Vivendi Universal and Sony said on Thursday they are on track to launch a joint online music service or "virtual jukebox," this summer.

The Internet service will challenge Napster, the popular online song-swap service, which earlier this week offered to pay $1 billion over five years to the recording industry to end a bitter lawsuit that threatens its survival.

It also throws down the gauntlet to German media giant Bertelsmann, which joined forces with Napster in October in an effort to resolve the company's legal problems.

"It is an alternative to Napster which will allow us to monitor exactly which titles have been listened to and downloaded," said Pascal Negre, head of Paris-based Vivendi Universal's Universal Music France. "It is over a secure network that prevents the item from getting distributed all over the Internet and provides better sound quality."

Vivendi Chairman Jean-Marie Messier said in an interview published Thursday that the new venture, which has the working name Duet, was already operational through a team in San Francisco. Sony said it would be based in New York. The project was originally announced without much fanfare by Sony and Universal Music, then a unit of Seagram, in May 2000.

In addition to the music of Universal and Sony Music, the new site plans to buy licensing rights from other music companies, Messier said.

"We hope to license 50 percent of the world's music," Messier said.

Messier said the venture was not pursuing an alliance with Napster but was in advanced discussions with other partners.

"We often thought that an alliance with Napster would be the only possibility, but I don't believe it is right to give the advantage to pirates," he said.

Sony and Vivendi will have equal ownership of Duet and will offer both a subscription service and a pay-per-listen option.

Universal Music Group, Warner Music Group, EMI Recorded Music, Sony Music Group and Bertelsmann's BMG Entertainment first sued Napster in December 1999 on copyright grounds after the company offered their music on its song-swapping service.

Bertelsmann later broke ranks with other labels and joined forces with Napster in October, to launch a subscription-based service. The German group has since been holding talks with the other music majors to try to convince them to join the venture.

The Big Five record labels control some 75 percent of the world music market. The global music market is estimated at an annual $40 billion and online music could reach $8.6 billion by 2005, according to Jupiter Media Metrix. The research company estimates that sales from music downloading will represent 9.1 percent of total industry sales from 2001.

Universal Music's Negre said he did not expect prices for online music to decline, noting that the price of CDs had risen at a rate that was three times lower than the average rise in consumer prices since 1970.

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