for the Grammy Awards. To outsiders, the label's troubles can be traced to Sony and Bertelsmann's conflicting corporate cultures. The deep fractures at Sony BMG first became public when executives from the Bertelsmann side of the venture worked to oust Andy Lack, the company's first CEO. Lack had been handpicked by Sony Chairman Howard Stringer, but he lasted just two years.

On the technology side of the house, insiders say Sony has struggled to recover from the Rootkit scandal. In 2005, Sony attempted to quietly place copy-prevention software on CDs. The technology, however, opened security holes on a person's hard drive when a CD was loaded into a computer. The software made the PC vulnerable to malware.

Sony was sued by several parties and was widely attacked by the public and press.

Behind the beat
Since then, Sony has rarely been out in front of the music industry's most important digital initiatives. For example, Universal was the first major recording company to sign a licensing deal with social network, MySpace, and was instrumental in the formation of MySpace Music, the jointly operated music service founded by all four major labels and Rupert Murdoch's News Corp.

When it came to partnering with YouTube, the Web video powerhouse, Warner Music was the first to sign a licensing deal. Sony Music was even the last of the majors to join Sony Ericsson's PlayNow online music store, according to an October story in The Los Angeles Times.

Sony Music's missteps have opened the door for rivals. As the company's share of digital music has declined, Warner Music's has increased. Warner's share of digital sales jumped from 18.10 percent in 2004, to 22.08 percent in 2008, according to SoundScan. This is a vital area, as digital download sales are expected to replace CD sales in coming years.

Certainly, Sony Music has plenty of resources to fuel a comeback. The company owns one of the largest music libraries as well as a stable of established and promising young artists, including Springsteen, Beyonce, and the band Franz Ferdinand. Sony also has a long history in music. The Sony Walkman, its iconic tape and CD players, were synonymous for decades with mobile music.

Of course, the Walkman was eclipsed by the iPod as the public's favorite mobile music player years ago and Sony's attempts to compete with the iPod and iTunes have gone nowhere.

Nobody can say that Sony Music hasn't tried new approaches to building a recording company equipped to compete in the digital age. The trouble is that few of the company's ideas have caught on.

In 2007, Sony raised eyebrows when it began turning to the industry's creative wing for managerial talent. The label hired Rubin, the bushy-bearded co-founder of hip-hop's pioneering record label, Def Jam Recordings. Rubin has produced hit albums for the Beastie Boys, the Red Hot Chili Peppers, Johnny Cash, and Neil Diamond, but his maverick managing style--he continues to produce records for bands at other labels--has irked some at Sony Music, according to The Times' piece.

Sony hasn't had much more success on the digital side. Remember the Ringle?

In 2007, Sony BMG spearheaded an effort to combine songs with ringtones and package them on CDs. This half-single, half-ringtone offer was supposed to help record stores cash in on the ringtone craze as well as help boost physical sales. At best consumer adoption has been lukewarm.

Unfortunately, the same can be said for much of what Sony Music has been trying to sell.