“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,” Jeff Leeds reports for The Los Angeles Times. “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.”
“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,” Leeds reports. “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.”
Leeds reports, “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.”
Leeds reports, “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.”
Full article here.
MacDailyNews Take: Certain analysts and Anti-Apple “Windows experts” will need to send their pants out to the dry cleaners and Steve Jobs needs to get on the horn to Burger King pronto. Nothing’s worse than word leaking of a huge deal (as was the iTunes and McDonald’s deal) and then having it go to a competitor. At least it’s Sony (the service is doomed, no matter how many giveaways they conduct) and not some WMA outfit. Sony Connect is said to utilize Sony’s “ATRAC 3” format and songs can only be transferred to “secure Sony portable audio products.” Notes to McDonald’s: most people use, have, or want iPods or iPod minis. Your giveaway is incompatible with the market-dominating player. Not a smart choice. And please try to serve hot food, or at least melt the cheese, if you can figure out how to do it, okay?
Man, what is Sony’s market share in portable players??? I don’t understand this deal at all. What was McDonalds thinking?
Thats fine, I’m already drinking way too much Pepsi because of this iTunes give-away. I dont need to start eating too much McDonalds as well.
I think Pepsi redemptions are merely LATE–the bottles were delivered late–not “falling short.”
As for word leaking about Apple and McD and then the deal falling through–how reliable are the “sources” that say this was ever true? It may well have been true, but then again, Apple may never have been anything more than one name on a list to McD. (This sounds a bit like the Mini-for-$99 rumor that got started, and then somehow it’s a terrible thing when it turns out to have been only rumor.)
I’d rather see Sony become one of the other big players after Apple, instead of one of the failing Microsoft-controlled WMA stores. But be prepared for LOTS of big promotions for various online stores, including Microsoft’s own MSN thing. Apple’s not the only online store that will be used for giveaways–that was never a possibility.
And that’s fine for Apple: iTunes is still the leader by far.
Judging by the massive deprecation of the McDonald’s brand [certainly in the UK, but I suspect in North America also] and general lack of consumer confidence in McDonald’s it is probrably a good thing that Apple are out of the picture.
Note: I am not anti fast-food nor I am a McDonald’s basher. That said;
There are some major implications of being linked to McDonald’s which would deliver negative brand equity onto any linked third-party. While I would not accuse McDonlad’s corporate policies as being anywhere near as bad as the others [you know who they are] over recent times MaccyDee’s product value and employment ethics have bboth come into question.
Remember back in the days of HyperCard? The license agreement had a “no nuclear end use” policy. Wind forward to 2004 and question if you want to sit the LEADING digitla music brand next to a convenience food retailing franchise which has been widely slated in the media for bad quality product which harms both the consumer and the envrinoment in general.
this is a promotion to introduce a new product as opposed to iTunes and the Pepsi promotion to increase brand recognition. I don’t think it will generate much buzz or be all that sucessful.
I also think Apple needs to change their advertising at this point. Viewers should come away from it knowing that 15 minutes after unpacking that new iMac that can be buying music, sharing photos, editing video and it works.
Imagine a commercial where some guy is sitting there reading email, his pc using buddy there also and the Mac guy saves the virus attachment, opens the attachment in preview or TextEdit, and starts explaining why he is secure.. his buddy sits there gaping…. fade to black.. .Apple logo…
Well, only 100 million and not a billion as originally thought! Still, it would have been nice to add this one to the PepsiCo promo.
McDonald’s has completely misread the ‘state of the union’ in terms of digital music; offering an ATRAC3-only solution that locks out the new generation of digital music players is probably the worst route they could have followed – NetMD and NetWalkman simply won’t have the critical mass of hipness or actual unit sales in the market segment that frequent McDonalds ‘restaurants’.
I can imagine that Sony offered them perhaps a 20% saving on the costs of an iTMS promotion; but the money they are going to spend on advertising the promo, printing special cups, et al is going to be a waste because it won’t lift sales one iota.
The reason for this is that iPod users are a community – tied together by 2 million pairs of white headphones – who would have presented a ready-made customer base for this promo: NetMD – which is hardly the success story of the decade – has no such community and no such base; and nobody is going to go and buy a Sony player simply to take advantage of this promo.
This is fantastic news. With Apple’s AAC format out there it looked like it would be the battle with Windows WMA. But here comes Sony to save the day with ATRAC 3. This is great, Windows and gang will compete for the small % of the pie while Apple takes the lion’s share.
I think I am going to go the MacDonalds store and tell the kiddies how wonderful Sony is.
Wow. After reading the article, I’m even more pessimistic about their chances, especially after reading that mcdonalds wants to increase brand awareness to hip young people.
mcdonalds base is moms with kids. This promo would have had a lot more success with a more “adult” chain like Jack in the Box, Subway, etc.
This isn’t too surprising, considering that McDonalds is a Coca-Cola house, while Pepsi owns fast-food competitors to McDonalds (KFC, Taco Bell).
And while it’s cool to see that McDonalds is going with non-WMA, a quick quiz: Do you or does anyone you know own a Sony ATRAC player?
Mickey-D’s was thinking how much money they will save with a low redemption rate.
Supposedly the ATRAC format can SUPER-compress audio onto CDs, MD players, and portable mp3 players (but do ANY support ATRAC???). I haven’t seen any professional quality reviews of ATRAC vs other formats, but having owned a minidisc player and having tested various new ones over the past year… ATRAC can’t even compete with MP3, let alone AAC. You need to jack up the bitrate to well over 200 to even come into the ballmark of a 128bps mp3. At that higher bit rate, you’ve lost any extra compression that ATRAC was offering you.
ATRAC is suck.
“I haven’t seen any professional quality reviews of ATRAC”
And this wasn’t from a lack of trying. Their just aren’t any that I can find on google. I’ve found some amateur reviews thus far, but no pro. This corresponds to the REALLY low market share of the minidisc player. Who cares enough to do a review on a format that so few people use?
This could be huge for Jack in the Box (I’m relying on a bit of inside info). A deal with Apple with give them a lot of exposure and target their primary customer base who tend to be more upscale than mcdonalds.
The McDonalds connection, pardon the pun, never made any sense since they are a Coca Cola user. Burger King and Jack In The Box are small-time compared to McDonalds. McDonalds demographics is not what Apple needs. Too young. The best way to increase iTMS downloads is do get a decent ad campaign and that’s not going to happen unless Apple changes ad agencies.
Just think about how many of these give-aways will go un-redeemed! This will make iTunes/iPods look even better.
The Pepsi bottles still haven’t made it to middle Mississippi. I can buy something called Sierra Mist with iTunes caps, but only in sugared form, not diet.
Shame that Micky D’s is going with Sony, but Stevo still has a lot Pixar movie promotion tie-ins to dangle in front of someone else.
I haven’t seen any Pepsi-iTunes bottles in Brooklyn or Manhattan yet. Sony’s format is AAC but will only work on their own Sony players no one elses. I think this deal is probably in addition to Apple’s deal and not instead of. Especially since each will only play on their own players. I don’t think McD’s is stupid enough to commit to a service and format that hasn’t even launched in the US yet. It’s just another rumor, let’s not get carried away.
Could Apple possibly set up a deal with Whole foods market? Certain products would have a pull off sticker or something.
mcdondalds is great..guess what.. the pepsi thing probably ticked off coke.. okay guys makes sense get over it…
type fast bad spel i know
A bit of a bummer since there had been some anticipation. The fact that this is yet another proprietary format added to the mix can only help Apple. Kinda like a third candidate for the presidency doesn’t stand a chance of winning but can act as a spoiler. I doubt if this will slow Apple down much, more likely it will just screw with WMA.
Cat Person:
PepsiCo actually has no beneficial shareholding in YUM! Brands (KFC, Pizza Hut, etc.), as it gave the value to shareholders in a tax-efficient demerger a few years ago.
The demerged company (Tricon Restaurants) then merged with another fast-food combine to create YUM!
I am thinking “Ponderosa”..
Who’s with me??
Bad news is bad news, even if it is just one rumor contradicting an earlier one. Assuming that the business terms are reasonable, a promotion with McDonalds is a big thing in anyone’s book. This isn’t going to crush the iTMS, especially since it is for a proprietary Sony audio format and not WMA. But I don’t see any value in trying to spin the situation (Alasdair Scott) and make it sound like a good thing.
ATRAC? Doesn’t that sound a bit too much like 8-Track?!?!
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alasdair be quiet… apple is hanging out with nike.. we’re already dancing with the devil..