Napster has agreed to pay $26m (£18m) to settle its dispute with music publishers and songwriters, agreeing to pay them one-third of the royalties Napster will issue from its new subscription service. That leaves two-thirds of the royalties for the record labels themselves, and means publishers and songwriters will do much better in the online world than in the real, where their share is smaller.
Today, Napster is an empty shell: a brand waiting for a new purpose. The original free song-swapping service which made Napster's name has been shut down, while Napster continues attempts to placate the music industry so offended by the rampant piracy which took place over Napster's system. In the meantime, Napster's users have migrated to other, mostly less effective, services (see links below) where the piracy continues unabated.
Napster itself has embarked on a transformation that would test even the most established of corporations. The fact that the company is two and a half years old makes its efforts all the more amazing. First, it has been fighting a legal battle on several fronts for half its life. Second - partly as a result of those legal battles going against it - it has been attempting to completely transform its core technology at the same time, to make it secure. Third, parallel to all this, it has been trying to do deals with the reluctant giants of its industry to ensure it has legitimate - and popular - content to sell in the future.
The significance of yesterday's deal is that while Napster has long been looking to settle its court battles, this is the first time the claimants have agreed to play along.
The problem for anyone attempting online music distribution is the tangle of rights that are associated with individual pieces of music. It is not just the record label that owns the latest chart-topper - the songwriter, performer, session musicians and music publishers may all be taking a cut too. Thanks to the new deal, the publishers have been taken care of.
Meanwhile, Napster is negotiating with the record labels to sort out paying everyone else. In June the internet company did deals with the UK's Association of Independent Music and the Independent Music Companies Association, which gives it access to hundreds of thousands of tracks from thousands of European artists on independent labels. Napster's new paid-for service will likely use this large body of music as its launch pad.
But the big prize is the majors - the kind of places Kylie, Madonna and Mrs Beckham hang out - and deals with them are proving a little more difficult. The big labels, having ignored the rise of the internet until 1999, are now more net-savvy. They realise the potential for vast profit from selling music over the internet, bypassing distributors, retailers and the need for packaging, and that's why they want to set up their own online subscription services. One - called Pressplay - will draw on the talent on the Vivendi, Universal and Sony labels, and is expected to launch within weeks.
Napster has a deal with Pressplay's rival, MusicNet, which includes EMI, BMG and Warner. But Napster's involvement depends entirely on it proving it has stamped out music piracy on its service. This will prove to be a big problem for Napster, whose programmers will find themselves up against a small army of net-linked "crackers" when they launch a secure system.
This maze of rights, lawsuits and expensive traps are the reason some have said Napster - the music industry's online pioneer and wake-up call - might not last long enough to see through the revolution it started. What yesterday's deal signals to us is that this remarkable little company might, just might, manage to pull it off.
Related article
25.09.2001: Napster to pay £18m in damages
Useful links
Napster
Association of Independent Music
Pressplay
Vivendi
Universal Music Group
MusicNet
EMI Group
BMG
Warner Music Group
