Rumors Regarding a Real Deal with Three of the Major Labels Circulate

Real Networks (www.realnetworks.com) is negotiating a licensing agreement with three of the major labels to offer a subscription-based music download service, according to a report in the online version of the Wall Street Journal. Real Networks has not yet confirmed the speculation, and the story notes that the deal is not yet closed.

The WSJ report states that the service will likely be called MusicNet, and the URL www.musicnet.com is already owned by Real.

Phil Leigh, VP at Raymond James, believes that if this deal goes through, it could cause the most significant upswing the Internet market has seen for a while. Leigh also states that the Real deal could take advantage of the fact that nearly 70 percent of Napster users surveyed, said they would be willing to pay $15 per month for the service, which could equal as much as $360 million in annual revenue, split among the parties.

Leigh also believes that the move may make sense for record labels looking to avert a growth in popularity for Napster's rival P2P search engines such as Gnutella.

The Real format may be the ace up Real Network's sleeve, because the format is not plagued with an association with Napster and pirated music like the MP3 format. Real will likely announce new DRM technology to accompany the deal.

Don't count Napster out of the picture, though. The WSJ article says that the deal makers would consider licensing the service to Napster for limited use, which could be a serious coup for the Real Audio format.