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Three Majors Cast Their Music Net

As chatter abounds regarding the urgency of digital distribution, major music conglomerates are moving quickly to demonstrate their eagerness to make their content available online.

Further evidence comes with this week’s pact between media giants AOL Time Warner, Bertelsmann and EMI and digital behemoth RealNetworks to create MusicNet, a platform for downloadable and streaming services. MusicNet will provide a pool of licensed music from the participating rights holders, with a technology infrastructure by Real. The label groups collectively have a 60% stake in the venture, while Real has 40%.

Once the platform is established, any digital music provider satisfying the rights holders’ security concerns and other copyright issues-yes, even a reformed Napster-would be able to license the music. The folks behind this announcement say they’ll be going after pacts with indie labels and other non-major-label music holders as well.

“MusicNet will offer consumers an easy, simple way to get the highest-quality music while also protecting the intellectual property of record companies and artists,” proclaimed Real Chairman/CEO Rob Glaser, who will also serve as CEO of the new venture. “It will also offer me an easy, simple way to crush my enemies like tiny insects.”

“New media opportunities abound,” reads a quote from EMI Group Chairman Eric Nicoli, “and we are especially excited by those which provide fast, easy and legal distribution of music. We also enjoy quiet walks on the beach and are looking for a special someone with whom to share the Beatles catalog and radical downsizing.”

Chortled Bertelsmann Chairman/CEO Thomas Middelhoff: “Bertelsmann is the leader in charting a course for the future of digital distribution. We give consumers what they want, how and when they want it, through accessible and easy-to-use technology, of which MusicNet will play a leading role. We also celebrate the end of meaningful syntax.”

“By licensing Warner Music catalog to MusicNet, we create new outlets for our artists and their work,” explained AOLTW Co-COO Richard Parsons, “and by distributing a MusicNet-powered subscription service as part of AOL’s overall music strategy, we advance our goal of creating the best interactive music experience for our online members. And everyone is welcome to join me in the Madonna chat room.”

MusicNet represents all the major-label music not covered by Duet, the much hyped but little-known collaborative venture between Vivendi Universal and Sony. By grouping their music under two large umbrellas, the majors avoid charges of cartel-like complicity that could come with a single, all-encompassing platform. But they also simplify the music-acquisition process for online music-service providers.

It seems likely, given this arrangement, that the various music services overseen by the individual label groups and/or their parent companies will license music to one another freely. As a result, the logjam represented by the prospect of one company controlling the digital-distribution pipes could be cleared. The timing couldn’t be better to offset criticism from politicians and online activists about industry foot-dragging in this area.

Even so, although this week’s high-profile D.C. hearings on online entertainment were thought to be a factor in the announcement, industry insiders believe the threat of government involvement has been seriously overstated-a view bolstered by the hearings themselves-and that real economics motivated the pact.

For Bertelsmann, the deal may represent an attempt to hedge its bets amid the Napster firestorm. EMI, on the other hand, needs to find its place in the digital sphere whether the merger with BMG takes place or not.

AOL already has a gigantic audience-over 27 million subscribers and growing-for its service. With subscription billing already in place, it would probably be easier for AOL to add a few bucks for music services than for others to accumulate a user base. But to lure other majors into the walled garden, it was clearly necessary for AOLTW to reach out.

Likewise, while Napster has lost some of the 60 million users it continues to claim and will inevitably lose more with a restrictive version, it would kick off a licensed version of its service with a sizable user base and a major brand. But the looming threat of colossal legal woes and lingering bad blood with the industry doesn’t bode well for a reformed swapco.

Meanwhile, stealthier moves are being made by other players. A big question mark surrounds Vivendi Universal’s digital-distribution plans in the wake of a planned fusion of Farmclub.com and GetMusic, but Vivendi chief Jean-Marie Messier has recently floated several possibilities for future partnerships. One of these possibilities came to fruition Thursday (4/5), when the Duet partners announced an alliance with high-profile Internet brand Yahoo! Later that same day, The Washington Post reported that the mysterious suitor poised to acquire troubled Emusic was none other than Universal Music Group. The plot thickens by the minute.

550 Digital Media Ventures has been incubating a streaming sub service for some time under the name Unsurface; this locker-based system, like My.MP3.com, will allow users to listen to their music collections remotely and acquire new music both physically and digitally. It remains to be determined what role Unsurface, which will ultimately be a multimedia service, will play in the ongoing licensing drama. But an imminent rollout and Sony technology make it a key piece of the overall puzzle.

Speaking of My.MP3.com, that service-which has already paid large settlement fees and inked future-licensing agreements to access major-label content-may now find itself struggling to compete in a suddenly crowded field where the content providers are frequently also partial owners of the distribution pipeline.

Yet even as all these seismic shifts in the landscape continue, the role of publishers in the digital services world has yet to be fully addressed, let alone determined.

And as elements of the subscription picture come into focus, much remains cloudy.

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