Napster struck a deal with Liquid Audio on Monday that marks a preliminary effort on the part of the music-swapping software maker to make amends with various principals in the record industry who have pulled the company into court. The new partnership was struck up at Jupiter Communication's Plug, an Internet commerce research firm. At a conference in New York City, Napster CEO Hank Berry admitted the company needed to devise a new plan for business that was cognizant of intellectual property.

The move came just two days before Napster and the Recording Industry Association of America were due in U.S. District Court in San Francisco. The partnership means Napster will incorporate Liquid Audio's Genuine Music Mark into their technology. The watermark is a method of identifying a digital music file so that ownership of copyrighted material can be traced.

Also revealed at the Jupiter Conference was a study that suggested that Napster users were forty-five percent more likely to have increases in their music purchasing habits than nonusers. "Because Napster users are music enthusiasts, it's logical to believe that they are more likely to purchase now, and increase their music spending in the future," said Jupiter analyst Aram Sinnreich. "When we conducted our consumer survey, controlled for key music purchasing factors -- such as existing spending level, age, income, gender and online tenure -- we still found that Napster usage is one of the strongest determinants of increased music buying." Sinnreich also suggested that the RIAA's assertion that Napster usage has caused a decrease in music purchases in college areas is wrong, claiming that the decrease in purchases began prior to Napster's existence.

Napster and the RIAA will appear before Judge Marilyn Patel on Wednesday as the latter pursues its preliminary injunction to shut down the software maker.

ANDREW DANSBY
(July 26, 2000)