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FullAudio gets new music, funding

The online music service says it is receiving $13.5 million in new funding and is striking a licensing deal with Bertelsmann's BMG, its fourth major record label.

    Online music service FullAudio received $13.5 million in new funding and struck a licensing deal with Bertelsmann's BMG, its fourth major record label, the company said Tuesday.

    Chicago-based FullAudio said the third round of funding brings the company's total investments to $36 million, which will be used to expand its business development, marketing and digital music subscription services.

    FullAudio also said it will offer Bertelsmann Music Group's catalog of songs through its online music subscription service, MusicNow. FullAudio said subscribers will be able to download songs from BMG artists including Whitney Houston, Christina Aguilera and Usher. FullAudio also has licensing deals with EMI Recorded Music, Universal Music Group and Warner Music Group.

    FullAudio's licensing deal and latest financing come as the record labels are struggling to woo consumers from free file-swapping services to paid legal music sold over the Web, through their own subscription services Pressplay and MusicNet, as well as direct Internet singles sales and third-party distributors. The music industry has blamed free online peer-to-peer services for the widespread unauthorized copying of digital music.

    In a report released last week, The International Federation of the Phonographic Industry (IFPI), a lobbying group, said the Web is being used to sell counterfeit, unauthorized compilations and other physical pirated products. The IFPI estimated that in May 2002, there were approximately 3 million people and 500 million files available for copying at any one time on all of the peer-to-peer services worldwide.

    "For the time being, if you want to find free music badly enough, and you've got the time on your hands to do it, you can; the services are out there," said Susan Kevorkian, a research analyst at Framingham, Mass.-based IDC. "That's a big hurdle, a major competitor for any online music service."

    Kevorkian said that providing music from the Big Five record labels is also important in attracting consumers to the legitimate paid services. Kevorkian said FullAudio and Listen.com so far are the only services to have gained access to music from four of the Big Five labels.

    Two months ago, FullAudio launched its music-subscription service, carried on Clear Channel's network of radio Web sites. FullAudio's Clear Channel site offers 50 songs download per month for $7.49, or 100 downloaded songs for $14.99. However, those songs can't be burned to CD or transferred to an MP3 player; analysts say portability is a key ingredient to the success of paid online music services.

    Still, FullAudio is confident that with the new funding and licensing deal, the company will be able to sustain its business as well as become a key player in the online music scene.

    "What we do is provide a platform to companies who want to offer digital music services to their customers," said Chris Gladwin, chief executive officer of FullAudio. The licensing deal "just further shows FullAudio is a company that is embraced by the music industry, and we are on our way to licensing all the content that is required for these kinds of services."

    FullAudio's investors include New Enterprise Associates, William Harris Investors (WHI) Ventures Fund I, Rocket Ventures, Millennium Technology Ventures, Odyssey Venture Partners, New Enterprise Associates, Venture Strategy Partners, Kettle Partners and IDEO Ventures.