GOOGLE TAKES ON iTUNES AND ALREADY WINS

Forbes.com
NEW YORK –

Add gBox Inc. to the growing list of online music services hoping to chip away at iTunes’s dominance.

The Cupertino, Calif., startup was forced out of a stealth mode when
Universal Music Group announced late Thursday it would test sales of
some digital music without the customary copy-protection technology.

Under the program, gBox will get referrals through ads Universal will buy through search leader Google Inc., gBox Chief Executive Tammy Artim said Friday.

Google will get standard advertising fees rather than a cut of sales under the
arrangement. The ads, which would appear when a Google user searches
for specific terms such as the name of an artist, will direct the user
to gBox.

The arrangement with Universal and gBox is separate from
Google’s music search service, which directs users to online music
stores when they search for specific albums or artists. The company
says it does not get paid for such referrals, and it does not restrict
links to a single retailer.

Google, which has said it has no
plans to create a music store of its own, described the new arrangement
as strictly an advertising relationship.

Songs at gBox cost 99
cents each. For the Universal songs that are part of the test, gBox
will offer an MP3 version free of copy-protection technology known as
digital-rights management, or DRM. A DRM-enabled version will be
available at the same price.

DRM technology is designed to block or set limits on copying and CD burning.

Although DRM can help stem illegal copying, it can also frustrate consumers by
limiting the type of device or number of computers on which they can
listen.

Copy-protected songs sold through Apple‘s
market-leading iTunes store generally won’t play on devices other than
its popular iPod digital player, and iPods won’t play DRM-enabled songs
bought at rival music stores, including gBox.

Although many independent music labels have for years sold their tunes without copy
restrictions, the major recording companies have resisted.

Earlier this year, Britain’s EMI Group PLC became the first of the major labels
to embrace DRM-free tunes, letting Apple sell versions of songs with
higher audio quality and without any built-in copying hurdles.

The test by Vivendi SA’s Universal Music Group, while only encompassing a
portion of its catalog, is significant because Universal is the world’s
largest recording company. That raises the prospect that other major
labels could follow.

Universal Music will make DRM-free songs available Aug. 21 to Jan. 31.  to Amazon.com Inc.

 Wal-Mart Stores Inc., Best Buy Co., and RealNetworks Inc.’s Rhapsody are among the other retailers selling such tracks, but only gBox will get Universal’s Google referrals.

Although gBox won’t formally launch until Aug. 21, it already has a site with music from Sony Corp. and independent labels. Artim said the company has negotiated deals
with other labels, but could not disclose them until the launch.

She also said gBox was working with other major labels to sell DRM-free tracks like Universal’s, but such talks are ongoing.

GBox now works only with Microsoft Corp.’s
Internet Explorer browser on Windows-based computers, but Firefox support will come by the launch date, Artim said.

It won’t be compatible with Apple’s Macintosh computers, however. Even
though DRM-free tracks can play on any computer, the DRM versions
won’t, and gBox didn’t want to confuse customers, Artim said.

GBox is also is developing a “wish list” feature – software code that users can
place on their blogs or social-networking profiles at News Corp.‘s MySpace, Facebook and other sites. Friends visiting the blog or profile can buy a song for that user through gBox.

In relying on referrals through Google and social-networking sites, gBox
is taking a different approach to marketing. Other retailers tend to
drive music buyers to the store’s home page to discover new songs and
make purchases there.

“Instead of doing marketing and
(advertising on) billboards on Highway 101 to go to gBox,” Artim said,
“we want to take advantage of the viral element that has been so
successful for companies in the past
Forbes.com

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