September 11, 2000

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Warner Music, RealNetworks in Digital Music Pact



Ban Napster?

NEW YORK -- Record label Warner Music Group, making a belated first step into the hotly contested online digital music space, said on Monday it would join with streaming media company RealNetworks Inc. (RNWK.O) to distribute music on the Internet.

Warner, a unit of media powerhouse Time Warner Inc. (TWX.N), will from November offer current singles and ''Internet-only'' tracks from artists such as Paul Simon and Barenaked Ladies on Web retailing sites. These will include Inc. (AMZN.O) and, the online venture of the world's largest retailer Wal-Mart Stores Inc. (WMT.N) .

Warner is the last of the big-five record labels to announce a digital distribution initiative in the midst of a heated court battle against Redwood City, Calif.-based Napster Inc., a music downloading site the companies say facilitates copyright infringement and online piracy.

Warner's proposed offering of 1,000 online tracks and albums is significantly larger than those offered by other labels, which have numbered as few as 50.

``That's a pretty comprehensive library of music,'' said Aram Sinnreich, an analyst at market research firm Jupiter Communications when asked why Warner was the last to make a digital move. Warner's service took ``maybe six months of work on the back end for lawyers and rights holders,'' all of whom needed to be consulted before the music could go online, he said.

Recording companies have been accused by some industry analysts of moving too slowly in the digital sphere as song-swapping programs such as Napster have become some of the Internet's most popular sites.

But others say that the labels have room to catch up and make a profitable dent in Internet music.

``There was less than $1 million spent in paid music online in 1999, but in five years it will be a $1 billion industry,'' Sinnreich said.

Time Warner's proposed merger with the world's largest Internet provider America Online Inc. (AOL.N), could create a world-wide audience of more than 24 million subscribers for Warner's service.

Warner Music and EMI Group Plc, which has its own online partnership with Liquid Audio Inc. (LQID.O) and Microsoft Corp. (MSFT.O), announced plans to merge their music businesses earlier this year. That deal is being delayed by a European Commission probe.

Seattle-based RealNetworks, which will host Warner Music's downloading service, will offer a flexible infrastructure to support several popular digital playback formats endorsed by the music industry. RealNetworks will also prepare the music for online distribution, manage the digital rights and provide customer support.

Shares of RealNetworks closed up $1-3/16 at $50-5/8 on Monday on the Nasdaq stock market. Shares of Time Warner were up 15/16 to $80-5/16 on the New York Stock Exchange.

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