In a major online music move, three of the five major record labels announced Monday that they are joining forces in a new company that will license their music to subscription services on America Online and perhaps even Napster, if the file-sharing service can prove it is protecting copyrights.
The new company, MusicNet, is a joint venture of companies whose massive artist rosters include Christina Aguilera, the Red Hot Chili Peppers, the Beatles and Madonna. AOL Time Warner, Bertelsmann AG and the EMI Group the parent companies of major labels Warner Music Group, BMG Entertainment and EMI Recorded Music will team up with streaming-music veterans RealNetworks on the venture.
Label executives promised that MusicNet would fulfill the long-heralded dream of legal music on-demand via the Internet. Most music fans have glimpsed that celestial jukebox only through Napster, which is under court order to filter out copyrighted music from its service.
"This agreement ushers in the era of secure, convenient, interactive mass music distribution," AOL Time Warner co-chief operating officer Dick Parsons said in a prepared statement. "It will transform how consumers discover and experience music in their everyday lives."
MusicNet hopes to begin immediate discussions with Napster in an effort to license music through the file-trading service, according to Rob Glaser, MusicNet's interim CEO.
"In the context of Napster offering a system and a solution that fully satisfies legal, copyright, and security concerns, MusicNet will enter into distribution discussions with Napster commencing right away," Glaser said in a press conference Monday afternoon (April 2).
Napster greeted the MusicNet announcement "with interest" and will watch the company's development closely, CEO Hank Barry said in a terse statement released through the company's publicist. Napster plans to evolve into a copyright-friendly subscription service in the coming months.
MusicNet is also planning to reach out to the rest of the music industry, Glaser said in the press conference. "We hope to sign additional partners not just the other major labels, but all the independent labels."
Last year, the other two major labels, Sony and Universal, announced plans to create Duet, another service that would license music to subscription services. They've invited other labels to join them on the project, but so far none have.
America Online and RealNetworks each plan to launch music subscription services using MusicNet by late summer or early fall, with services from many other companies to follow, according to Glaser. The services are expected to include both on-demand streaming music and downloadable files.
The MusicNet announcement comes one day before a Senate Judiciary Committee hearing that will focus on digital music issues. U.S. Sen. Orrin Hatch, the head of the committee, has suggested that unless music labels begin voluntarily licensing their music online, Congress might have to force them to do so. But Glaser called the timing of Monday's announcement a coincidence.
MusicNet's agreement with the labels is nonexclusive, leaving them the option of licensing their music to other services.
[This story was updated at 6:33 p.m. ET Monday, April 2, 2001.]