Universal OKs Songs for FullAudio

Universal Music Group has issued a rare license for an interactive online music service, giving independent distributor FullAudio the rights to a portion of its music catalog.

The move--which is expected to be announced today--aids a would-be competitor to Pressplay, an online music service that Universal owns jointly with Sony Corp.

But it’s unclear whether FullAudio, a Chicago-based music-rental company, will be able to offer consumers as much of Universal’s catalog as Pressplay.

The license is the broadest one Universal has announced for an interactive music subscription service other than Pressplay.

James Glicker, FullAudio’s president for music services, said the company has enough material to deliver its service to distributors, starting in January with the Web sites for Clear Channel Communications Inc. radio stations in five cities.

The record industry’s licensing practices are under scrutiny by the Justice Department, which has launched a preliminary antitrust investigation. Among other things, that probe looks into Pressplay and MusicNet, a joint venture of three record companies’ parent firms: AOL Time Warner Inc., Bertelsmann and EMI Group.

Recently, however, the pace of licensing has started to accelerate. Last week, Warner Music Group announced its first license for an interactive subscription service, and Warner officials said they expect to announce more deals within weeks.

Glicker said his company reached an agreement in principle with Universal months ago, well before the antitrust investigation began. It took a long time to get a signed contract, he said, because many of the issues posed by an online music-rental service are new to Universal and the other labels.

Since June, FullAudio has negotiated the rights to a significant portion of EMI’s catalog and licenses from the music-publishing arms of EMI, Universal and Bertelsmann subsidiary BMG. Those deals provide FullAudio with more material than any other independent subscription music service but less than Pressplay and MusicNet.

FullAudio lets consumers download dozens of songs to their computers for a flat monthly fee. The songs are locked on the subscriber’s computer and expire after a month, but they can be renewed on a month-to-month basis.

The 30 Clear Channel Web sites will let consumers download songs individually or in collections assembled by the stations’ disc jockeys.

Analyst P.J. McNealy of GartnerG2, a technology research and consulting company, said FullAudio won’t be able to offer a compelling service until it has licenses to all five of the major record companies’ songs. “They’re two-fifths of the way there now,” McNealy said.

A more important issue, analysts said, is whether FullAudio is getting the right terms on those licenses.

Although the financial details were not disclosed, Universal’s license doesn’t permit the downloaded songs to be moved to portable devices or burned onto CDs.

A Universal spokeswoman declined to say whether FullAudio would have access to as much of the label’s music as Pressplay. But McNealy said “it would be risky antitrust-wise” for Universal not to offer the same terms to FullAudio as it did to its affiliate.