MusicNet to roll out technology platform shortly

Sue Zeidler

LOS ANGELES: MusicNet, the online music venture between RealNetworks Inc. and
three major record labels, said on Friday it plans to deliver its technology
platform to distribution partners within weeks, the first step toward a
full-launch of the new service for subscribers.

"Within a couple of weeks, our partners will have it in its final
form," said Richard Wolpert, a strategic advisor to the venture. MusicNet,
backed by RealNetworks , AOL Time Warner Inc.'s Warner Music, EMI Group Plc and
Bertelsmann AG's BMG, is one of two music subscription services poised to launch
this fall. Zomba, a giant independent label, is also part of the MusicNet
service.

Rival Pressplay, owned jointly by Vivendi Universal's Universal Music and
Sony Music , said last week it was set for a mid-September launch. "The
normal course of business will resume on Monday and we will revisit the issue
then," a Pressplay spokesman said on Friday.

Many Pressplay's employees were based in New York City, where business was at
a standstill this week due to the collapse of the World Trade Center in air
attacks, he said. Pressplay is set to launch on Microsoft Corp.'s MSN, Yahoo Inc
. and MP3.com. The service will also market directly to customers, offering a
selection of somewhere between 70,000 and 100,000 songs.

MusicNet is a business-to-business venture, selling both technology and its
content to partners such as AOL, RealNetworks and Napster.

"It's a two-phase launch," Wolpert said, adding that once MusicNet
provides the technology to its distributors, they will have to integrate the
encoded music and the software for its delivery with their other offerings. Both
AOL and RealNetworks said this week they were on track to launch the service for
subscribers sometime this fall.

Napster hard to follow

The new commercial services are aiming at the void left by Napster, which
has suspended its free file-swapping service due to a copyright infringement
lawsuit. Napster, which in its heyday attracted nearly 80 million users, is also
in the process of reinventing itself as a paid service.

The new services face several key hurdles, including convincing users to pay
a monthly fee, scrutiny from antitrust regulators and ongoing talks aimed
securing all the necessary licenses for the music they offer.

"I think a better comparison (than Napster) is America Online, which
took nearly eight years to get to a million subscribers," Wolpert said.
"We don't expect significant numbers in the first 12 months. It's not going
to be a million people."

The roll-out of MusicNet and Pressplay comes as a rift over publishing rates
continues. The services need licenses for both compositions and sound
recordings, something which remains a sticking point amid a continued debate
over terms.

Talks between PressPlay, MusicNet and publishers, who own the rights to
underlying compositions, are ongoing but have hung up on the question of what
rates are due publishers for songs provided in interactive Internet music
services.

Industry members have said the dispute could hold up the launch of the new
services, but Wolpert remained optimistic. "We do not believe the
publishing issues will stop us from launching. We believe we'll have a
resolution," he said.

"We're pursuing a lot of different ways to resolve this," he said,
adding entire catalogs of music from the labels would not be available at
launch, but that MusicNet would provide as many as 100,000 tracks to start.

Edward Murphy, president and chief executive officer of the "National
Music Publishers' Association (NMPA), said some progress was being made in the
ongoing negotiations. "We're all working toward a goal. It could happen
quickly, but it hasn't happened yet," he said.

(C) Reuters Limited 2001.