Cable Operators Getting in Tune

Dozens of cable operators — from top-ranked Comcast Corp. to small, privately held firms such as York, Pa.-based Susquehanna Communications — are beginning to face the music: if they don’t offer customers Internet song services, they’ll lose their attention to those who will, such as Apple Computer Inc. and its iTunes Music Store.

“All of the operators will have one form or another of a music service,” said Synacor Inc. CEO Ron Frankel, whose company builds Web portals for cable distributors and supplies music content from MusicNet, a New York-based vendor owned by private-equity firm Baker Capital.

Two of Synacor’s customers, Charter Communications Inc. and Susquehanna Communications Inc., began marketing services this month that allow subscribers to download an unlimited number of songs from MusicNet’s 2-million-song library to MP3 players. Charter is selling Charter Music-To-Go for $9.99 monthly, while SusCom is collecting $6.99 per month for SusCom Music-To-Go.

Operators are looking for a cut of a music-download sector that is dominated by Apple Computer Inc., Napster Inc., Real Networks Inc. and Yahoo Inc. The music-download business in North America and Europe is expected to rocket from $1 billion in 2005 to $4.5 billion by 2010, according to Strategy Analytics.

Apple dominates digital music, with an 83% share of the download business during the fourth quarter, chairman Steve Jobs told attendees at the MacWorld confab in San Francisco last week. iTunes sells more than 3 million songs — priced at 99 cents apiece — every day, he added.

While Apple is leading a growing list of competitors in music downloads, in terms of market share, the company offers consumers fewer pricing options than its rivals.

For about $10 per month, RealNetworks’ Rhapsody, Napster, Yahoo, and cable operators that market music services that rely on MusicNet offer unlimited subscription packages which allow customers to use their PCs as a jukebox connected to libraries containing millions of songs.

For a few more dollars each month, Yahoo, Rhapsody and MusicNet customers can download as many songs as they want to portable players. Customers that want to burn the songs on CDs generally pay 99 cents per song (excluding Yahoo, which charges subscribers 79 cents).

Several operators are using music as a retention tool, offering streaming radio services for free to all high-speed Internet customers, including Comcast, Charter and Adelphia Communications Corp.

Companies looking to sell music downloads also face new competition from News Corp.’s, which is positioning itself as an online community for youths. More than 660,000 bands, from Nine Inch Nails to amateur groups, allow users to listen to up to four of their songs at a sitting. Some of the bands also allow users to transfer the songs to MP3 players.