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On Tuesday, MP3.com relaunched its MyMP3.com locker service, which allows customers to access their CD collections at any Web-enabled computer from a pre-loaded library of music. The relaunched service will cost premium customers $49.95 a year and allow them to store as many as 500 albums in a cyberspace “locker.” Listeners will periodically be prompted to prove they own the CDs in their collections by inserting a physical copy into their computer. MP3.com also will offer a free, advertising-supported service that will allow users to store only 25 CDs. “This is the direction the music industry is moving,” says Michael Robertson, CEO of MP3.com. “It is really a precursor to the next wave of digital music.” MP3.com had shut down the MyMP3.com service in April, after the music industry accused the San Diego-based company of infringing on its copyrighted materials by building a library without obtaining licenses first. MP3.com then settled with four of the Big Five record labels and secured licenses from each over the summer, for a reported $20 million each. In November, the company was ordered to pay Universal Music $53.4 million after lawyers for both sides submitted a proposal to a New York judge. MP3.com has not released the specific terms of its license agreements, though it has set aside $170 million to cover its legal costs. Some competitors have doubted the viability of the locker-service model in its new incarnation. Because MP3.com has to pay royalties for each song in the library, as well as royalties for each time a song is streamed, the service could well have a negative gross margin, skeptics say. It could cost MP3.com as much as $75 per user to operate the premium service, assuming that MP3.com pays 1.5 cents per song in the library and that a user takes advantage of the full 500-CD capacity. But even that formula doesn’t include the royalties that need to be paid each time a song is streamed. “Who’s going to pay to listen to music they’ve already bought?” says David Pakman, senior VP for business development at Myplay, another online music company. “It’s a slow bankruptcy death.” Robertson counters that the service is part of the evolution of music consumption. It includes a feature that allows consumers to immediately have access to music they may have ordered through online retailers but have yet to receive on CD. “Once people get a taste of it, they will demand it from all retailers’ music,” Robertson says. “Music is a spontaneous purchase.” Related Articles from The Industry Standard: Another Front in the Digital-Music Battle 2 Labels Want More Money From MP3.com MP3.com Faces Suit From Indie Labels Copyright � 2000 The Industry Standard

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