After weeks of negotiations, Microsoft Corp. has suspended talks with the four major record companies over the licensing terms for a new online music subscription service, according to people familiar with the talks.
The Redmond, Wash.-based software giant broke off the discussions on Friday, citing an impasse with the record companies over royalty rates, these people said Tuesday. (MSNBC is a Microsoft - NBC joint venture.)
One of the sources, who works closely with Microsoft and has been involved in company discussions on the possible venture with the labels, confirmed the negotiations had ended, but said Microsoft remains committed to the idea of a subscription service.
Microsoft spokesman Adam Sohn declined to comment.
Microsoft already sells song downloads on its MSN Music Internet site but had been seeking to develop a subscription service. Such services typically offer users unlimited number of tracks for download, and in some cases, for use on compatible portable music players, for a monthly fee.
Several online retailers already offer online music subscription, including Yahoo Inc., Napster Inc., RealNetworks Inc.’s Rhapsody and MusicNet. Their fees vary, but range between roughly $5 to $15 a month, with some charging users extra to move songs to portable players.
The collapse of the talks between Microsoft and the major record labels, reported by The Wall Street Journal on Tuesday, represents the latest skirmish between retailers and record labels over pricing in the developing digital music market.
Last month, Apple Computer Inc. CEO Steve Jobs publicly criticized the recording industry, saying some major labels were “greedy” for pushing Apple to hike prices on the iTunes Music Store.
Record label executives have scoffed at the suggestion they’re being greedy. Last month, Warner Music Group CEO Edgar Bronfman Jr. said at an investors’ conference that Apple’s 99-cent price for single tracks — the service charges variable prices for some of album downloads — ignores the issue that not all songs are the same commercially and, like any other commodity, shouldn’t be priced the same.
“The labels have complained basically that they’re not making enough money on downloads, that they prefer subscription services,” said Phil Leigh, a digital music analyst in Tampa, Fla.
“Microsoft is saying on behalf of themselves and, indirectly, on behalf of the rest of the subscription (services), ‘If you want a subscription offering, if you want the better recurring revenue from subscription pricing, then give us a better price.”’