Napster Settles with Songwriters, Moves Closer to Paid Service

Music file-swapping network Napster inched closer to being reborn as a legitimate, paid service Monday when it announced a preliminary settlement of a class-action lawsuit filed by songwriters and music publishers.

Napster said it agreed to pay US$26 million to the National Music Publishers' Association (NMPA) and other groups, and an additional $10 million as an advance against future royalties.

Chief Judge Marilyn Hall Patel of the U.S. District Court for the Northern District of California must still approve the settlement.

NMPA president and chief executive officer Edward P. Murphy said Napster's willingness to "pay fair compensation to creators and copyright owners for past and future uses of musical compositions on its service led to a proposal that songwriters and music publishers can embrace."

Help from Congress

Both sides cited the assistance of several members of Congress -- including Senate Judiciary Committee chairman Patrick Leahy (D-Vermont) and Orrin Hatch (R-Utah) -- in helping craft the settlement.

"We are pleased to have secured such an important element in creating our new service, one that will benefit songwriters, artists and consumers alike," said Napster chief executive officer Konrad Hilbers.

Hilbers also said that the agreement "marks a huge stepping stone" for Napster in its efforts to build a digital music marketplace.

Licensing, Monitoring

Under the deal , the Harry Fox Agency, a subsidiary of the NMPA, will handle licensing and royalty distribution. Harry Fox will also monitor Napster's compliance with the license terms.

"This settlement, which only a few weeks ago seemed a near-impossibility, will hopefully lead to immediate and unprecedented growth in the licensed use of music on the Internet," said George David Weiss, a member of the Songwriters Guild of America, another plaintiff in the suit.

Back in Business?

If approved by the court, the Napster settlement could pave the way for Napster to come out of dormancy.

The swapping site has been shut down by court order since early this year and has already missed an expected mid-summer launch for its subscription-based service.

Napster has already signed a partnership with MusicNet, giving it access to independent recordings and music from European labels.

In July, Napster hired Hilbers, then an executive with Bertelsmann AG, to become its new chairman, a move that analysts said would help pave the way for record-industry deals.

Consumers Willing

Napster might find it difficult to regain its former popularity, which peaked early this year just before legal entanglements forced the network to be curtailed and then shut down. Even so, there are signs that the public is warming to the idea of paying to download digital music.

Jupiter Media Metrix reported in July that 59 percent of online music buyers are willing to pay a monthly fee to belong to a subscription digital music service, though most said they would demand top-level service in exchange for their payments.