After three years of rancour, lawsuits, ego-wars and secretive preparations, the first two of what could become half a dozen industry-backed commercial online music sites were launched last week. Their arrival was met by underwhelming applause from consumers and technology analysts alike.

After the David and Goliath drama of Napster, it was perhaps inevitable that any industry-backed offering would seem meek after the free-for-all that Napster encouraged before it was effectively gutted by the courts earlier this year.

The two subscription services launched were RealOne and Rhapsody. Real Networks' RealOne, based on MusicNet, is a partnership with three major record labels - Bertelsmann, AOL Time Warner, EMI - and Zoomba, the boy-band independent label. Rhapsody is an independent subscription service with licensing deals with the big five record companies (the three major labels mentioned plus Sony and Universal) from Listen.com.

By the end of the year, RealOne and Rhapsody will be followed by Pressplay, a subscription service backed by Universal Music and Sony Music, which will also include the EMI library. Next year others will become available, including a newly-legitimised Napster, and services from AmericaOnline and MTVi.

In the UK, BT Openworld is trialling a classical music service for £7.99 per month.

As these services roll out - heralding the eventual transformation of the music industry into an all- digital, online consumer service - many questions remain unanswered. Fundamentally, will consumers buy or rent what they have, or continue to enjoy it free?

"The jury is out," says Aram Sinnreich of Jupiter Media Metrix. "There's not much to compare it to, and consumers are trying to figure out what it is and why they need it."

As much as a billion dollars in revenue is forecast over the coming years, but few expect online music distribution to take the place of the CD or any succeeding format in the next decade. "We're in the nascent stages of the market and none of the products are quite fully connected," says Ryan Jones of the analyst firm The Yankee Group.

Of the two new services, the most instructive to the record industry's intentions is the RealOne/ MusicNet service. Launched with a catalogue of about 75,000 songs, the service costs $9.95 a month, which entitles subscribers to download 100 songs and stream 100 more.

But the service is full of restrictions. RealOne will not take subscribers from outside the US because American and rest-of-the-world music rights and publishing contracts have yet to be renegotiated.

The number of contracts between artists (or their estates), record companies and publishers that must be renegotiated is vast. After all, until five years ago, no contract even mentioned digital rights.

"We have to renegotiate all new content and licensing agreements," says MusicNet's Anne Garrett. "It's taken us a year to do that in America." Moreover, Garrett says, there are technology compatibility issues.

But artists have already begun complaining that they have not been consulted on whether they want their songs included. Lawyers for dozens of artists have sent cease-and-desist notices that would bar the use of their songs and have accused the labels of failing to inform artists how they will be compensated when their songs are downloaded or played.

"Artist managers are very alarmed," said Simon Renshaw, a manager at the Firm, which represents such acts as the Dixie Chicks, Korn and Limp Bizkit.

Jim Guerinot, manager of Offspring and No Doubt, told the Los Angeles Times he has never been contacted about internet usage. "We have never had a single discussion with a label about how they intend to compensate artists or in what manner the service will work. The contracts require labels to ask [our] permission before posting songs."

Should enterprising European computer users get around RealNetworks' automatic DNS checking system, they will find a series of restrictions. Songs downloaded from RealOne will stop working after 30 days, though they can be reactivated at the cost of one credit. MusicNet's music stored on a subscriber's hard drive cannot be burned on to a CD or played on a portable MP3 player.

Considering that about 1.4m portable MP3 players have been sold in the US alone, and that mobility is considered the key requirement by consumers, the attraction of music that can only be played by the computer on which it was downloaded is a severe disincentive.

"The two most important things a music service can offer are variety and portability," says Jones. "Unfortunately, none of the services right now do a very good job of it. MusicNet/RealOne player does a fairly good job of content providing but they are still lacking in portability."

Rhapsody users will also not be able to download music to portable devices or create their own CDs. The service costs $10 a month, for which subscribers have unlimited monthly access but, to prevent piracy, they will be able to listen to the music only while they are logged on to the internet.

The technology behind the Listen.com service allows users to permanently download and store 99% of each song on their hard drives. Each time they want to play the songs, they must log on to Listen.com and download the remaining bits. But the main obstacle for Rhapsody is content: so far, Listen.com only has licensing deals with 37 independent labels.

Using Microsoft's Windows Media Audio format, Pressplay will offer a slightly different subscription model, with different levels of service at different prices. Songs downloaded in any one month can be played in the future without incurring the cost of a credit. However, songs in the library will not play if the subscription lapses.

"You can build a collection of songs," says Pressplay's Seth Oster. "Capping the number of songs you have on your system is not the way people collect music. The only requirement is that you keep your service active."

Similarly, Pressplay, which will be available via third-party platforms such as Yahoo, does not offer CD burning or portability. "Portability is extremely important to music fans, and it is crucial to establishing a successful service," says Oster. "Initially, we will offer streaming and downloading, but we will offer burning as soon as we can."

One singularly problematic feature is that a fan of both Bob Dylan and Neil Young will have to subscribe to both RealOne and Pressplay, since Dylan is on Columbia Records and thus part of the Universal-Sony consortium, while Young is on Warner-Reprise, part of the Bertelsmann-AOL Time Warner-EMI system. Only EMI has so far licensed music to both systems.

For commercial reasons, the services have promised to exchange proprietory content, an idea given impetus because US anti-trust investigators are looking into allegations that the music labels have been slow to make content available to third party operations such as Launch.com's Rhapsody and Rioport's PulseOne.

Legislation before US law- makers aims at preventing the five largest music companies from licensing songs to each other at favourable rates, while charging higher fees to other companies. Between them, the five giants control 80% of the world's most popular music.

In a turn of the tables, the presiding judge in the record labels' two-year-old lawsuit against Napster, recently questioned whether they had violated anti-trust laws by allegedly trying to use their copyrights to deprive the public of fair competition and alternative means to hear music. Napster's lawyers argued that even if the company contributed to copyright violations, the law prevents an enforcement action if the labels are mis-using their own copyrights.

It is in the interests of the music industry to sort out issues of content, if not portability, quickly. The record industry has had a terrible year, with sales declining by at least 10%, and it is arguable that the illegal Napster boosted record sales. "Napster's users were 45% more likely to buy music than non-Napster users," says Aram Sinnreich of Jupiter.

And what of Napster itself? The revolutionary music swapping service has been offline since July, but is planning to relaunch in the new year with legitimate content from the big five labels as well as music from independent British labels. But while Napster, which now has a close relationship with Bertelsmann, may be going legit, there is still plenty of illegal music swapping going on.

Recent figures show the number of people exchanging music simultaneously on the Amsterdam-based network Fast Track, available using programs such as Morpheus, KaZaA and Grokster, now exceeds Napster at its peak.

So what, ultimately, is the benefit of subscribing to either RealOne, Pressplay or any of the other services? They are user friendly, they offer links to radio stations around the world, as well as information on the bands, video streaming and - of course - links to buy records.

But most web surfers still find online music too complex to use regularly, and those that do are probably ingenious enough to do it illegally.

"The only thing that will encourage people to go to these sites is not wanting to be a criminal," says Jones. "The quality [of the legitimate online sites] is more reliable, but it is hard to beat something that is free. At the moment, the downside of illegal music is almost none. The flaws of today's legitimate music services will get smoothed out and the legal pressures against the illegal services will get more intense.

"Eventually we will reach a place in the middle where there is a comprehensive, legitimate online music distribution," says Jones. "But you won't see the internet replacing the physically recorded medium like the CD in the foreseeable future."

RealOne: a needle in a haystack

RealOne's catalogue of 75,000 songs sounds a lot but consider the millions of recordings released over the past 40 years. RealOne is probably better for young fans keen to get their hands on the new Backstreet Boys single than it is for anyone with a longer and more selective memory.

For the middle-aged subscriber, service can be frustrating: the songs one might want to collect are often absent. Take Aretha Franklin. The 36 tracks avail able are from her late 80s recordings, but none from the Jerry Wexler-produced classics of the late 60s.

Search REM's listings, or Iggy Pop, or the Ramones, and what is on offer tends to be from periods either forgotten or best forgotten, or from "best of" compilations.

However, the quality and compression of the recording is more reliable than Napster, and downloading is reliable: you get few aborted or transmission error messages. RealOne is a promising start.

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