LOS ANGELES (Reuters) - And the beat goes on in the online music sector as Listen.com Wednesday become the third Web upstart in about a week to sign a key licensing deal by reaching a pact with music publishers for songs on the Rhapsody music subscription service it plans to launch on Dec. 3.
Under the deal, Listen will pay the National Music Publishers' Association (NMPA)'s Harry Fox Agency licensing arm a $500,000 advance for use of its clients' music over two years until rates are determined. Harry Fox is an agent for more than 27,000 publishers who represent more than 160,000 songwriters.
Once set, royalties will be paid retroactively or Listen will pay monthly fees after two years until the rates are set.
Listen's deal follows licensing deals in the past week between tiny Web firms FullAudio Corp. and Echo Networks with major recording companies. All three online music companies are soon launching Web subscription services that will compete with services backed by the world's recording giants.
The flurry of dealmaking comes as federal regulators continue an anti-trust probe into MusicNet and Pressplay, two online ventures backed by the big music companies.
The Justice Department is looking into complaints that the big labels have been slow to license content to smaller companies as they sought to build MusicNet and Pressplay.
A spokesman for Listen said it recently produced documents to the Justice Department in compliance with the probe.
"These small companies have been looking into online services for a lot longer than majors, but without licenses they haven't been able to do anything. Now licensing deals are getting done. It certainly makes the labels look more friendly to outsiders," said Ric Dube, an analyst with Webnoize.
TWO DEALS ALREADY THIS WEEK
The deals cut this week by FullAudio and Echo Networks were with Vivendi Universal's Universal Music and AOL Time Warner Inc.'s Warner Music, respectively, covering licenses for sound recordings. Listen.com's deal is different because it involves licenses with publishers for rights to underlying compositions.
Both sets of copyrights are needed to launch a secure music subscription service, experts said.
"This confirms that music publishers are prepared to meet the demand of Internet music services for licenses to launch subscription services immediately," said Edward Murphy, president, chief executive of the NMPA, adding he expects to see many similar deals in weeks and months to come.
Music publishers themselves had been at odds with giant recording companies -- many of which are owned by the same parent company -- over online royalty rates until they reached a deal last month enabling MusicNet and Pressplay to proceed.
Listen on Tuesday said its deal with the NMPA was modeled on the deal reached between publishers and the Recording Industry Association of America (RIAA), although the RIAA agreed to pay Harry Fox a higher advance of $1 million.
Listen has yet to score a licensing deal with any major labels but continues to talk with them. Meanwhile, it has inked several licensing deals with various independent labels.
Rhapsody, costing under $10 monthly, will offer streaming music-on-demand, Internet radio, reviews and recommendations.
"This deal will allow us to launch Rhapsody in December with a large body of music from the independent label deals we have signed to date, and simplify the process for adding major label content to the service in the coming months," Sean Ryan, president and chief executive officer of Listen.com.
The NMPA also signed a deal in September with Napster, clearing some of the beleaguered song-swap service's legal hurdles.
