Microsoft, BT in UK music subscription deal

Two days before the launch of Microsoft Corp.'s Windows XP operating system, the software company announced plans to launch a U.K. music subscription service with British Telecommunications PLC (BT).

The service, based on a custom-designed player using Microsoft's Windows Media technology, will be delivered through BT's BTopenworld division, the companies announced Tuesday.

The secure subscription service is currently on trial, said Erik Huggers, European business manager for Microsoft's digital media division.

Microsoft and BT will provide music from labels including BMG Entertainment Inc. (whose parent company is Bertelsmann AG), V2 Ltd. (parent company Virgin Group Ltd.) and Warner Music U.K. (parent company AOL Time Warner Inc.)"We are in a trial period now and that will be going on for a couple of months. We are expecting to launch the service in the first half of next year," said Ben Drury, head of music for BTopenworld"We are doing extensive research as part of the trial. No one has really buttoned down what the actual subscription services for online music distribution are yet and how to charge for them. A large part of our research is determining what the monthly subscription fee will be," Drury said.

The BT online music subscription service hopes to get a jump on the U.K. market before its main competition, MusicNet and Pressplay, make their way to Europe, Drury said.

MusicNet is backed by RealNetworks Inc., Bertelsmann, AOL Time Warner and EMI Group PLC. Pressplay was formed by Vivendi Universal SA and Sony Music Entertainment Inc. and is backed by Microsoft.

"MusicNet and Pressplay will be operating exclusively in the U.S. when they are launched and won't be coming over (to Europe) until sometime later next year. We are currently having dialogue with both MusicNet and Pressplay, but we've made no firm decision about which provider or combination of providers we may work with in the future," Drury said.

BT is currently working with On Demand Distribution Ltd. (OD2), co-founded by musician Peter Gabriel, to distribute its online connect to BTopenworld's 1.5 million customers, and is looking to sign more music labels to the project before its launch next year, Drury said.

Drury pointed out that BTopenworld's deal with Microsoft is not exclusive, which leaves the door open for the company to work with Microsoft's main competition in the media player market, RealNetworks, at a future date.

"For downloading, Microsoft DRM (digital rights management) is proven and Microsoft was also willing to provide us with a customizable media player. Microsoft won't do that for just anybody; in fact, we're only the second company, after Pressplay, to be able to do that with Microsoft," Drury said.

BT did also announce a separate deal Tuesday with RealNetworks at the Steaming Media Europe 2001 conference. Under that deal, BT's BT Ignite Content Hosting division will support RealNetworks' upcoming RealOne Media Player through its iVelocity content distribution network, aimed at serving an European audience. "The answer as to why there are these two separate agreements is both simple and complex at the same time," said BT Ignite Chief Technology Officer Tom Walton.

"The agreements are uncoupled and though BT Ignite has a wholesale agreement with a pan-European focus with RealNetworks, BT hasn't forsworn other technologies where they make sense. The deal with Microsoft is more consumer-oriented," Watson said.

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