The Toronto Star - May 5, 2004
Napster sets sights on Canada
by Tyler Hamilton
Puretracks.com, the only major music-download service in Canada for the past seven months, is about to face some U.S.-style competition.
That's because Napster's heading north.
Roxio Inc. of Santa Clara, Calif., announced yesterday that its Napster 2.0 service will launch in Canada this summer, making it the first U.S.-based download service to target Canadian music fans.
"We want people to know that Canada is on our radar," said Dana Harris, a Napster spokesperson. "It's in the works. We're going to be there by summer."
Roxio launched Napster 2.0 in the U.S. market last October, though the service isn't anything like the original Napster that was created by Shawn Fanning in 1998. Fanning's service turned the music industry on its head and was eventually crushed under a mountain of lawsuits.
Roxio bought the rights to use the Napster name but the underlying technology is based on its purchase of Pressplay, the former online music venture of Universal Music Group and Sony Music Entertainment.
Kaan Yigit, president of Solutions Research Group Consultants Inc. in Toronto, said Napster is still a well-known brand among Canadians and could shake up the Canadian market.
"Seventy per cent of Internet users, whether they are music downloaders or not, know the Napster name," said Yigit. "It's still got huge brand equity."
He added that the arrival of Napster is likely to expand awareness of pay-per-download music services in Canada, which are still in a "very embryonic" stage. At the same time, the competition has the potential of driving down prices, which currently average 99 cents to $1.20 for each song download.
Roxio's Napster 2.0 will be localized for the Canadian market and will be available on a subscription basis or as a "Light" product that allows a la carte downloads from an archive containing several hundreds of thousands of digital songs. The subscription will include Canadian-specific radio stations, promotions and content.
The Canadian headquarters for the service will be based in Richmond Hill, where Roxio, an entertainment software provider, already has an office. The company said its U.S. management team will oversee operation of the Canadian site and its local staff.
Pricing will be "competitive," said Harris, who declined to give specific details.
Napster 2.0 isn't expected to be the last U.S. music-download service to enter Canada. Apple's successful iTunes, which sold more than 70 million songs in its first year and made a small profit last quarter, has expressed an interest in coming north, as has Musicmatch Inc.'s Musicmatch Download service.
Coming to Canada isn't easy because new publishing rights must be negotiated and U.S. players need to consider how to process the goods and services tax. This is where Puretracks- .com, which has sold more than 1 million downloads since its launch in October, has had a significant head start.
Yigit said the competition will be good for Puretracks.com because of the general awareness it will bring to music-download services, but the pressure on pricing could trim already slim margins.
One advantage Puretracks.com has, added Yigit, is that its operator, Moontaxi Media Inc., has embarked on a white-label strategy that offloads marketing costs but brings in licensing revenues. Bell Canada licensed the Puretracks platform in March and Telus Corp. did the same in December. Canada's two largest phone companies will promote the service as their own.
