April 2, 2001, 12:00 AM

Record giants, AOL and RealNetworks form MusicNet

In a major agreement that speeds the conversion of music retailing from store-based to Internet-based, three record companies, AOL and Real Networks have created MusicNet to market music on the web using licensing with labels and consumer subscriptions.

In a stunning move that challenges the long-term viability of record stores, AOL Time Warner, Bertelsmann, EMI Group and Real Networks have formed a joint-venture company called MusicNet, which will market an extensive, downloadable collection of recorded music over the Internet to consumers who subscribe to the service through various web-based distribution networks, including AOL and RealNetworks. The agreement marks the first time that a majority of leading record labels has licensed their music collection to a venture whose sole purpose is to mass market music subscription services over the Internet. Though owned by its founding record and Internet companies, MusicNet will operate as a stand-alone music distributor that will license its platform to any recording company seeking to sell downloadable music over the Internet using branded subscription services marketed by a host of Internet distributors. AOL and RealNetworks, each of which launch separate branded online music subscription services later this year, constitute MusicNet’s the first two Internet distributors. However, the new company will also license its platform to other Internet music distributors, including Napster, so long as they satisfy legal, copyright and security requirements. MusicNet will start operation with a vast selection of recorded music, thanks to the contributions of its content-rich parents. MusicNet’s initial roster of artists provided by its founding record companies includes such industry heavyweights as Eric Clapton, Dave Matthews Band, Faith Hill, Madonna, matchbox twenty and Santana.

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