WMG, BMG, EMI MAY TEAM WITH REAL FOR SUB MODEL

The Wall Street Journal reports the three major label groups are each in negotiations with RealNetworks, who through its MusicNet.com, is offering an ownership interest in the planned subscription service to the record companies in exchange for licensing rights.

As part of the deal, MusicNet would be made available to other online services, the paper said, citing sources familiar with the ongoing talks.

To wit, the Journal added that the companies are discussing giving Napster an opportunity to license said service under certain strict conditions. However, such proposals by those involved would not necessarily change anything for Napster in regards to their ongoing legal troubles.

RealNetworks and the three record majors are hoping to ink the deal by next week, the paper said, couching the report by noting a suitable agreement is certainly not a guarantee.

Subscription music services, which in the past year have become the music industry's preferred business model for future online distribution, could offer consumers the right to listen to music for a fixed monthly fee, possibly $10 to $15 a month. Specific details of such subscription service figures have yet to be revealed, but most agree the estimated monthly fee is in the right ballpark.

To that end, AOL Time Warner, parent of Warner Music Group, has already said it is developing its own service, while Universal Music Group and Sony Music are planning Duet, a subscription service slated for a summer debut. UMG and Sony are the two not included in these discussions, at this point. However, sources point out, that for subscription services to work most effectively, participation from the five majors is necessary, and all such services will likely be non-exclusive. In short, the theory is that it would be profitable for all the majors to license songs to all of the legitimate and available services, sources said, noting that subscription music services will need to offer music from all companies to have a chance of success, given Napster's influence.

While a WMG-BMG-EMI alliance would rival the proposed UMG-Sony pairing in the quantity of music available online, sources said it is more likely that a deal among all involved will emerge eventually. If the RealNetworks deal goes down as planned, a combined WMG-BMG-EMI would account for close to 40% of the market. The UMG-Sony union has about a 46% share.