not a paticularly positive developement

Vivendi Deal for MP3.com Highlights Trend

By MATT RICHTEL

SAN FRANCISCO, May 21 — Internet start-ups like MP3.com, Napster and EMusic.com set out several years ago to challenge major record labels as the predominant distributors of music. But the announcement on Sunday that Vivendi Universal is buying MP3.com punctuates how radically things have changed: in recent months, a number of the leading music upstarts have been absorbed, in whole or in part, by the very labels they set out to challenge.

The upshot, industry analysts say, is that the five major record companies could wind up actually consolidating their power in an Internet age that some analysts thought would shake the labels to their core.

Napster is struggling, too, in light of a court decision earlier this year that required it to prevent the exchange of copyrighted files owned by the major record companies. The company said today that last week its average traffic had fallen to seven million visitors a day. In April, the company had averaged eight million visitors a day, a Napster spokeswoman said.

Aram Sinnreich, an industry analyst with Jupiter Media Metrix, said the spate of acquisitions had dashed some peoples' expectations that the Internet would become a "democratizing influence" to mitigate the role of the major record companies.

"A lot of people used to gas off about how the Internet was going to kill the major labels," he said. But the Internet has turned out to be "one more instrument for the major media companies that own the major record labels to consolidate their power and influence."

"It ultimately means that neither consumers nor musicians will have much greater choice than they had in the first place," Mr. Sinnreich added.

Eric Scheirer, an analyst with the consulting firm Forrester Research, said Vivendi Universal might be able to use the acquisition to reach its own goal — beginning the Duet music service with Sony — more quickly

But, echoing Mr. Sinnreich, Mr. Scheirer said the acquisition of MP3.com could be frustrating to independent, unsigned musicians who hoped the Net would reduce some power of the labels. And Mr. Scheirer said the death or acquisition of the smaller sites could raise the concerns of some members of Congress, who have suggested that record companies should be forced to license their music to competing music services on the Internet.

"At this point, there is no Internet start-up that's functioning well, that's stable and that's not under the control of the labels," Mr. Scheirer said. "This is explicitly something Congress has not wanted to see come to pass."

5/22/’01 NYT