RealNetworks, EMI, AOL, BMG in online music deal

MusicNet will combine the music assets of Bertelsmann, EMI Group and AOL Time Warner. The companies' music subsidiaries -- EMI Recorded Music, BMG Entertainment, and Warner Brothers Music Group -- will each license their music to MusicNet on a non-exclusive basis while RealNetworks will provide the online music delivery technology. AOL will also tie the new company into its existing portfolio of online brands, which include the music sites WinAmp and Spinner.

MusicNet will operate as an independent company, with each of the four companies involved owning a minority stake. The new company will also seek to license music from other record companies, both independents and the two remaining major labels -- Sony Music Entertainment and Universal Music Group.

Rob Glaser, chairman and chief executive officer of RealNetworks, will be the interim chairman and CEO of MusicNet as well. The companies chose a CEO from outside the labels for MusicNet to avert a potential antitrust inquiry that could result from having a distribution venture that combines three of the five largest music labels, said P.J. McNealy, a senior analyst high-tech research firm Gartner Group.

"EMI and Sony couldn't talk in the same room as a Universal guy without an antitrust lawyer in the room," McNealy said.

Glaser dismissed antitrust concerns in a conference call Monday afternoon. "One of the core participants in this has been Joel Klein," he said, referring to the Clinton administration antitrust prosecutor who pursued the government's case against Microsoft. Klein now heads Bertelsmann's US operations.

"I think all of the participants have made it clear that there's nothing exclusive," in the agreements, permitting all parties involved to make additional distribution deals, Glaser said.

He also refuted the claim that the announcement was purposely timed one day before Senate hearings into online music, where music executives are expected to be grilled on their strategy for online music distribution.

"This is not just a fig leaf sort of thing," he said. "This is the real deal."

Few hard details came out of the conference call, however. No date was announced for the business-to-business service to begin. No model for subscriptions was announced. No model for distribution was announced, beyond Glaser noting that it will be business-to-business and not business-to-consumer, and that it will support both streaming audio and downloads.

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