EMI cozies up to rival Pressplay

The announcement comes as Pressplay and MusicNet prepare to launch their music-subscription services. Originally slated for a September release to consumers, Pressplay's launch was delayed last week by its corporate parent, Vivendi Universal, which blamed the postponement on the terrorist attacks on the World Trade Center and the Pentagon.

Until now, the major record labels were divided between the two digital music services, with Pressplay tapping songs from Universal Music Group and Sony Music Entertainment, and with MusicNet to offer songs from Warner Music Group, BMG Entertainment and EMI.

But EMI's announcement Tuesday bridged a rift that had divided music and technology companies into the two alliances. EMI has similar licensing deals with online music services HitHive and FullAudio.

"I hope competition between these services creates better services for music fans to choose from," said Jay Samit, EMI's senior vice president for new music.

The music industry has been on a mission to launch online music services since being blindsided by popular Internet start-ups such as Napster. Despite ongoing lawsuits against the popular file-swapping company, record companies want to tap the consumer appetite for an all-encompassing digital music service that sells music in download and streaming formats.

Pressplay and MusicNet are similar in offering consumers wide swaths of music, but different in their economics to partners.

Pressplay acts as a retailer, selling to people directly and paying affiliates such as MSN and Yahoo to distribute to a wider audience. Affiliates are paid an up-front fee and a possible cut of revenue depending on how many people sign up.

In contrast, MusicNet acts as a wholesaler. Its partners--RealNetworks, which owns the largest stake in the service, and America Online--pay MusicNet an undisclosed fee for carrying MusicNet but then set their own prices for offering music. Pressplay partners have no say in pricing.

MusicNet has already shipped its technology to RealNetworks and AOL. Both partners are expected to launch a product to consumers by the end of the year.

Despite the recording industry's momentum, there are still some major hurdles that could slow Pressplay and MusicNet's progress. Neither service has struck licensing agreements with the largest body of music publishers, the National Music Publishers Association (NMPA), which through the courts could block any service from launching.

Just last week, the NMPA won a lawsuit against Universal that found the label in violation of its copyrights by streaming songs that were not previously licensed. Universal had originally licensed songs from publishers for inclusion in their albums, and believed the agreements extended to Web streams. However, the ruling concluded that separate licenses have to be struck for songs to be streamed interactively through the Internet.

Meanwhile, the record industry is facing a Department of Justice investigation that will largely focus on Pressplay and MusicNet. Smaller music start-ups have complained that the labels have held out in offering their catalogs, leading many to go out of business for lack of content.

Still, Tuesday's licensing deal could benefit music-hungry consumers who couldn't care less about divisions between labels.

"I think the ice has been broken and we'll see some aggressive cross-licensing between the labels and their respective camps over next few months," said Aram Sinnreich, an analyst at market research company Jupiter Media Metrix.