Napster to launch fee-based service by mid-year

In a speech at the World Economic Forum in Davos, Switzerland, Thomas Middelhoff, Bertelsmann's chief executive officer, announced there would be a second Napster service. Middelhoff said he expects the new service to go live in June or July.

"The new service will co-exist with the existing Napster service," said Frank Sarfeld, senior vice president of the Bertelsmann eCommerce Group, in an interview. "Internet users will still be able to use the current Napster service."

Sarfeld said a survey of 20,000 Napster users conducted in December by Webnoize showed that a large majority is willing to pay up to $US15 a month for the music download service. However, Sarfeld cautioned, this is no indication for what the fee will be. "We are not talking figures yet," he said.

In August, Napster Chief Executive Officer Hank Barry, who is also in Davos attending meetings with the world's business and political leaders this week, suggested a monthly charge of around $US5, but said that figure shouldn't be taken too seriously. Sarfeld agrees.

The second Napster model will pay artists and copyrights holders, Sarfeld said. Payment is needed, he said, "to ensure new music will be out there."

Sarfeld wouldn't go into detail, but he said the second Napster would offer better service than the existing one. "It will offer reliable downloads, files will be scanned for viruses, and all songs will be available all the time," Sarfeld said.

Bertelsmann formed a strategic alliance with Napster last October. The German giant has provided Napster with a loan when the company was fencing off claims from the record industry in court. It has been rumoured that Bertelsmann currently holds a majority stake in Napster. Sarfeld strongly denies this.

Napster's software, available for free download from Napster.com, allows swapping of music files in the MP3 (MPEG-1 Audio Layer-3) format. The service has approximately 57 million users worldwide. The company has been in legal battles with all large record labels, which compare downloading via Napster to stealing compact discs from a record store.

To offer music, Napster will have to cut deals with record labels. The company has been successful in signing agreements with several smaller labels. Bertelsmann-owned BMG Entertainment Inc. is one of the largest ones. "Talks with the other labels are in progress," said Sarfeld.

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