RealTime IT News

Napster Airs Compensation Service for Labels, Artists

Napster Wednesday came up with some figures to accompany its promise to provide compensation for the record labels and artists who have decried them.

The file-sharing firm has apparently dangled the business plan in front of the labels for the last six months, according to a statement issued by Napster early Wednesday morning.

The proposal pledges to yield $1 billion to the major labels, songwriters and independent labels and artists over the next five years: major labels would receive $150 million per year for a non-exclusive license, predicated on files transferred; $50 million per year will be set aside for independent labels and artists to be paid on the same files-shared basis.

Napster's Chief Executive Officer Hank Barry said definitive pricing has not been set and that the model will have two tiers. Included are basic membership plan that would cost in the range of $2.95 to $4.95 per month and a premium offering tentatively in the range of $5.95 to $9.95. The latter would involve a share-as-much-as-you-want scheme while the former is an as-yet-undetermined limit.

Napster also said the new, diplomatic service is slated to launch this summer and will be designed as a promotional service with fidelity limitations of 128 kbps and lower to keep users honest. Users will be asked to pay an additional fee in order to burn CDs and to transfer their music to audio players or pocket PCs.

Shawn Fanning, who created the controversial sharing technology that ignited a furor, said in a company statement that he has "so many cool things in development."

Bertelsmann AG, the Germany-based media giant and owner of BMG Entertainment, reaffirmed its support for Napster, the firm it partnered with last October to work out how to incur revenue streams for labels and artists.

"Bertelsmann chose to build a partnership with Napster in October, 2000 because of the tremendous value it creates for promoting artists and building community," said Andreas Schmidt, president and CEO of Bertelsmann eCommerce Group. "The revenue potential of Napster for the entire recording industry is unprecedented and it's time to start thinking towards the future and figure out a way to leverage this potential instead of trying to quell it."

After the 9th Circuit Court of Appeals ruled that the outfit could indeed be in violation of certain elements of copyright law, Napster is in need of positive buzz and providing some preliminary figures could cement its status as a deliverer of good faith.

Some experts say that won't be enough.

Larry Iser, partner at Los Angeles-based Greenberg Glusker Fields Claman Machtinger and Kinsella LLP and head of its music litigation and intellectual property practices, told InternetNews.com he sees the proposed business model as publicity stunt designed to divert attention from last week's 9th Circuit ruling.

"I don't think the remaining major record companies will see Napster's offer as a serious, good faith offer to compromise," Iser said. "The record industry is nearly a $40 billion industry; the harm to the record industry and to the copyrights themselves from the massive infringement enabled by Napster greatly exceeds Napster's offer. The industry would be crazy to allow Napster to operate for the relative pittance Napster is offering."

Also missing from the offer, Iser said, are details as to how Napster intends to charge the users, and how Napster intends to account to the record and publishing companies for the use of the sound recordings.