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SAN JOSE — Edging closer to legitimacy, Napster Inc. on Monday tentatively settled a suit filed by music publishers and struck a deal that could lead to legal and fee-based song distribution online. 

Under the proposed settlement with the National Music Publishers’ Association, Napster will pay $26 million for past unauthorized use of music and $10 million down payment on future royalties. 

The deal also sets up terms under which songwriters and music publishers can license music to Napster’s upcoming fee-based service, which is now expected to be launched by the end of the year. 

“This will enable Napster to move forward with the launch of its new service, knowing that a growing range of content will be available to consumers,” said Napster chief executive Konrad Hilbers. 

But Napster, which has been shut down since early July, still has big hurdles to overcome, including the resolution of suits filed by the major labels that own the performance rights. 

Both the performance and publishing copyright issues must be resolved before a song can be legally distributed on Napster or anywhere else. Monday’s deal covers only the publishing rights of up to 700,000 songs. 

Officials were hopeful that the agreement could serve as a framework for future settlements. 

Under the agreement, a portion of the revenue collected for each song would be reserved for royalty payments. Of that amount, one-third would be paid to the publishers and songwriters, officials said. 

The remaining two-thirds would be reserved for holders of the performance rights. Specific terms, such as the size of the overall royalties chunk, were not disclosed. 

However, officials said the fractions reserved for songwriters and publishers is significantly larger than what is now paid out. 

“We’re very pleased we were able to assist each other in breaking new ground in new areas of delivering more product and at a much better rate to our songwriters and creators of American music,” said Ed Murphy, NMPA’s chief executive. 

The settlement must be approved by a judge, the board of directors of the NMPA and individual publishers. 

The Recording Industry Association of America, which represents the major music labels, declined to comment on the NMDA’s settlement. Hilbers, however, said some progress is being made in talks. 

The association led efforts to have Napster’s free service turned off earlier this year for allowing copyright infringement. And its members are now developing their own fee-based services for distributing music online. 

Napster has been shut down since late summer, when it tried to better comply with a federal judge’s order and strengthen the filtering of copyright music turned into extended downtime. 

Napster’s paid service had been expected to launch this summer. On Monday, Hilbers said it will launch before the end of the year. 

The Redwood City, Calif.-based pioneer could be re-entering a crowded field. One competitor, pressplay, is a collaboration between Sony and Universal Music Group. 

Napster previously announced it has signed a distribution deal with another potential competitor, MusicNet, which was founded by RealNetworks, AOL Time Warner, Bertelsmann and EMI. 

A lot has changed since Napster’s heyday, when it boasted of millions of people freely swapping billions of songs. 

As Napster’s legal woes increased, alternative song-swapping services started to take off. Though not as easy to use as Napster, they offer the same tunes plus other digital content such as software and movies. 

There also are questions about how useful Napster’s service will be and whether consumers will be able to transfer music to portable players or onto compact discs. 

”(Monday’s agreement) will matter only when the service comes up and we can see what it looks like,” said P.J. McNeally, an analyst at Gartner Dataquest. “From a consumers’ standpoint, this means nothing.”