MP3.com strikes Universal deal

MyMP3.com upset the big record companies

Controversial online music service MP3.com has ended its legal dispute with record company Universal, after agreeing to pay it $53.4m (£37.1m).

MP3.com has now secured a licensing agreement which allows it to use songs owned by Universal, which is the world's largest record company.

In return, Universal also has the right to buy a stake in MP3.com, and on Wednesday the label bought warrants to purchase nearly 5% of the company.

Universal acts include Eminem, U2 and Jimi Hendrix.

MP3.com chief executive Michael Robinson said: "Our shareholders should be excited. It gets us out of the courtroom and into the business of delivering digital music."

Eminem is a Universal artist

The company has already reached settlements with four other major companies - Warner Music Group, Bertelsmann, EMI and Sony Music Entertainment - and has arranged licensing deals with each of them.

In a joint statement issued by Universal and MP3.com, Universal president Zach Horowitz said his company had "pursued this case to send a strong message that copyrights will be protected and that copyright owners and artists need to be properly compensated for their work".

He added: "It was never our intention to put MP3.com out of business with a judgement so large it would threaten their viability as a company.

"We support the development of legitimate music businesses on the internet."

Members only

At stake was MyMp3.com, which allows computer users to listen to CDs over the Internet.

Members must first prove they paid for the recording by inserting the original CD into a computer's CD-Rom drive.

A judge ruled in September that MP3.com had intentionally violated the copyrights of the music companies, and awarded Universal $25,000 (£17,400) per CD - which could have resulted in a bill of up to $250m.

Digital dispute

Jan 2000: Record giants sue MP3.com

April 2000: MP3.com found liable

June 2000: Warner and BMG settle

July 2000: EMI settles

August 2000: Sony agreement

Sept 2000: MP3.com ordered to pay up to $250m to Universal

Nov 2000: Universal settlement

Hilary Rosen, president of the US music industry body, the Recording Industry Association of America, welcomed the deal.

She said: "It will drive home the point that the marketplace for legitimate music on the internet really works."

Some disputes between smaller record companies and MP3.com remain to be resolved, but these are not expected to pose a threat to the internet outfit.

Last month, Bertelsmann announced it was teaming up with another internet music service, Napster, in developing a membership-based system which would guarantee royalties to artists.

Napster simply acts as a clearing-house for users to find music on each other's hard-drives, while MP3.com stores the music on its own servers.