The recording industry continued its slow embrace of the Internet when four of the major labels contributed to Listen.com's third round of venture financing, which netted approximately $9 million.

With Bertelsmann's BMG Entertainment, EMI Recorded Music, Seagram's Universal Music Group, and the Time Warner's Warner Brothers Music Group participating in the round, all five of the major labels have now pressed their seal of approval on Listen.com. Sony's Music Entertainment invested in Listen.com in October. In addition, the latest round saw investments from two principals at Madonna's Maverick Records.

All parties, including previous investors The Barksdale Group and Chase H & Q's investment arm Access Technology Partners, have minority investments in the company, says Sean Ryan, Listen.com's business development vice president.

The company's latest financing round signals that recording labels are warming up to the Internet, industry analysts say. "The five majors are starting to get motivated to take equity stakes in these companies," says Mark Mooradian, a senior analyst at Jupiter Communications, an e-commerce market research firm.

There was another such deal just last month, when four of the five majors -- Universal Music Group, BMG, Sony, and Time Warner -- participated in a $97.5 million third round of funding in Artistdirect, a network of Web sites with artist news, information, and music-related e-commerce.

TOTALLY LEGAL

Listen.com is a directory of online music where Web surfers can search for artists' material and read music reviews written by the company's 40-person editorial staff. It competes with other online music directories such as Scour, a portal for audio, video, and image searches, and Audiofind, a Web site that allows users to search for digital audio files on the Net.

Listen.com says it only points users to music files it verifies as legally distributed on the Web. The five largest record labels fear that online music businesses will illegally distribute their copyrighted music, so they welcome Listen.com's safeguards.

Record labels are ready to pounce on Web companies they believe illegally distribute their copyrighted music. In January MP3.com launched a feature that lets users create a personalized, online jukebox they can play from anywhere they have Net access. To offer the service, MP3 copied 45,000 compact disc recordings onto its servers, a move that 10 major record labels claim infringes on their copyrights. The group -- which includes Listen.com investors BMG, Sony Music, and Warner Brothers -- last month filed a copyright-infringement lawsuit that accuses MP3.com of unauthorized distribution of its music.

SEE YOU IN COURT

The record labels are poised to protect their interests in court because more consumers are expected to turn to the Web for their music in the future. The number of online music buyers will rise from 10 million in 1999 to 33 million in 2003, according to Jupiter, and online sales of recorded music in the United States will grow from $150 million in 1998 to $2.5 billion in 2003.

Under the terms of the latest Listen.com investment, the labels will have access to the user statistics that Listen.com aggregates, Mr. Ryan says. But Listen.com won't play favorites: each label will receive the same data, such as what bands and genres are generating the most page views, which indicates what's hot.

The record labels view Listen.com as a neutral party in the nascent online music industry. "They like us because we are agnostic," Mr. Ryan says. "They're all interested in promoting their artists, and they see us as a way to do that."

Listen.com has grabbed a total of $44 million in venture capital since its founding in December 1998, according to a company spokesman. It received $9.3 million in March 1999 and $24 million in September 1999, according to Venture Economics, a VC industry researcher. Listen.com's site launched in June.

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