Music downloads play a key role in Bell and Telus business plans

Canada’s telcos are making major inroads into digital music distribution through both their wireline and wireless telephony services. At the beginning of the month, Bell Canada announced that it will take a majority ownership position in Puretracks, an online paid music download service launched in 2003 by Toronto’s Moontaxi Media Inc. "We have a majority interest in the company, but it will continue with its own business plan," says Pat McLean, GM of consumer Internet services at Bell Canada. Aspiring players in the paid music download market must compete against Apple Inc.’s iTunes, an established presence in the nascent industry, and Puretracks was no exception. After it cut prices last year to match those of iTunes’ downloads, industry watchers claimed the firm was struggling to win customers away from other higher-profile music download services. Those same experts now say Bell may have acquired its stake for reasonably cheap considering that lack of traction. "Puretracks was really in need of a strong strategic distribution partner, and I think that’s really what Bell Canada brings to the table as a strategic investor," McLean says. "Given our reach on Sympatico.MSN.ca – it reaches well over 80% of online Canadians every month – given that we’re Canada’s number one ISP and have a very strong position in mobile as well, it was really a natural fit for us to become an investor in Puretracks and a strategic partner, because I think what they were lacking was really breadth of marketing reach." Although McLean says Puretracks already has a strong product and a sizable library of tracks available for sale – especially for a homegrown Canadian offering – Bell Canada plans to further expand the Puretracks repertoire by drawing content from other partnerships, such as the Live At The Orange Lounge series of concerts with Universal Music. For example, Sympatico users who watch a free concert through the Live At The Orange Lounge microsite might be directed to Puretracks afterwards to purchase an MP3 download of the event. "The investment in Puretracks was a natural extension of what we’re doing in that category," he says. "Bring that combination of things together and I think you’re going to have a very strong, uniquely Canadian service, and I think that was really the strength of the two organizations coming together." McLean also believes that because Bell Canada and Puretracks are both Canadian, they will have a leg up on foreign competitors who may not understand the idiosyncrasies and individual preferences of Canadian music fans. "I think the key area of difference from what you’ll find Apple provides in the market and what we’re able to provide in partnership with Puretracks is a uniquely Canadian experience," he says. "People across the country have very unique and different tastes – I think if you went to the east coast you’d find a very different flavour of music than you’d find in the Quebec French-Canadian market, for example." Bell and Puretracks will also work to promote Canadian talent and independent recording artists. "We’re going to get closer to the independent music scene across the country, we’re going to work very closely with the Canadian labels to make sure we’re those unique differences across the country, and providing a Canadian experience," he says, adding that such a focus on niche content will help the Bell/Puretracks offering stand out from other similar services in the minds of consumers. "I think at the end of the day, everybody’s going to have the mainstream music," he says. "I really believe that there is lots of room to grow in category, and I think there’s a lot of room for Puretracks to capture more market share over time," McLean says. Telus Corp. obviously sees the same growth potential for online music sales as Bell does. It recently launched its Telus Mobile Music offering, which allows users to download digital music tracks for both their cell phones and their computers in one transaction. In contrast to Bell’s strategy emphasizing regional Canadian musicians and labels, Telus is touting its access to all four major multinational record companies as a prime attraction. "We’re the only carrier in Canada today that has all the big four record labels – EMI Music, Sony BMG, Universal Music Group and Warner Music Group," says Telus VP of wireless solutions Chris Langdon. The Telus Mobile Music offering is being introduced as part of the carrier’s Spark lineup of mobile multimedia services, which include video, audio, images, ringtones, messaging and other entertainment and communication options. Hardware is also a key component in the marketing of Telus’ mobile music service: the company is the first in Canada to have LG Electronics’ LG 8100 phone, which combines mobile telephony with an MP3 player, a 1.3 megapixel still/video camera, stereo speakers, and an expansion slot for up to 1 GB of mini-SD memory. Mobile phones, says Langdon, "are really morphing into what we’d call the mobile entertainment and communication devices." Interestingly, Puretracks currently provides its music catalog and back-end services to Telus’ wireline music download service, a relationship that may or may not continue: Langdon says "it would be hard to speculate" on the future of Telus’ involvement with Puretracks, while McLean says "whether they intend to pursue another course with another partner or on their own, or whether they intend to continue in partnership with Puretracks remains to be seen." In December 2005, Telus announced a plan to fold its wireless operations back into its traditional telephony business. Langdon says the firm is beginning to offer similar content across both mobile and fixed platforms – think IPTV and mobile TV – so divisions along network lines make less sense. "We think there’s lots of opportunity to create synergies between the two organizations, because now we’re a single organization focused on entertainment and IP services," he says. And, with both Bell and Telus rolling out third-generation CDMA1x EV-DO (Evolution Data Optimized) networks in select urban centres across Canada, the wireless bandwidth necessary for multi-megabyte music file downloads is starting to come online. McLean, meanwhile, sees the same logic driving similar initiatives at Bell. While Puretracks is targeted predominantly at those who’ll be using their home computer or portable digital media players to enjoy their music, the firm signed a mobile music download partnership with Andover MA’s Groovemobile late last year that allows users to make copies not just for use on their mobile phone but also on other platforms. "We’ll be working over time to make sure customers have a very strong experience across mobile and across Internet," he says. "I think over time you’ll find the mobile…and the Internet experiences come together." And while recording industry groups such as the Canadian Recording Industry Association have expressed concern over the ability for services such as Puretracks and Telus Mobile Music to compete with peer-to-peer filesharing, McLean believes music fans are growing wary of the lack of protection from spyware and other unwanted programs inherent in such an option. "I think over time you’re going to find people are really objecting to the type of invasive attachments that come along with some of the peer-to-peer file-sharing programs," he says.

Music downloads play a key role in Bell and Telus business plans

News | 03/20/2006 5:00 am EST

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