AOL's new Music Now service gears up for the Zune era

Posted by Scott M. Fulton, III

Dulles (VA) - The rebuilding of AOL continues at a breakneck pace today, as the company deploys more services to generate revenue to replace the diminishing amount it was receiving from its ISP business - which it is essentially jettisoning. Today, AOL is launching its Music Now service, which incorporates the streaming infrastructure it acquired last November from Circuit City, plus the core of music licenses it acquired from Spinner.com back in 1999.

Although the launch is being billed as a new venture, Music Now is actually one of the most launched and relaunched digital music services in the short history of the business. Radio broadcasting giant Clear Channel Communications co-founded MusicNow (at that time, without the space in-between words) in March 2003, to go up against Rhapsody, two other now-non-existent brands, and ironically, AOL's music service at that time. MusicNet, as it was then called, was one of AOL's premium ventures to exploit potential revenues from the Spinner.com licenses.

The original headquarters of Web streaming pioneer Spinner.com, in the SOMA district of San Francisco in 1999.

The original headquarters of Web streaming pioneer Spinner.com, in the SOMA district of San Francisco in 1999.

The first relaunch came in November 2003, when MusicNow co-founder FullAudio announced a partnership with retailer Best Buy. But to keep its chief rival from besting it in the online services arena, Circuit City bought MusicNow outright in March 2004, relaunching the site again in May. A corporate restructuring came only two months later, leading to a drop in subscription fees to $9.95 per month. Realizing that the per-song, or a la carte, option was helping competitor Napster to regain its lost momentum, MusicNow picked up a similar option during its March 2005 relaunch. That helped spur revenues, but it also made MusicNow a bigger meal for a bigger fish - AOL - later that year. AOL would acquire the firm and its executives, and add the space.

Under the new, merged AOL Music Now terms announced this morning, users will still have the option of purchasing songs a la carte for 99¢ per download, or subscribe for $9.95 per month and waive all per-song charges for unlimited downloads. But to help give the new Music Now an edge, AOL will be merging its video services into the mix as well, under a similar model. Users will now pay $1.99 for a la carte downloads of videos, or $14.95 per month for unlimited access to both song tracks and videos.

Music Now's unlimited subscription fee will cover users' rights to transfer tracks to Windows Media-compliant portable players, including Creative Labs' Zen, SanDisk's Sansa, and Toshiba's Gigabeat. All three players were featured in AOL's new advertising this morning, the Zen most prominently among the three, but it's the Gigabeat that may be causing some stir. Essentially, the next generation of the Gigabeat will be Microsoft's upcoming Zune player, manufactured for it by Toshiba, and bearing many of Gigabeat's existing characteristics, plus wireless networking.

AOL's statement this morning indicating that PC users will need Windows Media Player 10 or higher only, and not version 9 or earlier, makes it pretty clear that Music Now will be restricted to Microsoft's most stringent DRM-governed media format. Yesterday, TG Daily learned that one independent programmer has distributed a utility that claims to remove Windows Media encryption keys from Media Player files, leaving a presumably "clean" file that could be converted later to MP3. Media Now will evidently not be posting MP3s for download.

Among the other players in the "everyone-but-iTunes" music service space, Napster is perhaps the most recognized brand, with a similar 99¢-per-song download fee. It currently charges $9.95 per month for unlimited downloads to PC, and $14.95 per month for its "Napster to Go" service, which enables unlimited transfers to the same set of Windows Media devices. Real Networks' Rhapsody service is more price-competitive, charging 89¢ per song download, and $9.95 for "Rhapsody to Go" unlimited transfers to WMA devices. In-between the two is Yahoo, which charges 79¢ per download but $11.99 per month for unlimited downloads and transfers - reduced by 20% for customers billed annually. For now, none of these services are experimenting with video options - which, frankly, forsakes one of the key features of Creative's, SanDisk's, and Toshiba's devices: palm-sized video.

All three of these services promise per-song downloaders the right to burn their music to CD, albeit in individual tracks rather than as complete albums. However, all of AOL's information this morning only refers to the capability to transfer songs to PlaysForSure devices (supporting Windows Media). Previous incarnations of MusicNow did enable burning to CD. TG Daily has contacted AOL for clarification, and a response may yet be forthcoming.

Inside the headquarters of Spinner.com in 1999, where technicians transcoded digital audio one track at a time, by hand.

Inside the headquarters of Spinner.com in 1999, where technicians transcoded digital audio one track at a time, by hand.

One apparent victim of today's announcement is AOL's existing, though somewhat lukewarm, marketing arrangement with iTunes, which had in the past included AOL direct links to iTunes content. In their place, AOL will be instituting a new, open standard for direct and even deep linking to Music Now via Web services. This way, bloggers and Web site developers can use embedded controls that not only include links, but browsing controls that enable users to search for and locate tracks on Music Now.

When archaeologists dig through Music Now's multiple layers of relaunches to uncover its biological origins, what they'll discover is Spinner.com, one of the pioneering Web services for legal online streaming. Spinner.com purchased some of the first legal licenses for a Web site to digitally distribute music content, under the premise that it was in the context of a single, programmed stream rather than a database of random-access tracks. When my colleague, Wolfgang Gruener, visited Spinner.com in a converted factory in the SOMA district of San Francisco in 1999, he found the company's engineers making the first digital re-encodings of CD audio tracks for Web distribution...by hand, one-at-a-time. Some of these tracks are still in use today.

We shouldn't forget that, after all the millions of dollars of marketing effort ("Do we leave the space out, or add it back in?") have been spent, and the relaunches upon relaunches have been shot off, what remains is the foundation put forth by a handful of guys working non-stop, meals at their desks, usually overnight, working toward the kind of dream few in the corporate realm can even imagine to this day.