MTV fires up assault on iTunes

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Watch out, iTunes. Here comes MTV.

The cable giant, under the leadership of Tom Freston, is readying a digital-music service for an early 2006 launch in a bid to grab a chunk of the fast-growing $765 million market. The planned name for the iTunes challenger is Urge, and the service will also have a My Space-like online community, as well as subscription and a la carte downloading services, said people with knowledge of the plans.

In July, MTV parent company Viacom applied for the trademark "Urge" to be used as a brand name for an online community, news and chats, as well as downloading and streaming of digital audio, video, graphics and peer-to-peer networking. Viacom registered as trademarks the names "Phyle" and "Playcast," too. And it is readying a multimillion-dollar, cross-media marketing push to fuel Urge's takeoff.

Mr. Freston first mentioned an MTV-created digital-music-downloading service in 2003 at a Harris Nesbitt conference where he said it would compete with market leader Apple's iTunes. Originally slated to launch in the first half of 2004, the service has been pushed back several times. In December 2004 Jason Hirschhorn, senior VP-digital music and media for MTV Networks, promised the service would make its debut in 2005 and "blow the space open."

Taking on iTunes won't be easy. The reigning digital-music leader boasts a 67% market share, according to NPD. And other players such as Wal-Mart, America Online and Yahoo are crowding the space-with Amazon.com set to join the race soon.

But the prize is worth it. The burgeoning digital-music business is expected to top $3.4 billion by 2009, according to Veronis Suhler. And MTV has advantages over existing players.

"Apple doesn't offer subscription service and we know from our surveys subscriptions have strong appeal to younger users, especially under 24-year-olds"-a key MTV demographic, said Joe Wilcox, senior analyst at Jupiter Media.

MTV also brings built-in marketing prowess and a massive library of original content, both audio and video. In addition, combined with its Viacom siblings, it has an impressive arsenal of global media options that could be used in an effort to brand, and build traffic to, the service.

"That's one way to look at digital music-as opportunity for cross-promotion and cross-channel initiatives," Mr. Wilcox said. "Even Apple does that with the so-called halo effect, where iPods and iTunes help sell Macs. It's more than just about music."

WHY THE WAIT?

Still, many wonder what took MTV so long. "[MTV] should have made the move two years ago when Rhapsody and Napster did," said Phil Leigh, senior analyst, Inside Digital Media. "But when a company is successful in the old paradigm, adapting to the new paradigm isn't easy. It's something they do with reluctance."

According to many analysts, the most formidable force on the market today is Yahoo Unlimited Music, which has priced its all-you-can-eat subscription-based service aggressively at $5 a month with a year-long subscription commitment. "Yahoo was attempting not so much to challenge the incumbents but also preemptively strike against Amazon, MTV, Google and others," Mr. Leigh said. Ironically, Yahoo Music Unlimited is launching in conjunction with the MTV Video Music Awards on Aug. 28.

Subscription-based digital-music stores are seen as a better model because they generally offer higher profits and the promise of recurring revenue. Under the plans, users have access to a virtually unlimited library of songs-unless they quit subscribing, in which they lose them all.

MTV wouldn't comment other than to say plans are not finalized. It has previously promised a major marketing push behind a launch and those with knowledge of the plans said the creative for the project has been awarded to Publicis, New York. An agency representative referred calls to MTV.

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