MusicNet Cozies up to WM9

Struggling to stay viable in the nascent online music sector, MusicNet on Thursday announced it would
re-record more than 350,000 digital tracks in Microsoft’s Windows Media 9 format in order to open new doors for potential
subscribers.

MusicNet, which is backed by America Online ,
RealNetworks and record labels, said its entire music
library would now be available in Microsoft’s proprietary WM9 Series, which
features the Fast Streaming technology built into the new Microsoft Windows
Server 2003.

The move is seen as yet another interesting twist in the competitive
online music business, where the bigger companies are hedging multiple
bets
and cross-investing in rival services.

While RealNetworks’ own format will still be embedded into MusicNet, the
latest deal is seen as a coup for Microsoft, which has not yet made its move
with a music service of its own. Instead, the company is a
marketing/distribution partner for Pressplay and a potential acquirer of
the smaller FullAudio service.

It also comes on the heels of last month’s $750 million
settlement
of a legal tiff between AOL and Microsoft, a truce that
included a major digital media and digital rights management (DRM)
component.

MusicNet’s cozying up to Microsoft makes for strange bedfellows,
especially since Microsoft’s cross-town rival RealNetworks recently
participated in a $10 million funding round for the service.

In its announcement Thursday, MusicNet went to great lengths to hail
WM9’s technological capabilities. “With the availability of audio
tracks in Windows Media 9 Series, MusicNet enables its distribution partners
to deliver high-quality audio downloads as well as instant-on streaming
experiences to music fans with Fast Streaming technology…Fast Streaming
can deliver virtual instant-on playback for users of Windows Media Player 9
Series when they are streaming music clips on broadband connections,” the
company said.

Looking to win adoption from enterprise customers, MusicNet added: “In
addition, MusicNet distribution partners can provide customers with
extensive device flexibility with Windows Media on more than 50 supported
portable music devices. Windows Media offers consumers the ability to enjoy
twice as much music on their portable music device as they can with MP3,
without sacrificing quality, meaning more music with more choice.”

The inclusion of such laudatory quotes could be viewed as an indirect swipe at RealNetworks’ own Helix-powered platform, which is marketed as an open-source alternative to the WM9 Series.

MusicNet is currently being sold only to AOL’s dial-up and broadband subscribers after RealNetworks dumped the service in favor of the RealOne Rhapsody service which was acquired in the Listen.com deal.

Separately, RealNetworks announced plans to raise $100 million through a convertible bond offering, prompting speculation that company may go on a shopping spree. RealNetworks said the money would be used for general corporate spending and for possible acquisitions or joint venture transactions.

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