Yahoo, Universal, Sony Announce Online Music Deal

Online powerhouse Yahoo Inc., Universal Music Group and Sony Music Entertainment on Thursday, announced the outlines of a plan to sell music together via the Internet through monthly subscriptions.

The deal follows an announcement Monday by America Online and RealNetworks that they’re planning subscription music services with the other three major labels--EMI, Warner Music Group and BMG. Together, the deals represent the biggest Internet players teaming with the largest music companies to pitch what may be the next generation of music services.

Both announcements were missing critical details about pricing, technology and usage limits, suggesting the companies rushed to go public before many key issues were resolved. Nevertheless, the companies said the new services would be available this summer or fall.

The announcements underscored how fragmented and muddled the marketplace for digital music is, with the major suppliers of music aligning with competing distribution systems that aren’t yet ready for prime time. These systems appear incapable of working together seamlessly, making it difficult for companies such as Yahoo and AOL to offer an easy-to-use service with all the hit songs.

“It’s a disaster waiting to happen if it’s only just two [major labels] or it’s only just three,” said analyst P.J. McNealy of Gartner Group, a technology research and consulting company. Consumers are used to finding a full array of music at CD stores, and “they want that experience replicated on the Web,” McNealy said.

Nor is there any proof yet that consumers will subscribe to music services that don’t give them the flexibility or sound quality they enjoy from CDs. Analysts say that consumers have been unenthusiastic at best about the labels’ encrypted downloadable songs, which cost about the same as CDs but can’t be freely copied or moved to portable devices.

The labels may not be divided into rival Internet camps for long. Industry insiders said Thursday that a third record company--BMG--was about to play both sides of the fence by joining Universal and Sony’s “Duet” distribution alliance.

Universal also has signed a tentative deal to buy EMusic, which has exclusive online distribution licenses for more than 650 independent labels and at least 180,000 songs--the sixth largest music catalog in the world.

“There are no big lines that have been drawn in the sand,” said Jim Long of RioPort.com Inc., a distributor of online music. Noting that “deals are being thrown together somewhat hastily,” Long said he wouldn’t be surprised if both Duet and the MusicNet service, backed by EMI, Warner and BMG, wound up with licenses to all five companies’ catalogs.

RioPort already has licenses from each of the five major label groups to distribute downloadable songs and CDs from their catalogs. On Wednesday, the company announced a new service with Viacom’s MTVi, due later this month, that lets consumers buy and download the songs they hear on some of MTVi’s online radio stations.

The rash of announcements stemmed in part from the mounting pressure by influential congressmen, who want the major labels to license their music to online distributors. Label executives also say they’ve picked up the pace since an appeals court reined in the controversial song-swapping service from Napster Inc., chilling the prospects for any business wanting to give away music on the Net.

Vivendi Universal and Sony announced Duet last year, and Yahoo is its first partner. But Yahoo’s role is mainly to be a promoter, as the deal calls for Duet to design and package the music offerings, set their prices and deliver the songs to subscribers.

The labels were tight-lipped about the services’ price and shape, saying only that the first ones would be limited to online listening and later ones would allow downloading. Subscribers would have to listen to the music on their computers at first, but as the security technology improved, they would be able to move them to portable devices.

The deal isn’t exclusive, so Yahoo is free to bring in other labels’ and artists’ content separately. But it could find it impossible to combine the songs into a single system with a common set of tools and rules--unless, of course, those labels and artists agreed to have their songs distributed through Duet.

“Consumers want all the music from all the labels in one service,” said Ellen Siminoff, senior vice president of entertainment and small business at Yahoo. “That’s not necessarily something that Yahoo has the ability to control.”

Duet’s founders, Universal and Sony, are the No. 1 and No. 2 record companies in the world, accounting for nearly half of the music sold in the U.S. Through Duet, those companies are hoping to gain a direct connection to consumers, bypassing traditional retailers.

The rival MusicNet service is different in a couple of important ways. For one thing, it’s built on a particular technology: RealNetworks’ system for transmitting media through the Net. For another, it offers its customers more control over pricing, packaging and distributing files.

Like Duet, however, MusicNet is designed for encrypted song files. And encryption is the biggest impediment to providing a convenient, easy-to-use service for consumers.

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Related articles can be found at https://www.latimes.com/musicweb.