Seagram's Universal Music Group became the latest major record label to let a Web company license its coveted song library. The label announced yesterday that it will allow Musicbank to tap its list of popular songs for its services.
San Francisco-based Musicbank, which plans to launch in September, lets people listen to their CDs via the Internet shortly after buying the discs in retail stores. The company also has struck deals with music retailers, including Virgin Megastores, that will allow shoppers to immediately listen to their CD purchases via Musicbank's Web site.
People who buy discs from Universal artists, such as Eminem, Jimi Hendrix and Shania Twain, in certain retail stores will have access to the songs online through Musicbank.
Musicbank has said it plans to enter into licensing agreements with all of the major record labels. Barely two months ago, the company struck a deal with BMG Entertainment, the record label of German media giant Bertelsmann.
Universal also will take an undisclosed stake in Musicbank.
The label's entry into online licensing is another indication that the record industry is changing its tune. The industry has had a contentious relationship with the Internet thus far, given the rise of the MP3 audio format, which has become a de facto standard among legitimate Net users and music pirates alike.
Record labels have taken legal action against Net companies that are allegedly promoting the illegal distribution of copyright-protected music. Today, for instance, the record industry is awaiting comments from a judge in its attempt to shut down Napster, a Web site whose software lets people swap music files online. The record industry and artists have accused Napster of stealing their works without compensation.
Despite the industry's hard-line stance against Napster, record labels are still trying to figure out how to let people access songs online for a fee.
The labels are trying several avenues to find the road best traveled online. Some, such as Sony Music Group and Universal, are attempting to launch their own subscription services in which consumers pay a flat monthly fee to access the companies' music libraries.
But analysts remain wary of the record labels' efforts to do it themselves.
"They shouldn't be trying to do these things in-house," said Eric Schreier, an analyst at Forrester Research. "They should be trying to partner with as many digital distributors as possible."
Musicbank is similar to MP3.com's My.MP3.com, which streams an album's songs to people who have purchased that CD. But unlike MP3.com, Musicbank has established licensing deals with two major record labels, legally allowing CD owners to access their new albums online.
MP3.com ran afoul of the record industry because the company bought tens of thousands of CDs, created a database of downloads, and offered access to anyone who could prove they bought the CD by placing the disc in their computer.
The Recording Industry Association of America won a lawsuit against MP3.com earlier this year, forcing the company to settle with two major labels: Warner Music Group and BMG Entertainment. Settlements with the other three major labels are still in the works.