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Reuter News Service

Apple & Napster Spat Over Digital Music Sales
November. 7th, 2003

SAN FRANCISCO (Reuters) - The noisy legal battles that once defined online music may be fading but an equally contentious public relations war for the hearts and minds of consumers is only just beginning.

This week just as the Napster music service announced a deal with Pennsylvania State University to offer thousands of students access to legal online music, Apple Computer Inc. issued its own press release saying that it was still running ahead of its rival in sales.

In the first week that the revived Napster site was open for business, Apple's own iTunes service had outsold Napster five-to-one, Apple claimed.
Inaccurate and misleading, a senior Napster executive shot back a day later.

"You have sort of a Wild West mentality right now," said Phil Leigh, a senior analyst with Inside Digital Media. "People are shooting first and asking questions later."

Analysts said it is understandable that companies are wrangling to establish themselves as leading players in online music sales since the stakes are so high.

The music industry in the U.S. is $13 billion annually and another $17 billion when figuring in the rest of the world. Analysts say much of that combined $30 billion is moving from the physical delivery of music via CD to online downloads.
Already, the field is crowded. In addition to Apple's iTunes Music Store and Napster, part of Roxio Inc., Dell Inc . will enter the market, and there's already Liquid Audio, MusicMatch,, Rhapsody from RealNetworks Inc. and others.

"We're at the beginning of something so big, each wants to maintain as high a profile as possible," Leigh said. "We're going to see a lot of PR positioning."




On Friday, a day after Apple issued its press release saying it sold 1.5 million songs in the first week that Napster went live compared with the 300,000 sold by Napster, Chris Gorog, chief executive of Napster's parent company Roxio offered a rebuttal.

"The Apple spin machine is in full gear here," Gorog told Reuters, referring to their press release, adding that he was pleased with the 300,000 songs in its first week. "We're over the moon."

An Apple spokesman had no comment beyond the press release it issued on Thursday.
Gorog also disputed Apple's claim that it had 80 percent of the market for legal online downloads of music for the week ended Nov. 2.

"The SoundScan report did not include Napster's numbers because we hadn't reported yet," Gorog said. SoundScan compiles the figures from Monday through Sunday, then releases the figure to clients on the following Wednesday, a spokesman for SoundScan said.

"SoundScan does not break out the sales of individual reporters," a SoundScan spokesman said. But arriving at precise market share figures, at this early stage in the game, is not easy or even accurate. SoundScan for now, doesn't yet include songs sold from MusicMatch or BuyMusic, the spokesman said, and did not include Napster.

Given that, the 827,000 songs SoundSan reported as bought and downloaded during the week ended Nov. 2 did not represent the entire, currently available market for legally purchased digital music.

With big institutional deals like the one Napster struck with Penn State on the line, the dueling press releases are one way for companies to try and stay out in front, he said.

"They don't want to go to the University of California and have them think they're an also-ran," Leigh said. "The stakes are too high to be considered a weak competitor."

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