Microsoft technology to allow catalog sales

DRM to facilitate transfer of rented content

Are entertainment companies ready to offer consumers their entire catalog for a flat monthly fee?

That’s the question record labels will have to ask themselves, and movie studios will start thinking about, as Microsoft debuts the newest version of its Windows Media digital rights management technology. For the first time, the new DRM will allow consumers to transfer rented digital content between devices.

In practical terms, that means subscribers who pay $9.99 per month for access to the entire library of online music stores like Napster will now be able to move any songs they choose onto portable devices, into cars and, via wireless networks, to devices in the home. Implications for the music biz could be huge, as tech-savvy consumers would have no more reason to purchase a CD or download a track.

The downloaded content would expire after a certain period, say one month, unless the device is reconnected to the Internet to prove the subscription is still active.

“From the consumer perspective, we view this as the holy grail,” said Chris Gorog, CEO of Napster’s parent company, Roxio. “Because the portable subscription model is the most similar to illegal file-sharing, this is just what the industry has been missing to pose a serious threat to piracy.”

While the contracts that Napster and other music stores that use Windows Media DRM have with the labels allow them to offer portable subscriptions, Gorog allowed that many music execs are still wary of the implications. Industry will have to see whether the benefits of recurring revenue and more interest from casual music listeners will make up for the decline in CD sales from heavy listeners.

Portable devices that use Microsoft’s new DRM are scheduled to be released this summer. It’s widely expected that Microsoft’s online service MSN will launch its own music store centered on portable subscriptions at the same time.

This summer the tech giant will also release its Portable Media Center, an iPod-like device that plays movies, music and other content and is oriented heavily toward the ability to play subscription content. Other companies like Dell and Samsung will soon sell compatible portable devices, and components for stereos and cars will likely follow.

For the online music industry, the new DRM will give Napster, MusicNow and others that use Windows Media a new tool to challenge market leader iTunes, which has its own DRM and only offers a la carte downloads. Gorog added that portable subscriptions would give Napster justification to raise its monthly fee higher than the current $9.99.

Outside of music, other online content providers are looking at the unnamed technology, previously code-named Janus, as the first major step to make rented digital content accessible outside the PC.

Internet video-on-demand companies MovieLink and CinemaNow will for the first time be able to move films they rent onto portable devices, although the studios have not yet allowed them to offer a subscription service.

“In a couple of years,” CinemaNow exec VP Bruce Eisen said, “we’ll look back at content constrained to computers and consider it quaint.”