Napster Strikes Deal With Three Major Record Labels

Napster, the outlaw song-sharing service, said Tuesday it has struck a distribution deal with three major record labels that are launching a music subscription service this summer.

The agreement between Napster and the members of MusicNet is the biggest step Napster has taken so far toward legitimacy.

MusicNet is a venture between record label owners AOL Time Warner Inc., Bertelsmann and EMI Group, as well as Seattle-based RealNetworks, whose software allows users to listen to music and video via the Internet.

The deal makes Napster the third distribution partner for MusicNet, joining AOL RealNetworks and America Online. The MusicNet subscription service is slated to be available to consumers by late summer.

"We are pleased to be able to offer Napster members access to the MusicNet service," said Napster's CEO Hank Barry. He said the deal shows Napster's commitment to "the Napster community — the world's most enthusiastic music fans."

Barry said the new Napster service would not deal in unprotected music files, and would instead rely on technology to protect and track the ownership of songs.

"We're not going to be moving raw MP3s around the new network," Barry said. MusicNet would require an additional fee from Napster users, on top of a subscription fee.

Napster's basic subscription service would provide only independent-label music.

"Today's announcement is great for consumers, for artists and for the recording industry," said Rob Glaser, MusicNet's interim CEO and the CEO of RealNetworks.

Those who subscribe to MusicNet through Napster will be able to share MusicNet content with other subscribers. But parties to the deal haven't said whether people will be able to download, collect and trade MP3 files like they do on Napster, a popular activity that has infuriated music copyright holders.

MusicNet's online subscription service will let music fans listen to songs piped over the Internet for a yet-to-be-determined fee. Napster has also said it hopes to roll out a new version of its service this summer that would ensure royalty payments to artists and labels.

Napster is being sued by the music industry for copyright infringement and has been trying to purge copyright-protected music files from its system under court order. Napster has yet to satisfy industry concerns.

Warner Music Group said Tuesday that there could still be serious hitches in the deal.

"As previously announced, our content will not be available to Napster as part of the MusicNet service until we are reasonably satisfied that Napster is operating in a legal, non-infringing manner," Warner said in a statement.

EMI also said that Napster's current technology was not quite ready for prime time, despite the pending deal.

"EMI has always said that we'd be prepared to consider licensing our music to Napster, but only when certain critical conditions are met particularly in the area of copyright. Those conditions have not yet been met," it said in a statement.

Napster remains mired in a copyright infringement suit filed by the Big Five record labels — Warner, BMG, EMI, Universal and Sony.

A deal between MusicNet and Napster was not expected to affect that suit. All sides continue to work with a court-appointed technical adviser to bring the file-sharing service into compliance with an injunction mandating that Napster stop trading unauthorized music.