Napster, Publishers Reach Preliminary Royalties Agreement

Settlement may pave way for music-trading service's long-promised subscription service.

In the first sign of life from Napster since July, the on-hiatus music-trading service said Monday (September 24) that it had reached a preliminary agreement with songwriters and music publishers that would allow the company to move ahead with a long-promised subscription service.

Under the agreement — which is still subject to approval by various parties, including the judge presiding over copyright-infringement lawsuits against Napster — the service would pay $26 million in damages to publishers and songwriters. The company would also pay $10 million in advance of future royalties.

One-third of the royalties Napster intends to pay creators in its new system would go to songwriters and publishers; the rest would go to recording artists.

If approved, the settlement would result in the dismissal of music publishers' lawsuits against Napster but would not affect the lawsuit against Napster filed by the recording industry.

In a telephone press conference held Monday to announce the deal, Napster CEO Konrad Hilbers declined to predict exactly when his company would launch its new service, which will charge customers an undisclosed monthly fee to download a certain number of songs each month.

The launch, once set for this summer, will happen before the end of the year, Hilbers promised.

Meanwhile, Edward P. Murphy, president and CEO of the National Music Publishers' Association, said he was optimistic about ongoing negotiations with the Recording Industry Association of America (RIAA), which represents the major record companies.

According to Murphy, music publishers and the RIAA are close to reaching an agreement that would set online-publishing royalty rates and allow the major labels to launch their own upcoming subscription services, MusicNet and Pressplay (see "Britney, 'NSYNC, Tool Music To Be Legally Available Online").

The original version of Napster has been down since July 2, when the company said it was halting file transfers in order to solve problems with the database behind its new filters, which use acoustic-fingerprinting technology to identify songs by their musical content.

In Napster's absence, alternative music-sharing services — various programs using the Gnutella network as well as newer contenders including Audiogalaxy (, Morpheus ( and Kazaa ( — are gaining in popularity.

For complete digital music coverage, check out the Digital Music Reports.