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Napster, Songwriters Settle

Preliminary agreement key step toward launch of new file-sharing subscription service

September 25, 2001 12:00 AM ET

Napster has agreed to pay American songwriters and music publishers $26 million, as well as a portion of future revenues, to settle the lawsuit pending in federal court.

The agreement remains subject to the approval of U.S. District court Judge Marilyn Hall Patel, the plaintiffs in the class-action suit and the National Music Publishers' Association (NMPA) Board of Directors. But in a conference call Thursday afternoon, Napster CEO Konrad Hilbers and NMPA President Ed Murphy called the approval process "a formality" that will take less than ninety days.

Under the agreement, modeled on 1992's Audio Home Recording Act, the company will pay royalties to songwriters and publishers for every song Napster users download. Exactly how much money changes hands will depend not only on how many songs users share but also on how much the company will charge for a monthly subscription -- a detail Hilber wouldn't divulge.

Thursday's settlement does not resolve the company's still-pending litigation with the recording industry, but Hilber did maintain that his site, inoperative since July, would be back up and running by the end of the year. He also expressed confidence in the "Napster brand name," and suggested that his fully licensed service would flourish despite the free music download services still available on the internet.

The NMPA's Murphy, meanwhile, called the agreement a "landmark decision," and indicated that his organization would use the details of the plan as a model for its ongoing negotiations with similar online music services, including PressPlay and MusicNet. The Harry Fox Agency, an offshoot of the NMPA, will be responsible for monitoring, collecting and distributing revenue to songwriters and music publishers.

The NMPA initially sponsored the litigation against Napster on behalf of songwriters and music publishers last year.

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