The Technophilez

The world's biggest music companies, including Warner Music Group Corp and Sony BMG, denied that they have agreed to license songs for a free download service that was launched by Qtrax on Monday.

Qtrax told Reuters and other media outlets last week that it had deals with the major labels representing about 75 percent of all music sales, to let users download songs for free in a new service to be supported by advertising revenue.

But by Monday, Sony BMG Music Entertainment and Warner had publicly denied that they had agreed to back the new Qtrax service.

A source close to Universal Music, the largest of the group, said it also had not signed a deal for the new Qtrax service and is still in discussions.

And a source close to EMI Group said that while its song publishing unit has an agreement with Qtrax, its recorded music arm, EMI Music, does not.

"Sony BMG can confirm it has not signed a deal with Qtrax for the ad-supported service," said a spokesman for Sony BMG, a joint venture between Sony Corp and Bertelsmann AG.

EMI Music, Sony BMG and Warner all previously had agreements with Qtrax, which was testing a paid music download service. Sources say those agreements expired in the last year and did not cover the new free, ad-supported model now being promoted by Qtrax.

The success of the video game Rock Band is drumming up revenue for the music industry.

Virtual rockers downloaded roughly 2.5 million songs in the eight weeks since the game launched on the Microsoft Xbox 360 and Sony PlayStation 3 systems.

Rock Band, developed by Harmonix, which also created Guitar Hero, comes with 58 playable songs including the Rolling Stones' Gimme Shelter and Metallica's Enter Sandman. But many more tunes can be downloaded over the PlayStation Network and Xbox Live for prices varying from 99 cents to $2.99.

RELATED: Gaming industry sales grow by 43% in 2007

"Hopefully it helps evolve music to not just a linear art form but a more interactive art form," says Van Toffler of MTV Networks. MTV Games publishes Rock Band, along with Electronic Arts. "You look at a lot of 20-year-olds who are reticent to plop down $20 for a CD, yet they don't mind paying $25 for a DVD or $50 for a video game. … We're seeing the audience really embrace hearing new music for the first time or engaging with classic rock songs in a new way."

New songs are available weekly for Rock Band. And musicians and bands are lobbying to get their songs in the game. "As opposed to us being the aggressor, a lot of the classic bands and the biggest bands in modern music history are approaching us now to be in the game," Toffler says.

More than 1 million copies of the game have been sold, according to the NPD Group.

Sony BMG Music Entertainment on Jan. 15 becomes the last major record company to sell downloads without copy restrictions — but only to buyers who first visit a retail store.

The No. 2 record company after Universal Music will sell plastic cards, called Platinum MusicPass, for individual albums for a suggested price of $12.99. Buyers enter a code from the card at new Sony BMG (SNE) site MusicPass.com to download that card's album.

"The bigger picture is to make our music available in many different formats, through many different channels, in many different ways," says Thomas Hesse, president of Sony BMG's global digital business and U.S. sales.

Best Buy (BBY), Target (TGT) and Fred's (FRED) stores will be first to sell them. By Jan. 31, they'll be in Winn-Dixie, Coconuts, FYE, Spec's and Wherehouse. Like gift cards, MusicPass cards are activated at the store.

Sony BMG initially will offer cards for 37 albums by performers including Alicia Keys, Avril Lavigne, Bruce Springsteen, Chris Brown, Carrie Underwood, Daughtry, Jennifer Lopez and Santana.

Buyers also can download a digital booklet like those with CDs and material such as bonus tracks and videos.

For a suggested $19.99, Sony BMG also will offer cards for Kenny Chesney's album Just Who I Am: Poets & Pirates and Celine Dion's Taking Chances that let users download a second album by the same artist.

"I'm excited that Taking Chances will be included in the launch of these new cards, and I hope that my fans will see it as a great Valentine's Day present," Dion said in an e-mail.

The cards come as music sales continue to fall. Sales of 584.9 million albums or their digital equivalents last year were off 9.5% from 2006, according to Nielsen SoundScan. The outlook remains cloudy as retailers cut space for CDs, and online piracy continues.

Other record companies have already thrown in the towel and sell music without copy restrictions online, where sales were up 45% last year. Lifting copy limits lets fans listen to their songs on any PC or player. Warner Music (WMG) joined the bandwagon in December with a deal to sell on Amazon's MP3 service.

While conventional download services, such as iTunes, (AAPL) make impulse music buying easier than the cards, Sony BMG feels "strongly that there's a group that will enjoy carrying the imagery of an artist they love around with them, or sharing it with their friends," Hesse says. Cards allow one download, though they have a provision for a backup.

He says that Sony BMG would like other music companies to offer album cards. It also expects to sell MusicPass cards in additional stores and possibly at concert venues.

LAS VEGAS  - Dutch electronics group Philips is to partner digital media company RealNetworks in online music in a move to bolster its position in North America and help revive RealNetworks' music business.

Philips and RealNetworks will offer a unified music download service to home audio systems as well as portable music players from a single provider, filling what they argue is a gap in the market.

The two companies plan to launch the Rhapsody service for Philips devices in North America around the end of the first quarter, executives said at the Consumer Electronics Show in Las Vegas on Sunday.

They said they had learned from Apple's winning combination of the hit iPod music player and the iTunes online music store that has made Apple by far the market leader, while offering consumers more by bypassing the PC for music at home.

"You need very tight device-service combinations, and Apple has proven this," RealNetworks' head of consumer business development, Matt Rowlen, told Reuters in an interview.

Customers will need either a Philips home audio system or a box to attach to their existing system to have music they select from the Rhapsody subscription service downloaded simultaneously to their PC and home stereo.

The Philips MP3 music players that will make up the full set will be priced "very aggressively" at about $109 to $199 for 4 gigabyte or 8 GB versions, Philips Consumer Lifestyle strategy chief Kevin Lewis told Reuters. This is enough for up to about 2,000 songs.

Two music label titans, Sony and Warner Music Group, are increasingly being pressured to follow in the footsteps of their peers are remove the DRM restrictions on digital download versions of tracks in their vast catalogs. The pressure stems partially from the planned announcement of a free download promotion sponsored by Pepsi that will take place through Amazon's online music store. The download promotion will be included in 5 billion of Pepsi's soda bottle-caps, with customers needing to collect 5 caps in order to receive one free download. Pepsi ran a similar, but much smaller-scale promotion in conjunction with Apple's iTunes Music Store in 2004, offering 100 million free tracks, of which about 5 million were redeemed. Amazon's store is DRM-free.

According to PC Magazine Amazon will pay labels around 40 cents per track. "This compares with the 65-70 cents labels currently receive from Amazon for digital track sales and the 70 cents they get from Apple. [...]A mazon has captured about a 3 percent market share of the digital download channel, Billboard estimates. The store has a 6 percent market share of all CD sales."

In addition to the promotional opportunity that might be missed by not having a DRM-free catalog in time for the Amazon promotion, Warner and Sony will soon have to contend with Wal-Mart's pending decision to pull both companies' Windows Media Audio format-only catalogs sometime around the beginning of 2008. Wal-Mart carries only 2 percent market share in the digital download arena but sells about 22 percent of all physical CDs.

CD sales are down about 18.6 percent this year, while digital track sales have surged from 142.6 million tracks in 2004 to 735.4 million

The insistence by major music labels on digital rights management (DRM) for online stores is having a damaging ripple effect on retail music shops as well, says the head of Britain's Entertainment Retailers Association, Kim Bayley. The executive notes that while physical stores still see high profile releases and seasonal increases, the hesitation by buyers leery of either restricted direct downloads or higher-priced CDs is neutering the effect.