February 26, 2003 1:39 PM PST

RealNetworks invests in Listen.com

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Independent online music company Listen.com said Wednesday it had received a minority strategic investment from streaming technology company RealNetworks.

The infusion of cash comes as a welcome boost for Listen, which has seen layoffs decimate its staff over the past two years even as its online subscription service has won kudos from reviewers and ISP (Internet service provider) distribution partners.

"Today?s investment gives us a broad range of resources that will help bring (music subscription service) Rhapsody to an even wider consumer audience," Listen Chief Executive Shawn Ryan said in a statement. The companies did not release financial details of the transaction.

However, the investment may also signal a shift in the alliances that span the music technology industry. RealNetworks is also a 40 percent owner in MusicNet, a music subscription technology service that competes with Listen.com.

RealNetworks has been using MusicNet's service for the past year, but poor reviews of the underlying technology have kept adoption relatively slow. A new version of MusicNet's technology was released today on America Online, but RealNetworks has conspicuously avoided saying that it too would adopt the new version.

As part of Wednesday's deal, Listen said it would shift the foundation for its Rhapsody music subscription service to RealNetworks' audio technology. Previously the service had been based on Microsoft's Windows Media technology.

The companies also said they would "explore collaborating on future services," but provided no immediate guide as to what those might be.

At least one analyst cautioned against expecting broad alliances between the two companies, however.

"Listen was on the market for financial help," said P.J. McNealy, research director at GartnerG2, a division of the Gartner research firm. "Real's investment was opportunistic. But it benefits both companies."

In its early days, Listen.com also received investments from all five of the major music labels, but the sum amounted to less than 2 percent of the company's total financing, executives said.

"This investment demonstrates RealNetworks' commitment to bringing our advanced technology to consumers, and signifies our belief in the promise of a legitimate market for digital music," Richard Wolpert, executive strategic advisor at RealNetworks, said in a statement.

 

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