Media Giants To Sell Music Online By SETH SUTEL * 04/08/99 AP Online Financial/Business Copyright 1999 The Associated Press. All Rights Reserved. NEW YORK (AP) - Hoping to beef up their presence online, media conglomerates Seagram Co. and Bertelsmann AG are banding together to sell music over the Internet. Their efforts will face tough competition from the likes of Amazon.com and CDnow, however. The two companies, through their respective music subsidiaries Universal Music Group and BMG Entertainment, plan to leverage their relationships with hundreds of musicians to attract Web surfers with access to stars, video and audio clips and other proprietary content. The joint venture announced in New York Wednesday would add Universal artists to five existing Web sites run by BMG which cater to specific musical tastes, such as peeps.com for hip-hop artists and twangthis.com * for country music. The sites are linked to a new online music store, getmusic.com, which would also offer CDs from other labels. All the sites are currently running, but the companies expect to launch revamped versions this summer. Publishing under labels such as Geffen, A&M, Arista and RCA, the two companies control about 40 percent of the American music market, representing artists across many genres including Beck, Kenny G, Motley Crue, Shania Twain and TLC. Record companies have been scrambling to come up with online music strategies as it becomes easier to download bootleg music from the Internet. They are hoping to agree on a digital standard that would allow them to control the downloading of music and ensure that the companies and artists receive royalties. So far the companies are not talking about letting users download music themselves, although the move to establish a platform in cyberspace could clearly set the stage for such efforts in the future. The announcement of the project received lukewarm views from industry analysts, who say that the effort may need to evolve before finding success with new consumers. "In terms of building an online sales site around specific music genres, record companies may be putting the cart before the horse," said Melissa Blane, an analyst with the Yankee Group consulting company in Boston. "First-time online music shoppers are more likely to go to a general music site." "If I were Amazon, I wouldn't be afraid right now," agreed James McQuivey, a senior analyst with the consulting group Forrester Research. One challenge for the companies is to make sure their online sales efforts don't hurt relations with their traditional sales outlets. Leading music retailer Musicland Stores Corp. said it didn't necessarily see the BMG-Universal project as a threat, but Tower Records vice president Mike Farrace said: "We're never happy when a supplier goes into competition with us. We think it's a bad idea." BMG already runs a mail order music club, which competes with the Columbia House direct sales unit run by Time Warner Inc. and Sony Corp. The online operations of BMG's music club would not be affected by the arrangement with Universal. In addition to BMG, Germany-based Bertelsmann also owns the publishing houses Random House and Bantam Doubleday Dell, and has a half interest in Barnes & Noble's online bookstore. The Montreal-based Seagram, traditionally known as a whiskey maker, has been building up its entertainment holdings, which include the Universal movie studio.