Sony backs rival MusicNet

Sony Music, co-owner of the Pressplay online music service, has provided funding to rival service MusicNet, sources close to the companies say.

Sony Music, co-owner of the Pressplay online music service, has provided funding to rival service MusicNet, sources close to the companies said.

Executives for both Sony and MusicNet declined to comment. But sources close to the situation said Sony recently took a 4 percent stake in the service in the form of a convertible note.

The agreement is the second such financial deal linking digital music competitors in recent days. On Wednesday, digital media company RealNetworks said it had taken a minority stake in online music company Listen.com, a one-time competitor.

Under the deal, RealNetworks' technology became the primary platform for Listen's Rhapsody service, replacing Microsoft's Windows as the primary technology.

RealNetworks is a founding member of MusicNet, which competes with both Listen.com's Rhapsody and Pressplay, owned by Sony and Vivendi Universal.

All these services are struggling to gain traction at a time when music fans are used to getting music for free from renegade peer-to-peer services like Kazaa.

MusicNet's other owners are AOL Time Warner, Bertelsmann and EMI Group.

Sony already had links to MusicNet through a licensing deal announced in November. It was one of many such deals among the major labels as they sought to ramp up the legitimate online services and provide them with more extensive content.

"There are some lucrative deals being cut because companies need cash in the absence of revenues, and music companies are lining up their resources behind the services they think are going to be around," said P.J. McNealy, an analyst with GartnerG2.

Earlier this week, AOL Time Warner's America Online began offering a revamped version of MusicNet to its 27 million U.S. Internet customers, the biggest move yet to bring commercial online services to the mainstream as they struggle against free, unauthorized services like Kazaa.

Story Copyright  © 2003 Reuters Limited.  All rights reserved.

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