RealNetworks Unveils Music Subscription Deal

The rumors were confirmed today when AOL Time Warner, Bertelsmann, EMI Group, and RealNetworks officially announced MusicNet (www.musicnet.com), a venture that will create a platform for online music subscription services. Both America Online and RealNetworks announced plans to launch branded online subscription services in late summer or fall 2001.

EMI Recorded Music, BMG Entertainment, and Warner Music Group, will each separately license their music to MusicNet on a non-exclusive basis. According to a spokesperson for RealNetworks, MusicNet will have access to each labels' full catalogue for which they have online distribution rights. The percentage of their catalogue that will be offered varies from label to label. MusicNet will also pursue other licenses to expand its content offering.

MusicNet is gathering the content and creating the platform for distribution that will then be licensed to other companies who wish to have music subscription services. MusicNet was originally formed a year ago and incubated at RealNetworks. Plans are for MusicNet to operate as an independent company, with RealNetworks, EMI, Bertelsmann and AOL Time Warner, owning a minority stake in the company. RealNetworks CEO and chairman Rob Glaser, was named chairman and interim CEO of MusicNet.

The company is keeping quiet about the specifics of the technologies that will be used, saying only that both streaming and downloadable music will be available. A spokesperson for RealNetworks indicated that announcements regarding the Digital Rights Management (DRM) technologies would be made in months to come.

No pricing structure has been announced yet. MusicNet will not be offering a consumer pricing structure, leaving that up to the distributors who license their platform.

Ties to Napster?

Industry analysts have linked the timing of this announcement to the Senate Judiciary Committee's hearing tomorrow to review various copyright issues surrounding digital music distribution, including Napster. Throughout the legal battles there has been speculation that if Napster were shut down, members would begin using similar services (such as Gnutella) because of the lack of a legitimate offering.

The Big 5 music labels have been berated for dragging their feet on providing licenses for legitimate online distribution. The Napster drama, if nothing else, has convinced them that there is consumer demand for such a service.

Although the major labels have shunned Napster, Bertelsmann did agree to partner with them after Napster agreed to pay $1 billion over five years for the right to distribute Bertelsmann songs. So far, Napster has not been able to convince the labels that it can offer a secure setting for distribution, and Napster II has yet to be unveiled.

It seems Bertelsmann is playing both sides of the fence by partnering with both Napster and MusicNet. However, Rob Glaser of RealNetworks said in a press conference, that if Napster were to become a legally acceptable distribution service, MusicNet would be willing to license its platform for distribution. The details of what guidelines Napster would have to follow were unclear. Representatives of Bertelsmann were unavailable for comment.