• PC World
• » Tech Industry

RealNetworks and three major labels are betting you're willing to pay a regular monthly fee to access popular music online.

Today they launched a new subscription platform called MusicNet that's due to start serving up music later this summer.

Big-name labels Bertelsmann AG, EMI Group, and AOL Time Warner will license music to MusicNet, which will use technologies from Real Networks and others to deliver the music.

The service itself will be available from both RealNetworks and AOL, with other companies sure to follow, say RealNetworks executives. AOL plans to tie MusicNet into its existing portfolio of online brands, such as music sites WinAmp and Spinner.

Online Music, for a Fee

At this point, MusicNet is still only a plan--the companies won't launch actual services until summer or fall. Pricing for the service is unclear; the assorted distribution partners will likely set their own fees.

MusicNet will operate as an independent company with RealNetworks, EMI Group, Bertelsmann AG, and AOL Time Warner each owning a minority stake. The new company hopes to license music from other record companies, both independents and the two other major labels--Sony Music Entertainment and Universal Music Group--and plans to seek additional distribution partners, including Napster.

Subscriptions Get Real

"The goal of MusicNet is to make the dream of digital music subscription services a reality," says Rob Glaser, chairman and chief executive officer of RealNetworks and interim chair and chief executive of MusicNet.

"MusicNet is really a business-to-business aggregation service," Glaser says. It packages content and technology and offers it to distribution partners.

MusicNet plans to bring together content from Warner Brothers, EMI, and Bertelsmann; music technology from RealNetworks, MusicNet, and others; and consumer distribution services from AOL and RealNetworks.

MusicNet is building its platform using its own proprietary system, along with server technologies from RealNetworks and others, Glaser says. "The platform is flexible and will support both streaming and download services."

Will MusicNet Kill Napster?

MusicNet is considering a partnership with Napster, Glaser says, but it has to wait until Napster's service satisfies the record labels.

MusicNet will enter distribution discussions with Napster as soon as Napster fulfills its obligations to provide secure, copyright-protected service, Glaser says.

Napster continues to wrestle the Recording Industry Association of America in court over the adequacy of the filter technology it implemented to block users from sharing copyright-protected music files.

Meanwhile, MusicNet part-owner Berteslmann already has an alliance with Napster to launch its own paid subscription service this summer.

Bertelsmann's dealing with other labels to develop a new distribution service casts some doubt on its commitment to Napster, says Ryan Jones, a music analyst from the Yankee Group.

To say that Bertelsmann is writing off Napster may be going too far, but "I think it's a thought that people should consider. Their [Napster's] user base has dropped off 25 percent since the court decision. They're a public relations nightmare now because they can't get their filtering software right."

P.J. McNealy, a senior analyst at Gartner, adds that Bertelsmann's investment in Napster could have simply been a hedge against a potential court victory. With the music-swapping service in decline, Bertelsmann may simply be making good on earlier statements that it would pursue multiple avenues for online music.

"Right now it has only cost them a loan of $50 million," he says. Even if they lose their Napster investment, "for a company like Bertelsmann, $50 million is a tax write-off," McNeal says.

But Bertelsmann isn't the only major label with its own subscription plans. Universal and Sony announced in February that they are working on their own subscription service, currently code-named "Duet."

Online Music Grows Up

Despite record labels' promises, some analysts see MusicNet as one of the first solid plans to get label-supported fee-based music distribution services up and running.

"I think it's pretty cool. It's a good example of online music distribution done the right way," says Ryan Jones, a music analyst from the Yankee Group. Critics have chastised the music labels in the past for fighting hard against Napster while failing to offer an alternative.

"Napster can't do anything legitimate and can't make any money right now," Jones says. "It's hard to say it's too little too late when no one is doing it right now...[MusicNet] seems to have all the pieces."

• See more like this:
• digital music,
• MP3,
• RealNetworks,
• Napster,
• MP3s,
• music services,
• subscription service,
• digital audio