Major Labels May License Tunes to RealNetworks

Major record labels Warner Music, BMG Entertainment and EMI Group are negotiating licenses with RealNetworks for use on an Internet-based music subscription service called MusicNet, according to a report published Friday.

RealNetworks, like nearly every other digital media company, has been in talks with the labels for more than a year. The Seattle-based streaming-technology firm could reach deals with the three labels as early as next week, according to the Wall Street Journal.

The news comes days before a second US Senate Judiciary Committee hearing that addresses online entertainment and copyright law. The major record labels have been criticized by some members of Congress for their glacial pace in resolving copyright and royalty issues and in issuing licenses for digital music distribution.

Over the past year, RealNetworks, a pioneer in streaming technology, has taken on the semblance of a media company. Last summer, it launched a subscription service called RealPlayer GoldPass that gives subscribers content, including movie trailers, downloadable games and sportscasts, for US$9.95 a month. This week, the company announced a deal with Major League Baseball that gives subscribers live audio Webcasts of all MLB games. The service has about 175,000 subscribers.

RealNetworks pays license fees to its content providers for the GoldPass service. But according to the Wall Street Journal report, the company is offering each of the three labels a stake in the planned MusicNet service in return for use of their content. Warner already has been given a stake in MusicNet, the Journal reported.

When contacted, RealNetworks declined to comment, as did Warner and EMI. BMG representatives were not immediately available.

The explosive popularity of the controversial Napster file-swapping service has underscored the widespread demand for digital access to music. The music industry - online and offline - has grappled with how to take advantage of that demand and build legitimate and profitable business models for digital distribution, such as through paid subscriptions.

Bertelsmann, the parent of BMG, has already pledged to license the BMG catalog to Napster if it succeeds in developing a secure version of its file-sharing platform. AOL Time Warner has been developing a streaming subscription service led by former BMG executive Kevin Conroy that is expected to launch sometime this year. Universal and Sony, which have been working on a subscription service code-named Duet, have indicated that they plan to add a third partner to the venture. EMI, meanwhile, signed a deal with a Dallas-based startup called Streamwaves. That service was expected to launch during the first quarter, but appears to be running behind that schedule.

A big sticking point for all of the proposed subscription services is getting licenses from music publishers, which have yet to resolve issues surrounding royalties for digital streams vs. downloads, among other things. Ironically, Universal was sued for copyright infringement by the music publishers late last year over the label's subscription service available through its Farmclub.com operation.

RealNetworks is considering making MusicNet available to additional online services, including Napster, under strict usage conditions, the Journal reported.

MusicNet and Duet are likely to have access to similar amounts of music if RealNetworks' signs licensing agreements with Warner, BMG and EMI

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