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Winning Over Music Industry, Apple Launches Online Service
The Associated Press

SAN FRANCISCO (AP) - Two years after angering the recording industry with its "Rip. Mix. Burn" ad campaign, Apple Computer Inc. has won its cooperation in creating the Internet's least restrictive commercial music service yet.
The iTunes Music Store announced by Apple CEO Steve Jobs on Monday draws from all five major labels in offering more than 200,000 songs at 99 cents a download - and includes some big name artists who previously shunned online distribution.

Unlike its competitors, the service has virtually no copy-protection - a major concession to consumer demand.

Apple lets customers keep songs indefinitely, share them on as many as three Macintosh computers and transfer them to any number of iPod portable music players. No subscriptions are necessary and buyers can burn unlimited copies of the songs onto CDs.

"There's no legal alternative that's worth beans," Jobs told reporters and industry analysts at San Francisco's convention center.

Jobs has intensely courted music industry executives, who have been leery of digital music downloads and have aggressively used lawsuits and lobbying to stem the illegal copying and distribution of copyright works. That wariness has hamstrung other online music distribution models, keeping most of the best new music offline.

In contrast, Music Store already includes music by Bob Dylan, U2, Eminem, Sheryl Crow, Sting and other artists previously wary about music downloads. Eventually, millions of songs will be for sale on the site, predicted Doug Morris, the chairman and CEO of Universal Music Group.

Morris, attending Monday's launch, called it "a defining moment in the music business."

By allowing people to do pretty much as they please with their digital copies, Apple and the music industry are acknowledging that, due to digital technology, online file-swapping can't be eradicated.

"You can't stop piracy, so you have to work with technology, and you have to get into the rhythm of it. That's what Apple has done here," said the musician Seal, who was at the announcement.

Even Hillary Rosen, who as CEO of the Recording Industry Association of America (RIAA) has led the fight against Napster and it's free online music-swapping successors, called Apple's new service "cool, cutting edge" in a statement.

"It's not stealing anymore. It's good karma," said Jobs, asserting that other industry-backed services' subscription-based models treat music fans as "criminals" with extra fees and restrictions. Apple also announced a new version of the iPod - thinner and lighter. It comes with 30 gigabytes, or about 7,500 songs, and costs $499.

Initially, Music Store only works on Macintosh computers, but by year's end, Apple plans to make it compatible with devices using the nearly ubiquitous Microsoft Windows platform - as it did for they iPod. Then, the service could have mass appeal.

While the service remains limited to Macs, which comprise less than 3 percent of the desktop computing market, the segment is big enough to let the music industry test a new business model, said Phil Leigh, an analyst at the research firm Raymond James & Associates.

"I think it'll change the world a little bit," Leigh said. "It'll be the first legitimate online music service that will have major brand recognition, and it's focused on portability and ease of use."

Until now, most music found online lacked the blessing of the major labels - BMG, EMI, Sony Music Entertainment, Universal and Warner. Millions of users are downloading free copies of songs through file-sharing services such as Kazaa - services that the recording industry have sued in an effort to stem what they deem as revenue-robbing piracy.

The RIAA has sued four college students who allegedly offered more than 1 million recordings over the Internet, demanding damages of $150,000 per song. Music companies also are lobbying corporations, urging them to crack down on the downloading of songs using company computers.

But their efforts suffered a major blow Friday when a federal judge in Los Angeles ruled that Grokster Ltd. and StreamCast Networks Inc., the companies that distribute Grokster and Morpheus, aren't to blame for any illegal copying that their customers do using their file-sharing software. They've vowed to appeal.

Apple enters a market that has yet to establish much traction. Other providers of online music to paid subscribers have drawn only about 650,000 users, analysts estimate.

Pressplay, a joint venture of Sony and Universal, charges a flat fee of $9.95 a month to listen using their computer to an unlimited number of songs from the major labels. Consumers who want to purchase songs to store on their hard drive or burn them onto a CD pay an extra fee of 98 cents per song.

Apple charges no such fees but does incorporate some minor restrictions - playlists can be stored on no more than three Macs and once a user burns 10 copies of a playlist onto CDs, they have to "modify" the list before copying again. This can be as simple as shuffling the order of the songs.

All Music Store songs are encoded in the AAC audio format, which allows for faster downloads and higher sound quality than MP3 files of the same size. The format was developed by Dolby to provide the sound for industry-standard MPEG-4 video files.

AP-ES-04-28-03 2040EDT

This story can be found at: http://ap.tbo.com/ap/breaking/MGAWKZP53FD.html