October 28, 2004, 12:00 AM

Microsoft, Wal-Mart build co-opetition in the digital music market

With the digital music market in a fast-growth mode, Microsoft Corp. is following a multi-pronged strategy to support digital music sales—both its own and industrywide.

It`s not an uncommon strategy for Microsoft Corp.: Provide basic technology that helps to build a broad market and offer a unique set of products in an effort to bring much of that market to Microsoft.

With the digital music market in a fast-growth mode, the Redmond, Wash.-based software company is following a multi-pronged strategy to support digital music sales--both its own and industrywide.

In recent weeks, Microsoft has introduced exclusive features in its own MSN Music service, offering more than 3,000 independent labels and exclusive content from dozens of music providers in jazz, classical and other music genres with a selection of more than 1 million tracks, at 99 cents per song.

MSN Music also offers integration with Microsoft`s Windows XP Media Center Edition 2005, a feature not included in an earlier beta version. And through a deal with Loudeye Corp., a digital music content provider, Microsoft plans to offer its MSN Music service to 17 international markets this fall.

But Microsoft also recently launched a new Windows Media Player, version 10, that lets users link to music downloads directly from the players on their computers to MSN or to several competitors, including Napster, Yahoo Inc.`s Musicmatch and Wal-Mart Stores Inc.`s Walmart.com, which undercuts Microsoft and the others with its per-song price. The Media Player also offers a separate "browse all" link to connect with virtually all other digital music services.

But while Microsoft sees its overall strategy supporting sales of Media Players as well of its own music service, Wal-Mart sees multiple benefits, a spokeswoman says. Walmart.com offers the new Windows Media Player on its home page as the primary on-ramp to its Music Downloads Service, where songs sell for 88 cents each--11 cents less than Microsoft`s rate.

The new service makes it easier to search, sample, download, purchase and burn music from a single application, Wal-Mart says. But it also lets shoppers link to the general merchandise section of Walmart.com for extended shopping, the spokeswoman says.

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