Music industry blues spur Best Buy to act

NEW YORK, April 9 (Reuters) - The music industry, hurt by slumping sales due to raging piracy on the Internet, may soon have an ally in Best Buy Co. Inc.
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NEW YORK, April 9 (Reuters) -

The music industry,hurt by slumping sales due to raging piracy on the Internet, maysoon have an ally in Best Buy Co. Inc. ,the No. 1 U.S. retailer of both entertainment software and consumerelectronics.

The Minneapolis company, whose Musicland Group Inc. unit hassuffered from sluggish music sales, said it is looking to team upwith record labels and technology groups to devise ways to preventwholesale copying of CDs without antagonizing customers.

Although Best Buy sells items like CD burners, MP3 audio playersand personal computers used in CD copying and Internet musicswapping, it supports the push by some music companies to produceCDs with anticopying technology, Chief Operating Officer AllenLenzmeier told Reuters on Monday.

"I think there's going to have to be some type of copyrightprotection that comes out," Lenzmeier said. "Hopefully, we canfacilitate a solution" that makes consumers willing to pay formusic instead of swapping files on the Internet.

Such a step could provide the necessary incentive for artistsand record labels to go on making music, he said.

Last week, Best Buy executives blamed Internet music-swappingand a dearth of new blockbuster albums for a slowdown in sales atMusicland, which operates stores under that name as well as SamGoody, Suncoast, Media Play and On Cue.

Analysts expect downloading of Internet music files to lead toanother year of declining sales after U.S. music shipments slumped10.3 percent in 2001.

When the Recording Industry Association of America released thefigures in February, it said 23 percent of surveyed consumers saidthey were not buying music because they are downloading or copyingit for free.

COPY-PROOFING VS. PLAYABILITY

In an effort to stem piracy, some labels have begun embeddingcopyright protection into CDs. But Sony's release of Celine Dion'slatest album angered fans in Europe this month when their computerscrashed as a result of the protection.

BMG, one of the world's five major labels, has announced plansto use copy-proof technology on promotional CDs, the free discsdistributed to critics, retailers and other insiders weeks beforethe official release.

Some kind of anticopying process, whether in the hardware orsoftware, is necessary to prevent consumers from making numerouscopies, Lenzmeier said, but it should not prevent them from playinga CD they purchased or from making a copy for their car.

"Somehow the technology industry, the music industry, thedistributors, the retailers, have to look cooperatively to come upwith some mechanism to make this do-able," he said. "Consumers arewilling to pay for content; that will have to be edited in some waydifferently than it is now."

Best Buy, which operates nearly 1,900 stores under its own nameas well other brands, said last week that it sees the musicindustry sales slowdown persisting through 2003.

More immediately, it said it expects weak music sales to crimpprofits in the current quarter.

The company acquired Musicland in February 2001 for $685million.