US Report: Music to be distributed online

Today sees the launch of a company, GoodNoise Corp., which plans to make its fortune based on the idea that the future of music distribution is online.

GoodNoise plans to take advantage of the growing community, mostly college students, who download and trade high-quality music clips over the Net. The trend has been given a boost by the dropping prices of CD writers, which allow users to cheaply store large music files, or even to burn CDs that will work on any CD player.

"We think the rights concerns are a bit too strong," said Gene Hoffman, president and co-founder of GoodNoise. "We're from a software background, mostly, and we've seen that people like downloadable software. Nobody's gone belly-up because of that. "Our strategy is going to be to make it easier to buy the music than to steal it," he added.

GoodNoise plans to sell single tracks for 95 cents (58p) a pop, or $8.95 (£5.45) for an album -- about half the price of an album at the local non-virtual music shop.

The company won't just be an online retailer. While it plans to license music from other record companies, GoodNoise is looking to acquire its own properties, partly to prove that online music distribution isn't the bane record company execs seem to think it is. GoodNoise will initially focus on alternative rock, the most popular genre in the college-aged marketplace.

Whether the informal network of online music trading will prove a substantial market remains to be seen, but analysts have already earmarked the trend as a potential bonanza. From about zip this year, Jupiter Communications foretells online music delivery will bring in $1.6 billion (£0.98bn) by 2002; that's about half what Jupiter predicts for the overall online music market, including advertising, merchandising and ticket sales.

Hoffman estimates that about 2 million users are already downloading and trading music online.

GoodNoise, which will also sell through traditional outlets and sell physical CDs online, expects to introduce its first products by August. In the mean time the company will be acquiring and licensing properties.

For now, GoodNoise will ship its music in the MP3 (MPEG1, Layer 3) format, commonly used in trading CD tracks now, but plans to help develop specialised music formats.

Today GoodNoise also announced a partnership with privately held music publisher peermusic. GoodNoise, based in California was formed early this year by Hoffman and Robert Kohn, both veterans of encryption technology company Pretty Good Privacy.