RealNetworks of Seattle, US, also said it would make a software patch available on its website to block the tracking technology.
There are more than 12 million registered users of the free "RealJukebox" software, which puts it among the world's most popular programs for listening to digital music through the internet.
Unique serial number
A US security expert, Richard Smith, found that the software secretly transmitted to the company's headquarters details about what music each customer listens to and how many songs are copied. The information sent includes a serial number that could be used to identify an individual.
RealNetworks insisted it never stored the information, which would be valuable for marketing purposes.
"We made a mistake in not being clear enough to our users about what kinds of data were being generated and transmitted," said Rob Glaser, Chairman and CEO of RealNetworks.
"We respect and value the privacy of our users, and we deeply apologise for doing anything that suggests otherwise."
The corrective patch can be downloaded immediately from the company's website and will be built into future versions of the software from next week.
'Unacceptable violatons'
Privacy groups had expressed outrage that RealNetworks never disclosed its practices in its website's privacy statement or in the software's license.
Online discussion groups were filled with blistering comments about the company. Some experts even called the company's music software a "Trojan horse," a malicious computer code that promises to perform one function as a cover for other unwanted activities.
Jason Catlett, president of privacy watchdog Junkbusters, complained in a letter to RealNetworks that its practices were "unacceptable violations of consumer privacy."
Personalised services
RealNetworks initial response was to update its website privacy promise, saying its tracking technology was intended "to understand the interests and needs of our users so that we can offer valuable personalised services."
Jay Wampold, of RealNetworks, said details about music CDs playing on its software needed to be sent to activate one of the program's features: when a CD is played, the software automatically shows its title, artist and list of songs based on data retrieved through a third company, CDDB in California.
But Wampold said information about each customer's tastes was never logged by RealNetworks.
The company's decision to change its Internet privacy policy drew concern from TRUSTe, the nonprofit group that monitors and enforces the corporate privacy policies of its members.
TRUSTe said it planned to investigate whether RealNetworks had broken its privacy promises and whether its previous statement - which TRUSTe had vetted - was adequate.
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(02 Nov 99 | Sci/Tech)
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RealNetworks
Junkbusters
TRUSTe
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