RealNetworks Venture May Find a Majority's Not Enough

April 4 -- Three out of five isn't bad. But it's not necessarily good, either.

Monday's announcement that three of the five major music labels have joined forces with Internet media firm RealNetworks represents a real milestone: It's the furthest that anyone has gone toward establishing a viable business for distributing mainstream music online.

But because so many questions about the online music service remain unanswered, it's too early to tell whether the venture will be as successful as it is noteworthy. Among the unknowns about the venture, dubbed MusicNet, are its price to consumers, its ease of use, the selection of music it will make available, and what type of antitrust scrutiny it might raise.

In other words, it's unclear whether the alliance of AOL Time Warner's Warner Music Group, EMI Group and Bertelsmann's BMG Entertainment will click like those industry heavyweights the Three Tenors, or end up as imporant to musical history as the Hudson Brothers.

Along for the Ride?

If the MusicNet does succeed after its expected commercial launch by early fall, clearly RealNetworks will benefit from being along for the ride. The company, which claims 170 million unique users of its RealPlayer media player software, owns 40 percent of MusicNet, with the rest held by AOL Time Warner, EMI, Bertelsmann and RealNetworks employees. MusicNet says it will employ a combination of RealNetworks software already in the field and new technology.

RealNetworks shares rose 50 cents by Monday afternoon, or 7 percent, to trade at $7.63.

The online subscription service's most valuable asset is certainly the participation of a majority of music majors. In the first place, incurring the established music industry's wrath can cripple any company trying to build an online music business, as the litigation against Napster and other firms has demonstrated.

Here Comes the 'Celestial Jukebox'

Active antagonism aside, pundits in the nascent business of online music have said that for subscription services to work, a service will have to have music from the world's five largest record labels.