RECORD FIRMS JOIN IN NET DEAL; UNIVERSAL MUSIC, BMG PLAN SITES.

Byline: Saul Hansell The New York Times

The nation's two largest record companies, Universal Music and BMG, are expected to announce today that they have formed a joint venture to create a series of Internet sites to promote and sell music, record industry executives said Tuesday.

The move recognizes the growing importance of the Internet, both in building an audience for musicians and for selling music. This year, an estimated 2 percent of the compact discs sold in the United States will be bought over the Internet.

The Universal-BMG venture, which is scheduled to be announced at a news conference in Manhattan this morning, will build off several sites BMG already has started to promote its artists, the executives said. These include Peeps.com, a rhythm 'n' blues site; Bugjuice.com, for alternative music; and Twangthis.com, for country music. Universal Music artists in each category will be added to these and other sites.

These genre-based sites will feature information about and interviews with artists, chat rooms for fans and live music broadcasts. The companies hope to attract a big audience because, as record companies, they have access to better information about artists than do other retail sites. In addition to promoting their own records, they probably will sell advertising.

Moreover, these sites will link users to a new Internet music store established by BMG and Universal called Getmusic.com. Unlike the genre sites, which will promote only Universal and BMG artists, Getmusic also will sell the music of artists from the other major labels and independent record companies.

BMG is part of Bertelsmann AG, the German media conglomerate, and has labels such as Arista, Elektra Nonesuch and BMG Classical, and artists including Whitney Houston, Puff Daddy and Sarah McLachlan.

The Universal Music Group is an arm of Seagram Co., which bought PolyGram NV last fall, and has labels such as MCA, Geffen, Def Jam, Mercury, Motown and A&M, with a roster of artists ranging from Elton John to Herbie Hancock to U2.

In the United States, Universal is the largest record company, with a 27 percent share of the market; BMG is second with 17 percent.

A few years ago, it would have raised eyebrows for a manufacturer of any product to compete with its dealers by opening an online retail store. But the Internet has caused many companies to open direct-sales channels.