The agreement between Napster and the members of MusicNet is the biggest step Napster hastaken so far toward legitimacy.

MusicNet is a venture between record label owners AOL Time Warner Inc., Bertelsmann andEMI Group, as well as Seattle-based RealNetworks, whose software allows users to listen tomusic and watch video via streaming technology over the Internet.

The deal makes Napster the third distribution partner for MusicNet, joining AOL RealNetworksand America Online. The MusicNet subscription services is slated to be available to consumersby late summer.

“We are pleased to be able to offer Napster members access to the MusicNet service,” saidNapster’s CEO Hank Barry. He said the deal shows Napster’s commitment to “the Napstercommunity – the world’s most enthusiastic music fans.”

“Today’s announcement is great for consumers, for artists and for the recording industry,” addedRob Glaser, MusicNet’s interim CEO and as well as CEO of RealNetworks.

Members of the new Napster Service who subscribe to the MusicNet offering through Napsterwill be able to share MusicNet content with other subscribers. But parties to the deal haven’t saidwhether people will be able to download, collect and trade MP3 files like they do on Napster, apopular activity that has infuriated music copyright holders.

MusicNet’s online subscription music service will let music fans listen to songs piped over theInternet for a yet-to-be-determined fee. Napster has also said it hopes to roll out a new version ofits service this summer that would ensure royalty payments to artists and labels.

Napster, which is still being sued by the music industry for copyright infringement, has beentrying to purge copyright-protected music files from its system under a court injunction.

But a technical solution that satisfies the music industry’s copyright protection concerns has sofar proved elusive.

Warner Music Group issued a statement Tuesday indicating that there could still be serioushitches in the deal.

“As previously announced, our content will not be available to Napster as part of the MusicNetservice until we are reasonably satisfied that Napster is operating in a legal, non-infringingmanner and has successfully deployed a technology that accurately tracks the identity of files onthe service,” Warner said in a statement.

EMI also said that Napster’s current technology was not quite ready for prime-time, despite thepending deal.

“EMI has always said that we’d be prepared to consider licensing our music to Napster, but onlywhen certain critical conditions are met particularly in the area of copyright. Those conditionshave not yet been met,” the label said in a statement.

Napster has said it planned to use software that maps songs based on their sound pattern. Napster is still mired in a copyright infringement suit filed by the Big Five record labels, Warner,BMG, EMI, Universal and Sony.

A deal between MusicNet and Napster was not expected to affect that suit and all sides continueto work closely with a court-appointed technical adviser in bringing the file-sharing service intocompliance with a pretrial injunction mandating that Napster halt trading of unauthorized music.

Bertelsmann has loaned Napster money and technical expertise to help it develop a legal versionof its file-swapping service. In exchange, Bertelsmann has the right to take a majority stake inNapster if the new system wins approval in the industry.

While Warner, BMG and EMI seek online music solutions with the MusicNet alliance, SonyCorp. and French media conglomerate Vivendi Universal formed a similar partnership calledDuet, which promises to have thousands of songs on the Internet for subscription-baseddownload by this summer.

Napster’s attempts at screening for unauthorized songs has severely hampered usage on itsservice. A study released Tuesday by Webnoize, a digital media research group, showed theaverage number of files shared among Napster users fell from 220 in February to 21 in May – adrop of 90 percent in three months.

Many of those music fans have migrated to other, decentralized file-swapping systems such asGnutella, where usage grew by nearly 5 percent in the last week alone, according to analyst PhilLeigh, who tracks digital music for Raymond James and Associates.