Napster, Majors Deal Done

Former outlaw music-sharing site joins forces with Warner, EMI and BMG

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Despite the Recording Industry Association of America's lawsuit against Napster still being in full swing in a federal court in California, the file-sharing company has inked a deal that aligns it with three of the five major labels. Napster announced on June 5th that it has signed a licensing agreement with MusicNet. Owned jointly by RealNetworks, Warner Music Group, BMG Entertainment, and EMI Recorded Music, MusicNet.com was the first to offer the legal digital distribution of major-label content in both streamable and downloadable forms.

The new deal means that Napster users will be able to download a Madonna or R.E.M. single from their latest Warner releases, but for a fee, therefore eliminating the broad-based file-swapping component of Napster that was at the center of both the company's success and controversy. "We think this is a big step toward offering the broadest catalog that music consumers want over the Internet," said Napster CEO Hank Barry late Tuesday night at a press conference with MusicNet interim CEO and Chairman of the Board, Rob Glaser. "Certainly when you think digital distribution of music and you think of the consumer experience, Napster is at the forefront," Glaser said.

But the Napster/MusicNet deal is still riding on a few key conditions stemming from the RIAA lawsuit and the subsequent court order to remove all copyrighted material from the Web site. BMG, EMI and Warner will make their content available to Napster only when the company has fully complied to the court ruling, which demands that the company make use of filtering technology to block the files major labels have designated. While Napster has significantly decreased the number of copyrighted files available on the site, the company claims that the filtering technology is also blocking files that have not been barred under copyright law. The specific technology MusicNet and Napster will use to ensure the secure exchange of files will be discussed in greater detail during the launch of the alliance, expected in late summer or early fall.

The deal also specifically entails the exclusion of the remaining two majors, Vivendi Universal and Sony Music Entertainment. Those two corporations created the online distribution service Duet for their content. One of the provisions of the Napster/MusicNet deal is that Napster may not enter into a similar agreement with Duet.

"What we're trying to do," Glaser said, "is go from the chaos and confusion and the contentiousness of the way this market has been to a market where consumers get what they want, which is a great consumer experience, artists and rights-holders get what they want, which is the structure that compensates them for their works; and today's announcement is an important step forward in the convergence of those two goals.