dailynews.yahoo.com
Wednesday February 21 2:08 AM ET
Napster offers $1 bln settlement deal
(updates with more details)
By Sue Zeidler
SAN FRANCISCO (Reuters) - Napster (news - web sites), the wildly popular online song-swap service, Tuesday offered to pay $1 billion over five years to the recording industry to end a bitter lawsuit that threatens its survival.
Napster officials, outlining a strategy they hope will keep their company alive in the face of a threatened legal injunction, said they were willing to pay $150 million per year in licensing fees to major record companies and $50 million per year in fees to independent labels and artists.
``We updated on short notice everyone in the music industry,'' Andreas Schmidt, president and chief executive of the e-commerce group at German media giant Bertelsmann AG (news - web sites) , said at a press conference Tuesday.
Bertelsmann in October joined forces with Napster in an effort to resolve the company's legal problems.
Napster's new proposal follows earlier failed settlement efforts with its recording industry foes who have sued it for copyright infringement.
Unlike previous offers, however, it is now offering music companies a fee based on the number of files traded over its service rather than a percentage of record company revenues.
``We're saying this community should be allowed to stay together,'' said Napster chief executive officer Hank Barry.
Napster's service has amassed over 50 million users who swap songs for free by trading MP3 files, a compression format that turns music on compact discs into small computer files.
``I believe it is time for the music industry and Napster to create a win-win strategy for users, artists and the labels,'' Bertelsmann's chief executive officer Thomas Middelhoff said on Tuesday
Offer Gets Cool Reception
But many recording industry observers quickly scoffed at the latest proposal, privately noting that $1 billion over five years does not even come close to the money the labels figured they are due for copyright infringements on Napster which facilitates the downloading of billions of songs each month.
``It is Napster's responsibility to come to the creative community with a legitimate business model and a system that protects our artists and copyrights,'' said Vivendi Universal's Universal Music Group in a statement on Tuesday.
``Nothing we have heard in the past and nothing we have heard today suggests they have yet been able to accomplish that task,'' Universal said.
Recording Industry Association of America (news - web sites) President and chief executive Hilary Rosen on Tuesday accused Napster of waging a public relations campaign through the media while engaging in ``delay tactics'' in court.
``We are exasperated that they have a public relations strategy rather than a business strategy. All you need to do is meet with record companies rather than holding press conferences,'' said Amy Weiss, a spokeswoman for the RIAA.
The copyright battle is seen as one of the turning points in the development of intellectual property rights protection in the digital age.
Last week, the 9th Circuit Court of Appeals ruled in support of U.S. District Judge Marilyn Hall Patel, who in July found Napster guilty of copyright infringement. A new injunction from Patel, which many say could shut Napster down for good, could be issued at any time.
Officials at AOL/Time Warner Inc , and Sony Corp had no immediate reaction to Napster's latest offer, but some said they are awaiting more concrete details about Napster's promised plan to unveil a new, secure, fee-charging membership service
``If there is a compelling and convincing business model, we would be interested in participating,'' a spokesperson for EMI Group Plc (news - web sites) said.
``We understand Napster's desire to not have to cease its operations in order to comply with an injunction order from the court,'' Rosen said earlier in a statement. ``It is unfortunate that Napster still has not developed a legitimate system that protects the interests of both consumers and creators.''
At the press briefing, Napster's Barry confirmed earlier promises by Bertelsmann's Middelhoff that the companies would roll out its new, secure business model by July.
``What we have thought through is a secure, rational business model for peer-to-peer'' file sharing, Barry said.
Bertelsmann and Napster officials said the envisioned service would consist of a free promotional membership, as well as basic and premium membership plans.
Under the basic plan, members may be charged anywhere from $2.95 a month to $4.95 a month, while the premium plan would cost $5.95 a month to $9.95 a month for unlimited transfers.
Exact membership fees have not yet been determined, Barry said. NEW MODEL WOULD PROVIDE NEW RESTRICTIONS
Napster said Digital World Services, a unit of Bertelsmann is working on the business model with technology that enables music files to be transferred from user to user but with new restrictions like requiring additional payments for users to copy files onto a CD.
Users would still be able to share MP3 files, but with an added ``protection layer'' such as limiting further use and verifying members' account statuses.
The new service would include an accounting feature that would feed track or song information and usage data into a rights database, Barry said.
He likened Napster's latest settlement to the model used by record clubs in the past in which labels were paid an estimated $15 million to $20 million per year for their licenses.
``Our offer of $30 million is more than a fair statement,'' Barry said. |
