Microsoft to Debut Store

The download market will get more crowded in September

August 24, 2004 12:00 AM ET
Apple's iTunes music store is about to face some serious competition, as online giant Microsoft prepares to roll out its own music store on September 2nd. With the ability to funnel 350 million users a month to the store via its Hotmail, Messenger and MSN sites, Microsoft will likely become the number-two player in the market for legally downloaded music and ultimately could challenge Apple's reign at the top.

The company has kept details of the Microsoft music store under wraps and declined to comment for this article. But according to sources close to Microsoft, the store will open to the public with somewhere between 600,000 and 700,000 tracks for sale at ninety-nine cents apiece. Within a couple of months, it will match Apple's 1 million offerings. Reports that Microsoft will use its financial clout to become the first site to offer the Beatles catalog (the band reportedly demands tens of millions of dollars for a long-term exclusive arrangement) could not be confirmed.

Microsoft is joining an increasingly competitive field. In the past year, high-profile stores have been launched by Wal-Mart, Napster and RealNetworks. Wal-Mart sells songs for eighty-eight cents, eleven cents less than iTunes or Microsoft. Many of the online stores seem to be timing promotional efforts to coincide with Microsoft's launch. Real began charging forty-nine cents a song for a limited time, losing money in the short-term in an attempt to gain new customers. In the coming months, Sony will be pushing its Connect store with television tie-ins, such as almost instant downloads of performances on the Jimmy Kimmel show and a new ad campaign featuring Macy Gray. In July, Napster launched an online-music store with Best Buy; by September, the download company will have kiosks in more than 600 stores for customers to try out the service.

Some sources speculate that Microsoft will bundle its new music store with future versions of Windows, much like Apple bundles iTunes with its operating system. Ted Cohen, EMI Worldwide's senior vice president of digital development and distribution, has seen Microsoft's site and describes it as "a better mousetrap" because it integrates the company's search and instant-messaging technologies. "I think it will be a serious competitor quickly," he says.

One source close to the matter says that Microsoft has made several overtures to Apple to make its store compatible with the industry-leading iPod but has been rebuffed. (Apple declined to comment.) Manufacturers of players that support Windows Media -- essentially all of them except the iPod -- are excited about the new site. "Any store selling music that our machines support is a great thing," says Gary Byrd, a spokesman for iRiver, a top-selling manufacturer. "When it comes to the market with Microsoft's might, that's a double bonus."

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