AOL offers MusicNet service with 250,000 songs beginning today:

In the strongest attempt yet to create a legitimate alternative to free music-trading sites, America Online will introduce a service today that lets users download and listen to a large catalog of songs.

For $8.95 a month, users will be able to listen to a catalog of music, now at 250,000 songs and growing, on their computers. Moving songs to CD's or portable players will cost more.

In the next few weeks, AOL is going to introduce an improved $15-a-month service, with a bundle of content and services meant for people who already buy broadband connections from their cable or telephone companies. That offering will include a limited version of MusicNet that will let users download 20 songs a month and listen to another 20 one time. Others can buy this limited version for $3.95 a month.

The standard $8.95 version of the service will allow users to listen to an unlimited number of songs on demand while they are connected to the Internet through a technology called streaming. They can also download the songs to their computers for higher sound quality and the ability to listen to them when not on the Internet.

....Paul-Jon McNealy, the research director for media at Gartner G2, said that with the latest releases of MusicNet and PressPlay, the music industry has eliminated most, but not all, barriers to creating an online service that will attract music fans.

"This is close to what people will find palatable," he said. The MusicNet on AOL service, he said, will be a good introduction to online music for a mainstream audience, but the limitations are still significant.

"People want to buy their music once and own it forever," he said. [NY Times]

Exactly: still too complicated with the various tiers and whatnot. For say $10 per month people should be able to do whatever they want with downloadable high quality MP3's; or, they should be able to buy song-MP3's at about 10 cents each with no monthly fee and be able to do what they want with them. When these conditions are met, then people will go with a pay service in significant numbers.