The merger of America Online Inc. and Time
Warner Inc. could turn out to be a hit with those who want their
music served hot off the Internet.
Most music now available for downloading is either by relatively
unknown artists or is bootlegged in violation of copyrights, but
the merger could help change all that hastening the day when
customers of the company can snatch popular albums directly off the
Web instead of buying $16 CDs.
"One of the main barriers to consumers adopting online music
has been the low volume of major label music that's available on a
legitimate basis," said Aram Sinnreich, an analyst with the
Internet research firm Jupiter Communications Inc. said Wednesday.
"AOL Time Warner has the power to change that."
How? Time Warner owns one of the largest music businesses, with
rights to top artists like Alanis Morissette, Madonna, Phil Collins
and R.E.M. as well as a cable-TV network ideal for high-speed
transmission of music. AOL, for its part, has a ready online
audience of 22 million users and a coveted team of software
By owning all the pieces to supplying online music on a broad
scale, AOL Time Warner gains a ready edge over other companies that
need to forge partnerships.
The promise of online music is compelling: Sales of downloaded
online music are expected to grow from a minuscule $1 million last
year to $1.1 billion by 2004, according to Forrester Research,
making up about 6 percent of all music sales. That means fewer CDs
sold at stores, as everyday Americans download songs to portable
digital players they can take jogging or on the train to work.
Despite the online potential, the recording industry thus far
has refused to release its songs over the Internet until a secure
method is widely adopted for making sure they get paid royalties
Time Warner chief executive Gerald Levin, at a news conference
Monday, named online music as a top priority. While Time Warner
also is a big film producer, movies are more difficult to
distribute online, because even with high-speed Internet hookups
they can take hours to download and video can appear jerky and
inconsistent. As a result widespread downloading of films is
probably years away.
While executives at America Online and Time Warner were vague
about plans, speculation is rife.
The combined company, analysts say, may initially step up
promotion of Time Warner's music to AOL's online users through ads
as well as through links to Web sites where people can buy CDs
through the mail.
In a second stage, Time Warner could transmit its music across
existing slow-speed Internet connections to AOL users who pay an
extra fee above its $21.95 monthly subscription fee.
As Time Warner's cable-TV lines are upgraded for Internet usage,
the merged company could zap songs across these high-speed lines,
resulting in better song quality and faster download times than
across slow telephone lines.
America Online also plans to boost its existing online music
For instance, it already owns Spinner.com, one of the biggest
sites for letting users listen to songs on their computer. This
site uses "streaming" technology that allows people pay just
pennies for each song they hear. While major artists are available,
streaming doesn't let users record and keep the music on portable
AOL's site would be an ideal place for Time Warner to promote
its trove of music, analysts said.