By Antony

SAN FRANCISCO (Billboard) – Customers picking up the latest MP3 players
this fall are getting much more than just a device. Increasingly,
they’re getting free music as well.

To set themselves apart from the pack, manufacturers are preloading
content into their players to increase sales — and the music industry
is only too happy to oblige.

The Zune from Microsoft, expected this fall, will contain up to 30 free
tracks donated from major and independent label partners.

While the economics of the deal vary a bit from one manufacturer to
another, they’re all basically quid pro quo arrangements in which labels
provide the free tracks and reap the promotional rewards in distribution
and marketing support.

“It’s a direct promotional situation” for labels, Zune head of artist
development Richard Winn said. “When you can quantify the real estate to
them, then they get interested.”

Microsoft is still not discussing the number of Zunes it will ship, but
it is expected to be in the millions. The company also will launch a
marketing campaign equal to that of its
Xbox 360 launch, estimated at more than $300 million. Winn says that
much of the advertising and promotional materials will contain images
and music of the artists whose tracks can be heard on the Zune.

SanDisk is taking the concept even further in its new relationship with
Rhapsody. The manufacturer will introduce a line of Sansa digital media
players dubbed the Sansa Rhapsody. More than 32 hours of music will be
preloaded into the device, most of it major-label fare. SanDisk, a
supplier of flash data storage products, holds the No. 2 position behind
the iPod with 18 percent of the flash-based player market.

This initiative is a bit different in that the music is
subscription-based, meaning that users have to subscribe to Rhapsody and
sync their devices, or the preloaded music will stop playing after 30 days.


Label sources say they see great promotional benefit for giving away
music on these devices, as long as it’s protected in a secure digital
rights management system that prohibits sharing that song for free.

“This represents a great opportunity for us,” said Astralwerks general
manager Errol Kolosine, whose company is contributing music from its
artist Hot Chip to Zune. “The music industry has been giving away music
samplers for decades. It’s like a pusher — we give you the first hit
for free.”

Interestingly, the concept of preloading came not out of a desire to
promote music, but rather a more tactical need.

In March, SanDisk (one of the pioneers of the preloading strategy) began
distributing the Sansa e200 with about 20 songs embedded. According to
Eric Bone, director of product marketing and audio/video for SanDisk,
the idea initially came at the request of consumer electronic retail
chains seeking a better try-before-you-buy experience. Without content,
there is little opportunity to compare user interfaces, say, or screen
resolution. “As they put the device out on the shelf displays, if
there’s no content on it, it’s worthless,” Bone said.

With 742 Best Buy stores and 632 Circuit City stores nationwide, the
music industry saw the advantage of exploiting this need to get its
music in front of more eyes and ears. Labels have focused on
contributing music by artists who have a new album or tour coinciding
with the device’s release date.

And manufacturers are planning to increase their retail presence as
well. Zune plans to establish a significant in-store experience that
includes listening stations and large displays that incorporate the
images and music of the embedded artists.

The biggest wild card, of course, is whether anyone purchasing these
devices will actually listen to the preloaded music and subsequently buy
more of it. But since the concept is relatively new, there’s no data yet
that suggests whether preloading music has any affect one way or the other

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