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EMI & Roxio pact in online CD venture
LOS ANGELES (The Hollywood Reporter) --- EMI Recorded Music and Roxio Inc. have entered into an agreement that will make it possible for customers to legally burn compact discs of music downloaded from the Internet. It is the first time a major music label has taken a step to permit and profit from CD burning.

Few of the specifics have been determined, though both principals promise tangible results by year's end.

EMI Recorded Music senior vp new media Jay Samit said the long-term strategy is more significant than the details. "This is a capabilities deal," he said. "It is not a licensing deal."

Samit said Roxio's software is a key component in EMI's future digital media plans. For instance, online subscriptions could include the right to burn a CD for an additional fee. In another example, a customer could purchase a CD single that includes a link to download the entire album, which could then be burned onto the remainder of the disc. There also is considerable scope for promotional activities, he added.

"Consumers have spoken loudly that they enjoy burning CDs," Samit said. "Roxio is the leader in providing this, and we are working with them to provide a revenue stream for our artists and to empower our customers."

"This is the first deal that recognizes how integral CD recording is to the digital distribution model," Roxio president and CEO Chris Gorog said. "Furthermore, I think this is the first step in confirming that the digital-distribution model is ready to supplant the bricks-and-mortar model for entertainment content."

EMI has made an equity investment in Roxio as part of the arrangement. Neither party would disclose the specifics except to say that it was a minority holding for a "not insignificant" sum.

"Rather than look backward and invest in business models that haven't caught on, EMI has chosen to invest in a company whose full business potential has not even been fully comprehended yet," said Samit, in what might be interpreted as a reference to major-label deals with such services as and Napster. Roxio's ability to automatically update itself was another attraction because the existing user base of multiple millions could automatically receive whatever capabilities EMI chooses to make available.

Copy protection will be addressed in any project, as will consumers' desire for flexibility and portability. Although he declined to predict whether copies of burned CDs will be permitted, Samit did suggest that the ability to make one additional copy would meet the needs of most consumers while still preventing piracy.

He also acknowledged that it was possible to make unlimited copies of today's commercially available CDs but added, "In the not-too-distant future, most of the record companies will use some form of technology to stop the burning and the ripping of their CDs."

The agreement is mutually nonexclusive, and Roxio remains in talks with other labels.

Technology industry analyst IDC predicts that there will be an installed base of 100 million CD burners in the marketplace by year's end, growing to 400 million by 2004. Furthermore, it estimates that 5 billion blank CDs will be sold by year's end.

Roxio holds more than 70% of the market in CD burning software with products that include Easy CD Creator (for Windows) and Toast (for Macintosh). More than 99% of all PC manufacturers include Roxio software when they ship an included recordable CD drive. Roxio, a publicly traded company, was spun off from Adaptec Inc. last month.

EMI Recorded Music includes such labels as Capitol, Angel, Blue Note, EMI, Priority and Virgin. Its roster includes about 1,500 artists, and it releases more than 1,000 albums each year.

"EMI continues to demonstrate leadership in pioneering technologies for digital distribution that are both effective and practical," Gorog said. "We want to continue to work with leaders in the music industry like EMI to not only provide for the protection of their digital content but also to enable record companies and artists to get paid for burning."

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