Three of the world's five largest record companies agreed to license their music to a new online venture yesterday in a move heralded as a breakthrough for digital downloading.

AOL Time Warner, Bertelsmann and EMI Group have all agreed to invest in a new online subscription service, to be called MusicNet. The service, to be run as a separate company, will use technology provided by RealNetworks, the streaming media company.

The new operation is expected to act as a rival to the subscription service to be launched by Napster, the song-swapping service, this year. MusicNet said yesterday that it would work with other online services, including Napster.

Oliver Herrgesell, a spokesman for Bertelsmann, said the German company would continue to work with Napster on its legal, subscription service as well as MusicNet. "We want to have our content everywhere," he said.

Online analysts believe that MusicNet is an important step in allowing consumers to legally download music online. Large record labels have previously been accused of failing to provide a viable online service, allowing Napster and other companies to take advantage of fast-growing demand.

Although financial terms of the deal were not disclosed, company insiders said that RealNetworks would own 40% of MusicNet with the three media groups owning about 20% each.