Real allies with Universal Music

Universal Music deal will allow RealNetworks to sell and play music from artists such as Andrea Bocelli, Sting and Limp Bizkit.

RealNetworks Inc. reached its broadest deal yet with a record company, an alliance with Seagram Co.'s Universal Music Group that advances both companies' plans in digital music.

Company officials said the agreement eventually will allow a vast selection of digital music from Universal's (NYSE: VO) extensive catalog to be sold and played on RealNetworks' (Nasdaq: RNWK) RealJukebox software using Universal's distribution format. Universal's huge roster under various labels ranges from artists such as Philip Glass and Andrea Bocelli, to Sting and Amy Grant, to Nine Inch Nails and Limp Bizkit.

Universal also will distribute RealJukebox, RealNetwork's popular music-storage and player application. The pair plans to use InterTrust Technologies Corp.'s (Nasdaq: ITRU) technology to protect copyrights on digital music. The companies said the integrated system will make it easier for a user to buy a range of songs, albums or self-created music collections over the Internet; it will also offer detailed information about the music.

The deal -- to be announced Friday in a keynote address to the International Consumer Electronics Show in Las Vegas by RealNetworks CEO Rob Glaser -- is yet another example of closer ties being forged between technology and music companies to take advantage of the burgeoning interest in the online delivery of music.

RealNetworks, of Seattle, is in a fierce battle with Microsoft Corp. (Nasdaq: MSFT) to set technology standards for audio and video on the Internet. Most of their relationships with big record companies have been small and oriented mostly toward "sampling" offers or one-time promotions of particular artists; these companies seek ways to deliver music that can't be pirated. Most of the music now available on the Web is in an unprotected format called MP3.

"This paves the way for the kind of comprehensive offering that will put together all the pieces people want when they buy music," Glaser said. "Most consumers want the full-deal meal and this is part of getting it to them."

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Larry Kenswil, who heads Universal's digital-music efforts, said the company selected RealNetworks because its music software was the most popular. Although the deal isn't exclusive, he said the company has no similar plans to work with Microsoft. "We see RealNetworks as the leader of this marketplace," he said.

In related news, RealNetworks said it also had struck a deal with Sony Corp. to enable it to securely transfer digital music from RealJukebox to the electronics concern's portable audio players. Glaser said Sony's music technologies will be supported by its software.

In addition, it also agreed with Adaptec Inc. to integrate CD-recording capabilities into RealJukebox, allowing consumers to record their digital music and custom playlists onto a standard audio CD.

Finally, RealNetworks also will integrate media-storage applications from Iomega Corp. into its software, which will allow for RealJukebox users to move larger music collections between devices.