Napster close to deal with three record labels

The Associated Press
Wednesday June 06, 2001

SAN FRANCISCO — Napster, the former music industry bad-boy, announced Tuesday it had struck a distribution deal with three major record labels that are launching a music subscription service this summer. 

The agreement between Napster and the members of MusicNet is the biggest step Napster has taken so far toward legitimacy. 

MusicNet is a venture between record label owners AOL Time Warner Inc., Bertelsmann and EMI Group, as well as Seattle-based RealNetworks, whose software allows users to listen to music and watch video via streaming technology over the Internet. 

The deal makes Napster the third distribution partner for MusicNet, joining AOL RealNetworks and America Online. The MusicNet subscription services is slated to be available to consumers by late summer. 

“We are pleased to be able to offer Napster members access to the MusicNet service,” said Napster’s CEO Hank Barry. He said the deal shows Napster’s commitment to “the Napster community – the world’s most enthusiastic music fans.” 

“Today’s announcement is great for consumers, for artists and for the recording industry,” added Rob Glaser, MusicNet’s interim CEO and as well as CEO of RealNetworks. 

Members of the new Napster Service who subscribe to the MusicNet offering through Napster will be able to share MusicNet content with other subscribers. But parties to the deal haven’t said whether people will be able to download, collect and trade MP3 files like they do on Napster, a popular activity that has infuriated music copyright holders. 

MusicNet’s online subscription music service will let music fans listen to songs piped over the Internet for a yet-to-be-determined fee. Napster has also said it hopes to roll out a new version of its service this summer that would ensure royalty payments to artists and labels. 

Napster, which is still being sued by the music industry for copyright infringement, has been trying to purge copyright-protected music files from its system under a court injunction. 

But a technical solution that satisfies the music industry’s copyright protection concerns has so far proved elusive. 

Warner Music Group issued a statement Tuesday indicating that there could still be serious hitches in the deal. 

“As previously announced, our content will not be available to Napster as part of the MusicNet service until we are reasonably satisfied that Napster is operating in a legal, non-infringing manner and has successfully deployed a technology that accurately tracks the identity of files on the service,” Warner said in a statement. EMI also said that Napster’s current technology was not quite ready for primetime, despite the pending deal. 

“EMI has always said that we’d be prepared to consider licensing our music to Napster, but only when certain critical conditions are met particularly in the area of copyright. Those conditions have not yet been met,” the label said in a statement. 

Napster has said it planned to use software that maps songs based on their sound pattern. 

Napster is still mired in a copyright infringement suit filed by the Big Five record labels, Warner, BMG, EMI, Universal and Sony. 

A deal between MusicNet and Napster was not expected to affect that suit and all sides continue to work closely with a court-appointed technical adviser in bringing the file-sharing service into compliance with a pretrial injunction mandating that Napster halt trading of unauthorized music. 

Bertelsmann has loaned Napster money and technical expertise to help it develop a legal version of its file-swapping service. In exchange, Bertelsmann has the right to take a majority stake in Napster if the new system wins approval in the industry. 

While Warner, BMG and EMI seek online music solutions with the MusicNet alliance, Sony Corp. and French media conglomerate Vivendi Universal formed a similar partnership called Duet, which promises to have thousands of songs on the Internet for subscription-based download by this summer. 

Napster’s attempts at screening for unauthorized songs has severely hampered usage on its service. A study released Tuesday by Webnoize, a digital media research group, showed the average number of files shared among Napster users fell from 220 in February to 21 in May — a drop of 90 percent in three months. 

Many of those music fans have migrated to other, decentralized file-swapping systems such as Gnutella, where usage grew by nearly 5 percent in the last week alone, according to analyst Phil Leigh, who tracks digital music for Raymond James and Associates. 


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