RealNetworks Takes Stake in Listen.com

Online music distributor Listen.com Inc. announced Wednesday that it had received a cash infusion from RealNetworks Inc., whose technology will replace Microsoft Corp.’s software as the backbone for Listen’s service.

By investing an undisclosed amount in San Francisco-based Listen, Real gains a minority stake in the privately held company. Real also owns 40% of MusicNet, a competing online music distributor that Real co-founded with three major record companies.

Neither company has revealed how many subscribers they’ve attracted for their online music services, but analysts estimate that the number is well under 100,000. Listen has been forced to winnow its staff several times to conserve its dwindling funds, most recently laying off one-third of its 75 workers, said analyst P.J. McNealy of GartnerG2, a technology research and consulting firm.

By contrast, Real reported more than $300 million in cash reserves at the end of 2002.

Real spokeswoman Erika Shaffer said the investment reflected the company’s belief in legitimate online music services. She also noted that Real and Listen are both focused on trying to move digital music beyond the computer to stereos, wireless phones and other devices.

But analyst Ryan Jones of Yankee Group, a technology research firm in Boston, said the move was “a land grab on Real’s part” in response to Microsoft’s growing dominance in the field of downloadable audio and video. And McNealy noted that Real would benefit from the distribution deals Listen has been aggressively striking with Internet service providers and cable operators.