Sony forms group to distribute music using the Internet

Sony Communication Network Corp. has created an alliance with 10 major record companies in order to set up a new firm later this month to offer infrastructure for distributing music through Web sites.

The new firm, to be named Label Gate Co., will offer “backyard” services to sell compressed music data over the Internet, said Senji Yamamoto, president of Sony Communication Network Corp., at a press conference at a Tokyo hotel Thursday.

The services will include settlement services over the Net, customer support, search engines to cover music databases of participating record firms as well as preparation for next-generation distribution platforms such as smart mobile phones, according to company officials.

The 10 record companies include Sony Music Entertainment (Japan) Inc., Avex Inc., King Record Co., For Life Records and Pony Canyon Inc.

Sony Communication Network first will set up the company with capital of 50 million yen, which will later be increased by the record firms to 100 million yen. Yamamoto will serve as president of the new firm.

Label Gate will launch full-scale operations in May. and aims to sell about 500,000 tunes in the first fiscal year, with commission sales of 65 million yen, according to Yamamoto.

“(The music) business itself will be run by a record company, not by (Label Gate),” said Shigeo Maruyama, president of Sony Music Entertainment (Japan) Inc., likening the new firm to a shipping agent for a record company.

Each of the participating companies will have their own Web sites, separately selling their own music at prices each will decide.

Record companies will only share backyard services offered by Label Gate and do not plan to integrate the nonpackage digital music business itself, he said.