The song-swapping internet service Napster yesterday offered $1bn to the recording industry to settle the copyright infringement suit that threatens to shut it down.
Under the proposal, Napster would pay $150m annually for five years to record companies Sony, Warner, BMG, EMI and Universal. An additional $50m would go to independent labels in each of those five years.
The offer comes a week after a US appeals court said the music industry would almost certainly win its suit against Napster, forcing it to shut its free song-swapping service down.
But by tapping into the popularity of that service, Napster believes it can generate hundreds of millions of dollars through monthly subscriptions. The subscription deal is expected to consist of a monthy membership fee of between $2.95 and $9.95.
It has tried to reach agreements with record companies before, but has done so only with BMG's parent, Bertelsmann. Thomas Middlehoff, head of Bertelsmann, said he believed Napster's new service could be ready by July.
Analysts said they doubted the rest of the recording industry would allow Napster and Bertelsmann to control the online distribution of their music. "Napster is basically trying to purchase the copyrights and resell them," said Susan Billheimer, an analyst with Zona Research. "The record companies have an interest in distributing their music themselves."
"I think it would take a small miracle to get all five labels to agree to this," said another analyst, PJ McNealy. Sony, for instance, produces and distributes music, movies and books. "To sit there and carve out the music piece to Napster doesn't seem to make much sense."
Universal played down Napster's offer as a rehash of previous promises that have gone unfulfilled.
"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. Nothing we have heard in the past and nothing we have heard today suggests they have yet been able to accomplish that task," the company said in a statement.
Napster CEO Hank Barry said it was crucial for all parties involved to reach an agreement "as fast as we can".
"We're saying this is something consumers really want. Let's do something to keep it going."
Related articles:
21.02.00: Napster outlines subscription-based model
18.02.00: How the record companies shot themselves in the foot
15.02.00: EU follows British lead on music piracy
Napster loses court fight
Useful links
Napster
Recording Industry Association of America
9th Circuit Court of Appeals
Stop Napster
Fairtunes
Artists Against Piracy
