Edition: U.S. / Global

AOL Reaches to Create Its Own Big Music Scene on the Internet

Published: September 2, 2002

''Start over, and keep it clean this time,'' the voice booms from the control room of an East Village sound studio.

Without losing stride, Ludacris, the sassy and sexy best-selling young rap star, and his new group, Disturbing Tha Peace, begin their song, ''Posted,'' from the top, this time slurring through some of the saltier verses.

Disturbing Tha Peace is on the road promoting its coming album, ''Golden Grain,'' much as generations of musicians have before, performing their hottest songs and submitting to softball interviews. But instead of appearing on radio stations or MTV, they are taping a segment for Sessions@AOL, a series of short video programs that users of America Online can watch on their computers. (And even for performances by artists like Ludacris, whose work is laced with sexual themes, AOL insists on keeping a family-friendly vocabulary.)

With radio controlled by a few chains and MTV playing videos less and less, the vanguard of music promotion has rapidly moved to the Internet. And AOL's music channel, with a vast audience of teenagers, has become the biggest force in online music promotion. That is why acts like Bruce Springsteen and the Rolling Stones are introducing their new songs on AOL.

And the success of AOL Music, in turn, is why one of the few rising stars in the largely floundering online service is Kevin Conroy. Since joining AOL to run its music area early last year, Mr. Conroy, from the BMG label, has created fresh content and a big audience. And in July, he was promoted to be senior vice president in charge of AOL's entertainment programming.

Indeed, much of what Mr. Conroy has done is being held out by AOL executives as an example of how it can revive its slowing subscriber growth. Jonathan Miller, America Online's new chairman, intends to differentiate the service with distinctive programming, especially short video clips.

On the surface, music is also the model for Mr. Miller's other priority: liberally lacing shopping opportunities amid the programming. AOL's music channel, like all online music sites, is filled with buttons to let users buy CD's, band T-shirts and concert tickets. It has started selling digital singles -- songs that can be downloaded -- for 99 cents. And this fall it will introduce its version of the MusicNet, the subscription service created by RealNetworks and backed by major labels.

But as times got tougher for AOL Time Warner, Mr. Conroy has resisted pressure to make quick bucks. Indeed, he cut off deals in which AOL was paid to link to outside music sites, choosing to build his own service. He refused even to introduce the first version of MusicNet, saying the quality was not up to snuff, even though AOL was a major investor.

''You can't skip steps,'' Mr. Conroy said in an interview recently at his Park Avenue South office. ''First we have to become really relevant to how people find and discover music. Then we will have the building blocks to profit from it.''

He argues that the industry has spent far too much of its energy creating services like MusicNet and its rival, Pressplay.

''At best, subscription services appeal to a minority of the population. We should be focused on the majority of the population,'' he said.

With resources scarce, he has made a virtue out of his budget limitations. Last week, as he watched the taping of the Disturbing Tha Peace segment from a dark corner of the control room, Mr. Conroy boasted of the unfinished style of the Sessions programs. During the first song, the red baseball cap fell off Shawnna, the group's female member, but the taping proceeded.

''We don't want to be heavily produced like a music video,'' he said. ''We want a grittiness that helps create a connection between the audience and the artist.''

That grittiness also kept the budget for each program to less than $3,000, allowing AOL to produce 40 Sessions programs a month, far more original video programming than any other area of the service.

Mr. Conroy was recruited to America Online in February 2001, just after its merger with Time Warner, largely at the initiative of Roger Ames, the head of Warner Music.

Mr. Conroy indeed bridged the music and online worlds. He spent six years running marketing for Bertelsmann's BMG Music Entertainment, where he was an early pioneer in Internet marketing and online music sales.

Colleagues at BMG describe Mr. Conroy as a serious presence, who argued passionately for his ideas. ''He was always very aggressive and forcefully strong,'' recalled Tom Corson, an executive vice president of J-Records, who had worked at BMG's Arista label. ''He was an iron fist with a velvet glove.''

Nowhere was Mr. Conroy more forceful than in pushing BMG onto the Internet. It was among the first labels to experiment with selling downloadable music. And it developed sites around various musical styles, like Peeps.com, about rap. Later, these sites were merged into a joint venture with the Universal Music Group called GetMusic.

But this put Mr. Conroy, and his boss, Strauss Zelnick, into conflict with Bertelsmann's chief at the time, Thomas Middelhoff, who saw the company's Internet operations primarily as a way to sell music. Mr. Conroy argued their most important role, at least at first, was to promote BMG artists to fans. Ultimately Mr. Conroy and Mr. Zelnick quit at the end of 2000 after Mr. Middelhoff bought control of Napster, the vast music file-trading service.

The legacy of Mr. Conroy's online efforts at BMG is mixed at best. GetMusic floundered. Universal ultimately bought out BMG's share in GetMusic and then more recently largely shut down its operations.

When Mr. Conroy arrived at AOL, its music programming consisted largely of links to MTV.com, GetMusic and other music sites and promotions for Bertelsmann's CDNow online music store. Mr. Conroy quickly unwound those deals and began creating AOL's own programming. That was not hugely expensive, as much of the content was songs, videos and information about artists provided by the record labels.

But Mr. Conroy turned his relations with the labels into exclusive arrangements, creating a feature called First Listen to introduce songs and one called First Look for new videos. What original programming he created was cheap and promotional. Big artists, like the Red Hot Chili Peppers, were invited to create their own stations on AOL's radio service, picking and introducing 100 songs that play in a continuous loop. Behind its glossy front page, AOL Music is a bit of a jumble, with much of its content hard to find.

Mr. Conroy also wanted to use AOL to help labels introduce acts. He tested this first with Michelle Branch, whose first album was set to come out last summer on Maverick Records, a Warner label. AOL offered free downloads of her songs and first views of her video and promoted them all over the service. In the first week, the album sold 15,000 copies, double what the label expected.

Since then, AOL has promoted new artists from other labels as well.

''AOL is a brand name people trust,'' said Aahmek Richards, the director of new media at Arista, which used AOL to promote Avril Lavigne. ''They are able to really help break a band that is borderline but not quite there.''

A lingering question is whether AOL will unfairly favor Warner over other labels. Mr. Conroy says that he will typically try new programs first with Warner because it is easier to get started, but will then open them to its rivals. Yet of the nine acts featured so far this year in AOL's artists of the month program -- its most prominent promotional position -- four are from Warner labels, double its share of the music market.

''We get more than our fair share of the slots,'' said Paul Vidich, executive vice president of Warner Music.

Mr. Conroy says the music channel has been profitable, if not hugely so. Its biggest source of revenue has been corporate sponsorships of some of the site's more popular features.

But it also has established partnerships with Britney Spears and 'N Sync, who provided a range of original material, like a diary Ms. Spears kept on her tour. The artists in turn received a share of the advertising revenue on these sites.

AOL has a longstanding deal with CDNow to enable users to buy the music they are listening to. Mr. Conroy hopes that AOL will begin selling CD's itself when the CDNow deal expires in January.

The biggest question facing AOL is what role it will play in a world where music is sold online. Of course the entire music industry is perplexed by this, especially in the face of Napster-like services, like KaZaA.

Mr. Conroy argues that as its audience expands, AOL will be able to get its users to pay for music. As an experiment, AOL and Warner Music offered a series of songs earlier this summer that users could download for 99 cents, billed to the credit card they use for the AOL service. Even though most of the songs were available free on KaZaA, thousands of users bought the singles.

Mr. Conroy says he will introduce an improved version of MusicNet later this year. He refused to offer the first version on AOL, saying it needed to offer more music, more features and be better integrated into the AOL service.

Alan McGlade, chief executive of MusicNet, concedes he was quite disappointed by Mr. Conroy's initial rejection. But he has come to respect his view. ''Kevin wants to go with things that are really ready for prime time.''

Photos: Songs from Bruce Springsteen's album, ''The Rising,'' were introduced on AOL Music's First Listen feature. (pg. C2); Kevin Conroy, general manager of AOL Entertainment, chats with Ludacris, the rap star, in a Manhattan recording studio. AOL has been introducing songs online. (Librado Romero/The New York Times)(pg. C1) Chart: ''Reaching for the Fans'' AOL's Internet music site has focused on building an audience through its investing in original programming and reviving subscriber growth. MUSIC WEB SITES -- Information, downloads and commerce SITES OWNED BY AOL TIME WARNER IN BOLD 1. BeMusic (Bertelsmann) JULY 02 VISITORS, IN MILLIONS: 10,331 2. AOL Music* JULY 02 VISITORS, IN MILLIONS: 6,829 3. Clear Channel JULY 02 VISITORS, IN MILLIONS: 6,173 4. Vivendi Universal Music JULY 02 VISITORS, IN MILLIONS: 5,884 5. MTV Networks Music JULY 02 VISITORS, IN MILLIONS: 5,608 6. LAUNCH (Yahoo) JULY 02 VISITORS, IN MILLIONS: 5,389 7. Sony Music JULY 02 VISITORS, IN MILLIONS: 4,409 8. ARTISTdirect JULY 02 VISITORS, IN MILLIONS: 2,948 9. MSN Music JULY 02 VISITORS, IN MILLIONS: 2,598 10. LYRICS.COM JULY 02 VISITORS, IN MILLIONS: 2,444 11. Warner Music Group JULY 02 VISITORS, IN MILLIONS: 2,059 12. WINAMP.COM JULY 02 VISITORS, IN MILLIONS: 1,991 16. Spinner JULY 02 VISITORS, IN MILLIONS: 1,345 23. Netscape - Music JULY 02 VISITORS, IN MILLIONS: 711 26. SHOUTCAST.COM JULY 02 VISITORS, IN MILLIONS: 458 *Available on AOL service only (Source: comScore Media Metrix)(pg. C1)