Sony-BMG to sell DRM-free music downloads through stores

The tracks will be offered in MP3 format, without DRM (digital rights management), from Jan. 15 in the U.S. and from late January in Canada.

The move is far from the all-digital service offered by its rivals, though. To obtain the Sony-BMG tracks, would-be listeners will first have to go to a retail store to buy a Platinum MusicPass, a card containing a secret code, for a suggested retail price of US$12.99. Once they have scratched off the card's covering to expose the code, they will be able to download one of just 37 albums available through the service, including Britney Spears' "Blackout" and Barry Manilow's "The Greatest Songs of the Seventies."

In contrast, online retailer Amazon.com offers 2.9 million DRM-free tracks in MP3 format from the catalogs of EMI Group, Warner Music Group, Universal Music and a host of independent record labels. Apple's iTunes Store has around 2 million DRM-free tracks in the AAC format supported by its iPod and many mobile phones. No store visit is necessary to download those tracks, and an album typically sells for $9.99 or less.

About 4,500 retail outlets in the U.S. will sell the Platinum MusicPass cards by the end of the month, including Best Buy, Target, Trans World, Fred's and Winn-Dixie, according to Sony-BMG. In Canada, the cards will sell through Best Buy, CD Plus and Wal-Mart, and later through record store HMV.

Online sales will "ultimately be part of the game plan" for at least one of those retail outlets, said a source familiar with the offering.

With Valentine's Day approaching, Sony-BMG is counting on demand for gift cards to boost sales of the downloads, as well as the collectible nature of the cards themselves, which feature images of the artists and information about the albums.

Sony-BMG will offer "expanded" versions of two of the initial offerings -- Celine Dion's "Taking Chances" and Kenny Chesney's "Just Who I Am: Poets & Pirates." These will retail for around $19.99 and in addition to the Platinum version will also include an additional album from the artist's back catalog.

When they first considered online music sales, major record labels initially insisted that download services such as Apple's iTunes Store encrypt their tracks with DRM technology to prevent copying.

Smaller labels sold unprotected MP3 files through sites like eMusic.com, gambling that the increased sales and notoriety that would come with easier access to their music would outweigh sales lost through unauthorized copying.

That argument eventually won favor with Apple, which last May began offering tracks from EMI without DRM for a small premium, later bringing the price down to the same $0.99 it charges for other tracks with DRM.

Amazon followed suit in September, selling unprotected MP3 files from EMI and Universal. Warner joined them on Dec. 28.

The record companies all say they hope the move will lead to greater online music sales.

Sony-BMG said it hopes its combined model, selling a download pass through a physical store, will lead to greater sales of physical and digital music.

Albums need a boost, as the number sold in the U.S. dropped again last year, even as the number of music purchases rose, market watcher Nielsen SoundScan reported last week.

U.S. music buyers made 1.4 billion music purchases in 2007, up from 1.2 billion a year earlier, Nielsen said.

Nielsen counts a purchase as an album, single, CD or online download. Within that figure, digital track sales rose from 582 million to 844 million as buyers cherry-picked the tracks they liked from albums available online, while physical album sales (whether sold in-store or over the Internet, but excluding downloads) fell to 451 million in 2007, from 556 million in 2006, it said.

But if U.S. consumers are making more music purchases, they may be spending less: Nielsen also counts something it calls track-equivalent album sales, in which it counts 10 track downloads as the equivalent of an album. By that measure, track-equivalent album sales fell 9.5 percent to 585 million in 2007, from 646 million in 2007.