March 22, 2004

Music and QSR Retail

McDonald's, Sony Said to Be in Music Pact

The fast-food chain would help market the launch of a new service to download tunes, sources say.

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By Jeff Leeds, Times Staff Writer

Hungry for a taste of the online music business, Sony Corp. is aiming to line up McDonald's Corp. to market the Japanese conglomerate's new download service, according to people familiar with the deal.

The two companies have been hammering out the details of a pact in which McDonald's would provide fast-food diners with free songs from Sony's online music store, Sony Connect, these people said. The deal is expected to be announced this week.

Representatives from Sony and McDonald's declined to comment.

The sources said McDonald's was expected to commit about $30 million to advertise the program in the U.S. and beef up the launch of Sony Connect, which will charge 99 cents per song when it starts up this spring.

In exchange, sources said, McDonald's will be able to buy some tunes from Sony Connect at unspecified discounts. The fast-food giant plans to give customers free songs when they buy certain menu items; customers will receive codes they can redeem online for downloads.

The pact would underscore a central strategy of would-be players in the online music world: find major advertisers with the marketing clout to sell alternatives to the illegal downloading of music on unauthorized file-sharing networks such as Kazaa and LimeWire.

Sony has already announced a deal with UAL Corp.'s United Airlines in which travelers, once the Connect service starts, will be able to trade in frequent flier miles for free songs. And Apple Computer Inc. has teamed with PepsiCo Inc. to award buyers of soft drinks downloads from the iTunes Music Store if they find special codes under bottle caps.

Pepsi pledged to give away up to 100 million songs in the bottle-cap contest. But Apple Chief Executive Steve Jobs said recently that the redemptions had fallen short of expectations.

One person familiar with the McDonald's deal said the fast-food company would probably give away more than 100 million Sony Connect songs in the U.S.

McDonald's had been in talks to launch a similar marketing effort with Apple, but switched plans after a last-minute pitch from Sony, sources said.

The McDonald's deal comes as Sony is racing to build a presence on the online landscape and drive sales of its own line of portable music devices. Sony, which introduced music lovers to portability with the Walkman, has lagged behind such rivals as Apple, which dominates the field with its iTunes service and has seized market share with the iPod music player.

Now, Sony not only has to catch up to Apple, but it also has to confront other online players, including Microsoft Corp., which is developing its own Internet music store.

For McDonald's, the aim is to build a hipper image among young consumers.

McDonald's, which has hired pop singer Justin Timberlake to appear in its commercials, has been laying large bets on the marketing power of music.

The McDonald's-Sony alliance is expected to focus on Sony's music service, but the sources said it might be extended to market Sony video games and other products.

McDonald's, Sony Said to Be in Music Pact

Posted by Craig at March 22, 2004 05:35 PM