MPPP settles and on CNBC in a minute.
NEW YORK (Reuters) - Online music provider MP3.com (NasdaqNM:MPPP - news) said on Friday it settled a copyright
infringement suit with two of the five largest record labels that will allow the company to include the labels' songs in its
Internet-based database.
Time Warner Inc.'s (NYSE:TWX - news) Warner Music Group and BMG Entertainment, the music unit of Bertelsmann AG
(BTGGga.D), are the first of the labels to settle the suit, brought in January.
The settlements follow a U.S. District Court ruling on April 28 that MP3.com infringed on the labels' copyrights by creating a
database of over 80,000 albums, which, when combined with MP3.com software, allows users to store music digitally and then
access it via any computer. The service is called My.MP3.com.
Financial terms of the two settlements were not disclosed, but sources familiar with the deals said
each label was to get between $15 million and $25 million to settle the suit. Under the terms of the
deals, MP3.com would also pay an undisclosed fee each time that label's CD is registered by a
user and another fee each time a user accesses one of its songs.
Neither Warner, BMG, nor MP3.com would comment on the specifics.
The other three labels in the copyright infringement suit -- Sony Music Entertainment (6758.T), Seagram Co.'s (Toronto:VO.TO
- news) Universal Music Group, and EMI Group Plc (EMI.L) -- are still negotiating with MP3.com.
MP3.com shares rose 22 percent, or 3-3/4, to 21 in early Nasdaq trading, after touching an intraday high of 22-1/4, the highest
level since March 31, though well below its high of 105 on its first trading day in July 1999.
The settlement with the two labels takes an important step toward dispersing a rain cloud over the San Diego company for the
short term, analysts said. But longer term, analysts expressed concern whether the company could make any money under the
terms of the deal.
MP3.com has said it generated no revenue from the My.MP3.com service and that it relied on advertising throughout the site for
its revenue. The company is also planning a subscription service allowing users unlimited downloads from its classical music
catalog for a monthly $9.99 fee.
Analysts have said that the company was counting on being able to offer major label songs to increase the amount they could
charge for advertising and subscriptions.
Most of the other music that can be downloaded via MP3.com comes from acts that are not under contract with a major label.
``The settlement money is not the problem,'' said Kaufman Brothers analyst Nitsan Hargil. ``It removes the sword dangling above
their head. They have $300 million cash on hand which should keep the company going in the near term.
``The bigger problem is that any solution will require MP3.com to pay the labels a royalty per unit copied into their database,'' he
added. ``I don't see how its current subscription revenue model or an advertising model can make up for that.''
The suit is part of an anti-piracy crusade launched by the recording industry partly in response to the success of MP3 technology.
The MP3 format, which has become a standard in the online music business, allows music on compact discs to be converted into
computer files in small packets of data. The compression makes it easy to store and copy music onto personal computers.
The My.MP3.com service lets computer users with an original copy of one of the recordings in the database register that CD. It
then allows the user to listen to that album over the Internet from any computer, without having to insert the original disc.
The Warner Music Group is home to such artists as Madonna, Kid Rock, and Neil Young, while BMG artists include Whitney
Houston, Britney Spears, The Dave Matthews Band and many others.
MP3.com was not immediately available for comment.
E-mail this story - (View most popular) | Printer-friendly format
Earlier Stories
Record Labels Near Settlement With MP3.com-Sources (June 7)
Record Cos. Eye Copyright Settlement With MP3.com (June 7) |
