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E-Music Deals Finally Gaining Ground

Internet: Record labels, online firms are working together on new services, but they face many hurdles.


Online jukeboxes that provide thousands of songs on demand to subscribers. Internet radio stations that let users buy and download the songs they hear. Online music storage vaults that enable users to supply songs to their friends.

These are some of the services made possible by a spate of deals announced this week between the major record labels and online entertainment and technology companies. The brief flurry suggests the music industry's difficult relationship with the Internet is finally warming up.

Insiders say the change stems from a variety of forces, including pressure from Congress and key court rulings that could sideline a formidable competitor.

Still, they caution that there's a gulf between an announcement and a real service, and a gap between what the labels are willing to do and what the public wants.

"My sense is, it's still more about talking than about doing," said Bill Koenig of Cantametrix, a company that helps protect copyrighted material online.

Nor is it enough just to win the labels' backing. Several online music services licensed by the labels have been hampered or derailed by other problems, including money shortages, shifting business models and troubles with the music publishers.

The five major record companies all have dipped their toes into the online music market, offering a small percentage of their songs for downloading. But before this week, they'd turned down virtually all proposals for distributing music in new ways through the Net.

Of the deals announced this week, the one closest to fruition is a new set of Net radio stations from MTVi, the online arm of Viacom's MTV, which are expected to be fully functional by the end of April.

These stations--grouped under the banners Radio and VH1atWork Radio--enable listeners to buy downloadable versions of select songs or CDs as they're playing. The supplier of the downloads is Inc., which spent several months winning distribution rights to songs from all five major record companies.

HitHive Inc. is expected to announce a deal with EMI today enabling a new form of music sharing by consumers. Working through other service providers, HitHive will enable consumers who buy an EMI release to let up to 25 friends download digital copies of those songs for a limited time--in essence, letting their friends sample the music they purchased.

The week's biggest announcement came Monday, when EMI, AOL Time Warner and Bertelsmann said they licensed their catalogs to a new company created by RealNetworks called MusicNet. Owned in part by the three label groups, MusicNet plans to make online jukebox, download and song-sharing services available through a variety of Web outlets, including America Online and RealNetworks.

The spate of newly authorized services comes in the wake of a precedent-setting appellate ruling that required Napster to block users for making unauthorized copies of the major labels' songs. The ruling encouraged the labels and online music companies, giving them hope that they wouldn't have to compete with businesses giving away songs over the Internet.

This week, the Senate Judiciary Committee held another hearing on the development of the online music marketplace--its second hearing in 10 months.

Though some senators expressed frustration Tuesday with the pace of business deals, no one proposed legislation that would force the major record labels to license their content to Internet retailers.

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