Napster lawsuit continues

Done deal: Napster's Hank Barry and Bertelsmann's Andreas Schmidt

The controversial online music-swapping site Napster is still facing legal proceedings over copyright infringements, even though it has done a deal with one of the companies trying to close it down.

If you think Napster is great now, just wait - we're just getting started

Shawn Fanning
Napster founder

Napster has formed an alliance with German entertainment giant Bertelsmann, with the aim of developing a new subscription-based service.

Bertelsmann says it will withdraw its lawsuit and make its catalogue available once Napster has successfully introduced a membership-only system.

Its artists range from Christina Aguilera and Carlos Santana to David Gray and Toni Braxton.

But the other companies suing Napster - Seagram's Universal Music, Sony Music, Warner Music and EMI - have so far declined to join the partnership and the legal action, which is currently in the US Appeal Court, will continue.

Monthly fee

Bertelsmann's e-commerce group is providing a loan to Napster to develop the new service in exchange for an option on a stake in the company.

Our alliance with Napster is key to providing consumers in the future with access to the largest global music catalogue of high-quality music files

Andreas Schmidt
Bertelsmann e-commerce group

Napster chief executive Hank Barry says he wants to launch the service "as soon as we can", with a subscription rate of $4.95 (£3.40) a month.

Napster is awaiting an Appeal Court decision on whether it will be allowed to continue to operate pending a final judgement in the copyright case.

The judgement is expected to define how books and movies, as well as music, are distributed on the net.

Potential

Bertelsmann chairman Thomas Middelhoff said: "Napster has pointed the way for a new direction for music distribution.

"We believe it will form the basis of important and exciting new business models for the future of the music industry."

Andreas Schmidt, president of Bertelsmann e-commerce group, said: "For recording artists and songwriters, we hope to realise Napster's full potential as a promotional vehicle while protecting their interests.

"For the recording industry, we are looking to take a positive approach with a membership-based service that complements other forms of music distribution."

Universal's response

Universal, the world's biggest music company, said it was glad Napster was trying to develop a "legitimate business".

It said: "While we are concerned that Napster still has no solution to ensure security and proper payment, we are encouraged that they are attempting to resolve this issue."

Napster, which claims it has 38 million users, has incurred the wrath of the music companies because its software enables people to download music free.

The music companies who own the copyright to tracks involved in the MP3 file-swapping have resorted to court action to ensure they are paid royalties.

Popular

Napster was founded in May 1999 by Shawn Fanning, then an 18-year-old freshman at Boston's Northeastern University.

It is based in Redwood City, California.

The site and its founder have received numerous industry awards for technology, innovation and marketing, including Wired magazine's Best Music Site award.

The federal court case in San Francisco for copyright infringement began in December 1999.