Terms were not disclosed but a source familiar with the matter put the deal's value at $20 million to $30 million.
RealNetworks, which owned about 40 percent of MusicNet, said it received proceeds of $7.3 million and expects another $2.7 million after escrow arrangements expire.
MusicNet provides the technology to run services for other brand name digital music providers like AOL Music and Virgin Digital, rather than offering downloads and subscription services directly to the public itself.
MusicNet, formed in 1999 by RealNetworks, Bertelsmann AG, EMI Group Plc Sony Corp and Time Warner Inc., which then owned Warner Music, has said it serves more than 500,000 subscribers, mostly AOL customers.
Since its inception it has faced increasing competition from companies like Apple Computer Inc., which has led the market with its popular iPod player and iTunes service, and MusicMatch, which Yahoo Inc. bought for $160 million.
The MusicNet sale was not unexpected since RealNetworks, which had been MusicNet's main stakeholder, bought rival Listen and its Rhapsody subscription service in August 2003.
RealNetworks posted MusicNet-related losses of more than $4 million in
2004, a RealNetwork spokesman said. The company said in a statement late on Tuesday that it would provide more details about the deal during its earnings call on May 4."RealNetworks had already indicated it was not going to put any more money into MusicNet, and to the extent they needed capital, the company was either going to have to be sold or get capital from the other partners," said Phil Leigh, an analyst with Inside Digital Media, a market research company.
Experts said MusicNet has struggled because its profit margins are much lower than those of direct retailers.
Other MusicNet partners include Virgin Digital, HMV Group and Trans World Entertainment.
MusicNet said it will be capitalized with the funds necessary to expand the scale of its operations.
"This is a natural evolution for the company," said MusicNet CEO Alan McGlade. "We've progressed nicely since the inception. Our partners' interest was not so much a big return on MusicNet, but in creating a legitimate marketplace. We have a good reputation in the industry." McGlade said there would be no major changes as result of the sale.
MusicNet employs nearly 100 people, he said. (additional reporting by Sinead Carew in New York)
Copyright 2005 Reuters Limited.
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