Sofware giant planned subscription music service.

Microsoft Corp. has broken off licensing talks with the four global music companies, raising questions about the software giant's plans to start a subscription-based music service, the Wall Street Journal reported today (Oct. 4), citing unnamed sources.

The paper reported negotiations broke down Friday (Sept. 30) over what Microsoft considered high royalty rates sought by EMI Group Plc, Warner Music Group Corp., Vivendi Universal's Universal Music Group and Sony BMG, a joint venture of Sony Corp. and Bertelsmann AG.

Services like those offered by Napster Inc., Yahoo Inc. and RealNetworks Inc., allow users to download music onto personal music players and have the potential to replace compact discs.

Microsoft has not announced a subscription music service, but it was widely expected to make such an announcement soon.

However, the company said the breakdown in its talks with the labels would indefinitely postpone a launch, according to two of the people close to the situation, the Journal said.

Microsoft has also been in talks to acquire a stake in Time Warner Inc.'s AOL service, which has a music subscription plan.

According to several people briefed on the matter, the labels separately were seeking royalty payments of $6 to $8 per user, per month. People close to the labels say that is in line with what existing subscription-music services pay, the Journal reported.

(c) Reuters 2005.