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Warner Music to License Songs to Online Service

It is the largest company to offer its full catalog, and the agreement with Echo Networks could signal a wave of music-sharing deals.


Warner Music Group on Monday announced its first licensing deal with an independent company planning to offer songs online to subscribers on demand.

The deal with Echo Networks of San Francisco makes Warner the largest record company to license its full catalog to an online subscription service. The deal may be the first in a wave of licensing agreements as a number of new online services gear up to launch early next year.

Artists signed to Warner-owned labels include pop icon Madonna, country singer Faith Hill and rapper Missy Elliott.

The only other online company to win access to Warner's catalog is MusicNet, a joint venture formed in April by RealNetworks Inc. and the owners of three major record companies--AOL Time Warner, Bertelsmann and EMI Group. MusicNet and Pressplay, a competing joint venture of Universal Music Group and Sony Music Entertainment, are the sole online music services licensed by more than one major label to provide a full range of songs by subscription.

In fact, before Monday's announcement, EMI was the lone major label to make public any deals with unaffiliated U.S. subscription services for its full catalog. The lack of licenses has drawn scrutiny from the antitrust division of the Department of Justice, which is investigating the record companies' licensing practices. Among other things, that probe is looking into MusicNet and Ppressplay.

Analysts also have criticized the labels for not striking deals more quickly with companies that want to offer alternatives to free song-sharing services, such as MusicCity's Morpheus.

Paul Vidich, a Warner Music executive vice president, said his company has been talking to all of the would-be online music suppliers for six to nine months. ""It's just a matter of who gets to the goal line first,"" Vidich said. ""We are not more than weeks away"" from several more deals.

Warner's major concerns have included security and accounting, but the main hold-up has been money. Neither Vidich nor officials at Echo would comment on the terms of the deal.

Founded in October 1999, Echo Networks offers an online radio service built around users' tastes and communities. With its new license, Echo plans to let subscribers listen to songs by Warner artists on demand--initially by playing them from an online collection, but eventually by downloading them to their computers.

The downloaded songs would be scrambled so they could not be burned to CD, moved to other computers or played if the user's subscription expired. Echo is working with consumer-electronics companies on ways to offer the Echo service to portable devices, company officials said.

Tuhin Roy, executive vice president of strategic development for Echo, said the company hasn't determined yet how many songs subscribers would be able to download or listen to on demand. Nor has it set a price, although Roy said it would be "significantly less than the price of a CD."

Echo has been sustained by private investors, who've put up almost $10 million to keep the company running. Raymond P. Stata, a director of the company and an investor in several upstart tech companies, said, "We've lasted this long because when we got into it at the beginning, we didn't think it was going to be a short game."

Also Monday, Napster Inc. announced a multi-year licensing deal with Vitaminic, an Italian distributor of digital music. The deal will make Vitaminic's catalog of 250,000 songs from more than 80,000 artists--many of them unknown in the U.S.--available to users of Napster's forthcoming song-sharing service.

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