Best Buy to Sell Online Music Service Amid Increasing Competition

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RealNetworks Inc. (RNWK) and electronics retailer Best Buy (BBY) announced a deal Monday in which customers can try out and sign up for RealNetworks' online music service at Best Buy's 560 stores across the country.

The agreement, which unites traditional sales with the fledgling Internet business of digital music, boosts competition among companies racing to distinguish themselves in the market for legally downloading songs and albums over the Internet.

RealNetworks has been aggressively making deals with high-speed Internet service companies to drive customers to its Rhapsody digital music subscription service (search), which it acquired in its recent purchase of San Francisco-based More are to come, said Dan Sheeran, RealNetworks' senior vice president of marketing.

With Rhapsody — including the new Best Buy Rhapsody service — customers pay a $9.95 monthly fee to listen to songs from a vast library of music from the major record labels as well as independent producers. Rhapsody subscribers can also burn songs onto compact discs for 79 cents each.

The service is one of several to emerge in recent months. Apple Computer (AAPL) launched its iTunes Music Store (search) in April, offering digital downloads of music for 99 cents a song. Microsoft Corp. (MSFT) last week teamed with a British company to offer a European service selling songs over the Internet for 99 euro cents (about $1.12) each through Microsoft's MSN Music Club or Tiscali Music Club, depending on the country.

The deal with Minneapolis-based Best Buy — in which the two companies will share revenue from subscribers — will help RealNetworks spread from its base of technology-savvy customers to a mainstream audience, Sheeran said.

He added that RealNetworks plans to offer a service by the end of the year that lets customers burn songs onto CDs without having to be a monthly subscriber.

Although he would not disclose other possible partners for the service, he said it is "the type of thing that e-retailers are interested in."

Companies have been increasingly casting about for legal ways to sell songs over the Internet that do not handcuff consumers' use of the music, but that also respect record labels' copyright concerns. Besides Apple and Microsoft, Seattle-based Internet retailer has also said it is interested in selling digital music, once it determines the best way to offer songs over the Internet.

The deal is good for both companies, letting them "tie the online and offline worlds of consumers," said Michael McGuire, an analyst with Gartner G2. "The more information like that you have, the better you are in the long term."