Legal MP3 sharing system created

US startup MusicBank is attempting to legitimise the popular, but controversial, trend of storing music on the web.

The San Francisco based company has struck a deal with major record label BMG to build an online library of its music that can be accessed by people who have purchased the physical CD. Listeners can either download the music or listen to it online.

The system is similar to that which has landed MP3.com in trouble with many record companies all over the world, but with one crucial difference - BMG is making licensing arrangements with each label to use their material before setting up the site.

Essentially what MusicBank is offering is an online storage service. It would be inconvenient for users to have to upload whole CDs of music to the MusicBank server, so the company will retain single copies of CDs which users can then play on request.

In theory, online storage should give consumers the chance to sample their music collection anywhere and anytime they can access the net. Users could put together compilations of their favourite tracks, ready to play at any time. As part of the deal, BMG has made sure that MusicBank will pay a royalty each time a track is played or downloaded.

Online storage is not new - it formed the heart of the original MP3.com site, for instance, but this is the first time that a site has attempted to build a music library to match listeners' needs.

According to MusicBank, the basic service will be free, but listeners wanting ultra high quality sound through high speed connections will be asked to pay a small, as yet undisclosed, fee for the service.

The deal with MusicBank comes at a time when truce talks between BMG, Warner Music Group and MP3.com are at a delicate stage. BMG and Warners are among a group of labels suing MP3.com for copyright infringements incurred when the newcomer set up its pioneering music sharing website.

Industry commentators in the US are predicting that a deal will be struck within days which will see MP3.com paying a fee, perhaps in the region of $100m, and then having the licence to legally use BMG's and Warners' property on the MP3.com site. Each use of a track would also generate a royalty to the record companies. Consumers could then have trouble-free online access for the first time to any one of thousands of tracks by hundreds of artists worldwide.