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Universal Music Ups Royalties for Song Downloads

Universal Music Group, the world’s biggest music company, has increased the royalties it pays artists on downloaded music, sources close to the company said on Thursday.

Universal, home to Sheryl Crow (news), Sting and Limp Bizkit, has increased its online royalty rate and stripped out some charges, a move that could effectively double payments to artists for songs downloaded on the Internet, the sources and experts said.

Officials for Universal, a unit a unit of Vivendi Universal, declined comment.

The higher payments reflect an effort by the music conglomerate to meet artists’ demands for greater transparency in accounting while enlisting their support in an ongoing campaign aimed at squelching online music piracy.

Under the deal, which is retroactive to Jan. 1, Universal will pay a higher “album” rate for song downloads to artists under contract. Royalties paid on songs that are part of an album are generally about 20 percent higher than the royalty paid on a song released as a single, music attorneys said.

Universal Music has also eliminated various items the label usually takes out of royalties such as a new technology deduction and packaging charges.

“This looks like it would increase royalties substantially, possibly as much as doubling the amount, but it will vary from artist contract to artist contract” said Jay Cooper, a music attorney.

With the new policy, an artist may now hypothetically get about 15 cents on a single downloaded for about one dollar, experts estimated.

“This comes as a result of artists’ unhappiness with the deductions the record companies were taking for regular sales and applying to downloaded sales,” Cooper said.

“It’s also a good faith attempt by the company to respond to certain artists’ complaints to get them to work with the labels in building a real download business,” he said.

Universal and all the big music companies are trying to bolster their online business models as they continue to battle unauthorized file-sharing on the Internet that has emerged in the wake of now-defunct Napster.

Music industry sources said MusicNet and Pressplay, the online services owned by the major record labels, are near licensing agreements that would enable them to offer songs from all five big music companies.

MusicNet is backed by AOL Time Warner Inc., EMI Group PLC and Bertelsmann AG, as well as RealNetworks Inc (NasdaqNM:RNWK – news).

Pressplay, owned by Sony Corp. and Vivendi Universal, has licensed music from EMI and this week announced another licensing deal with Bertelsmann’s BMG. It is also talking with Warner Music, sources said.

MusicNet, meanwhile, is close to a licensing agreement with Universal and near a deal with Sony, the sources said.

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