In a widely anticipated move, RealNetworks on Monday formed a pact with AOL Time Warner, Bertelsmann and EMI Group to create a company that will develop an online music subscription service dubbed MusicNet. Details of the new service remain murky, however. Questions persist over the type of technology that will be used in the service and whether consumers will adapt to the digital rights restrictions that will encircle every song.

Under the agreement, media giants AOL Time Warner, Bertelsmann and EMI will each own a minority stake in MusicNet, and the companies' record labels will separately license their music nonexclusively to the new venture. MusicNet, which will operate as an independent company, will offer a wide collection of downloadable and streaming music backed by RealNetworks' core streaming-media technology. MusicNet will package music with secure technology to offer third-party Web sites the chance to market their own music subscription services. RealNetworks executives characterized MusicNet as a "business-to-business" play where the company acts as a middleman between the labels and consumer Web sites. It will be up to the third party to determine pricing and the types of technology that will be employed to deliver the music.

AOL Time Warner's America Online and RealNetworks will be the first companies to offer subscriptions through the service, slated for launch by the end of summer. The start-up expects to license itself to music delivery companies including file-swapping service Napster once security and copyright concerns are addressed.

Monday's news underlines the need for many music companies to address growing consumer demand for online services that offer affordable, easily accessible and legal digital music. Eric Scheirer, an analyst at Forrester Research, said the deal represents a significant step in the right direction by music companies and technologists. Despite the holy war waged against Napster, the two sides have seen eye to eye on the need to create music subscription services.

RealNetworks executives have remained hesitant in divulging specific details about the service. One of the biggest questions is whether MusicNet will support archrival Microsoft's Windows Media Audio technology for streaming and the secure downloading of music. Many of the major record labels have supported Microsoft's audio format, leaving the question open as to whether RealNetworks may be forced to adopt its enemy's technology.

"We are not talking specifically about the other technology pieces," RealNetworks' Glaser said during a press conference, adding that more details will be revealed in the coming months. MusicNet will use RealNetworks' RealSystem iQ as its security backbone.

Questions have also been raised about when and whether MusicNet will license content from the remaining two major labels: Sony Music Group and Vivendi Universal's Universal Music Group. Those two labels recently struck an agreement to collaborate on a subscription service of their own, dubbed "Duet. Glaser acknowledged the absence of Sony and Universal but remained mum about whether MusicNet will aggressively court the two companies to participate.