Duet – a joint venture between music giants Vivendi Universal and Sony Corp – has quietly been lining up new leadership and negotiating with potential partners, including Microsoft Corp., sources close to the venture said Friday.
Although rival online music service MusicNet stole the spotlight this week by striking a licensing deal with song-swap company Napster, Duet is expected to announce the appointment of Andy Schuon to head the year-old venture, a move that could come as early as next week, the sources said.
Vivendi Universaland Sony Corpboth declined to comment on the expected appointment or on whether they are in talks with Microsoft Corp.
Executives at both companies confirmed privately, however, that there had been negotiations. According to a source familiar with the talks, Duet has explored a deal with Microsoft similar to its existing deal with Yahoo Incto distribute songs once the service launches this summer.
Microsoft’s MSN Product Manager Sarah Lefko said: “MSN continues to talk to many players in the music industry. We do not have anything to announce or discuss with regards to any discussions.”
Microsoft’s security technology has been endorsed by most of the big labels, but the companies have not licensed their content to Microsoft, in part because of concern the software giant, which is feared for its strong-arm marketing tactics, would take over the distribution of their music.
So far, the labels have announced distribution deals for their subscription services with Yahoo and two Microsoft competitors, America Online and RealNetworks Inc..
HOPE CAMPS WILL GET TOGETHER
Officials from both Duet and MusicNet have also said they hope the two camps will one day get together, but licensing issues remain the biggest hurdles.
“It’s really hard for the big music companies to agree on anything. And when they do, they are usually accused of collusion,” said Ric Dube, analyst with WebNoize.
Any deal between Duet and Microsoft would be record-setting in several ways, in part because of the access to a huge potential audience the MSN Internet service would provide.
“Microsoft is the single biggest question mark in the online music sector,” said P.J. McNealy, senior analyst with Gartner.
“They want to be the biggest player and have everything on the technology side but nothing in content. All these deals have happened with the exclusion of Microsoft,” he said.
Indeed, since Microsoft’s rival RealNetworks has already aligned with MusicNet’s Warner, EMI and Bertelsmann, it makes sense for Microsoft to strike a deal with Duet, analysts said.
But sources said Universal officials have long had a contentious relationship with Microsoft. One sticking point is that Universal has provided its music primarily in a digital format known as Blue Matter. A deal with Microsoft would presumably mean opening Duet to the Windows Media format.
Universal has struggled to some extent with Blue Matter with most fans using Windows Media, Liquid Audio Inc. or MP3 for downloads. Eventually, all these formats will be supported by multiple devices, some experts said.
“We think formats won’t become a huge issue over the long-term. We think software players and consumer devices will support multiple formats,” said Matt Smith, vice president of product marketing for Liquid Audio, a software company that provides distribution of digital music in Liquid Audio and Windows Media formats.
QUESTIONS OVER PLATFORM, PROGRESS
Duet’s ongoing negotiations and its executive appointments come as industry watchers question the venture’s outlook.
First announced in May 2000, Duet has yet to demonstrate its platform and skeptics have questioned its progress. Duet has maintained it will launch by late summer.
Schuon had formerly led Jimmy and Doug’s Farmclub.com online music site for Universal Music Group, which has been folded into GetMusic.com, another Universal venture. His appointment has been a matter of speculation for months.
Several analysts feel that MusicNet – a joint venture announced in April between RealNetworks Inc and AOL Time Warner’s Warner Music EMI Group Plcand Bertelsmann AG’sBMG – has some advantages because of its use of RealNetworks’ secure technology.
Vivendi Universal last month bought online music company MP3.com Inc, which some experts believe is Duet’s technological answer to MusicNet’s RealNetworks.
Sources this week noted frictions within MusicNet, with both Warner and EMI angry over MusicNet’s deal with Napster, under which they will provide content to a new service being developed by the company they sued for copyright infringement.
Under that deal, Napster is prohibited from negotiating a similar deal with Duet, but MusicNet’s acting chief executive Rob Glaser, who is also chief executive of RealNetworks, said he hopes Sony and Universal would agree to eventually license their music to MusicNet.
