Downloadable CDs to rival stores

THE WORLD'S five biggest record companies will today launch a scheme to offer music downloadable direct from the Internet in a move which could signal the end of the traditional record shop.

The trial, in San Diego, will enable 2,000 specially-selected Internet surfers to place orders for albums and download then direct to their computers via a cable modem in six minutes.

The result will be CD quality sound via a secure Internet link. But the price - around $12.99 (pounds 7.99) - will be no cheaper than that charged in ordinary US record shops.

The move is being pioneered by EMI, Sony, Time-Warner, Bertelsmann and Seagram, owner of Universal and PolyGram, who together control 80 per cent of the world's music business. Their aim is to counter the growing problem of music piracy on the Internet from where people can download songs for free using a format called MP3.

The problems has been compounded by the launch of an MP3 player, called Diamond Rio, which can play up to an hour of digital recordings using no disc or tape.

Under the codename "Project Madison", the music companies have linked up with IBM to provide the 2,000 participants with recordable compact disc machines which will capture the digital recordings much quicker than MP3 recordings and in a way that is financially secure.

The scheme will involve only a limited number of albums but they will be taken from the major labels' huge rosters. For instance, EMI has the Rolling Stones, the Spice Girls, Garth Brooks and the Smashing Pumpkins on its books.

Though the record companies say they hope to work with the retailers to provide the service, it is understood that some of the Big Five are keen to bypass the high street altogether. "Selling direct is an issue that has not yet been resolved," said an EMI spokesman. We want to find out how the technology works and what the customer reaction is."

Critics of the scheme say the music majors will find it difficult to replace the retailers. "If they band together to fight the retailers they would be hit by an anti-trust suit before they even started," said Will Whitehorn, a spokesman for Virgin which owns the Virgin Megastores.

Mr Whitehorn says even the most optimistic forecasts show that the Internet will account for just 9 per cent of US music sales by 2003-4 and the same figure in Europe by 2009.

Alan Giles, chief executive of HMV Media said: "You could view it as an opportunity for retailers rather than a threat. This will allow retailers to offer balance, recommendations and a choice that would not be available direct from the music companies." Mr Giles added that music shops would continue to have a role for the simple reason that many people enjoy shopping.

Traditional retailers are already being attacked by on-line music stores such as CDNow and Music Boulevard, which can offer lower prices, and new competition is arriving all the time. In April Virgin's new music label V2 is planning a scheme that will enable shoppers to listen to songs and view pop videos before deciding to download a song digitally.

It will undercut the traditional retailers on price but has not yet disclosed by how much. The scheme is set for launch in the US in April and in the UK in June.

Separately yesterday, FNAC France's leading music and books retailer announced plans to sell songs over the Internet.