Napster offers $US1 billion to settle lawsuit

Napster has offered to pay the record labels a total of $US1 billion over 5 years to settle the lawsuit, a spokesperson for Napster said. In return, the company would be permitted to continue to allow users to trade copyrighted music over its service in return for a membership fee for Napster's service.

"This is (Napster's) proposal for the new, membership-based plan which they are hoping the record labels will agree to and then drop their lawsuits," the Napster spokesperson said. "This is something they have been discussing with the labels each time they have met with them."

The five major record labels represented in the case are BMG Entertainment, Universal Music Group, Warner Brothers Music Group, EMI Group and Sony Music Entertainment.

The $US1 billion would be broken down as follows: Napster would pay the major labels $US150 million per year for a non-exclusive licence to their music, which would be divided according to the music files transferred. For example, if the transfers were evenly divided among the five labels, each label would receive $US30 million, Napster said in a statement.

A further $US50 million would be set aside each year for independent labels and artists, and it would be paid out based on the number of songs traded, the company said.

Napster users would be asked to subscribe to the service under a model that includes basic and premier membership plans. Exact pricing hasn't been set, but Napster expects to charge in the range of $US2.95 to $US4.95 per month for the basic plan, which would include a monthly limit to the number of files than can be traded. The premium plan, priced between $US5.95 and $US9.95 per month, would give users access to unlimited files, Napster said.

"Our research strongly suggests that a high percentage of Napster users would be willing to pay," the company said in the statement. "We will not be certain until we actually begin charging, but we do know that Napster has become an important part of daily life for a lot of people."

BMG Entertainment, one of the five major record labels originally suing Napster, signed a surprise settlement with Napster in October 2000 and invested a reported $US50 million in the service. The two have since been working on establishing a secure, copyright friendly version of Napster.

"We believe the new Napster proposal announced today is a positive step that will encourage the music industry to work with Napster," Rolf Schmidt-Holtz, president and chief executive officer of BMG Entertainment, said in a statement. "BMG embraces a secure peer-to-peer file sharing service that respects copyrights and compensates our artists and we are optimistic that this new service will meet those goals."

Napster's news conference to announce the proposal drew fire from Hilary Rosen, president and chief executive officer of the RIAA, before it had even begun.

"Stop the infringements, stop the delay tactics in court, and redouble your efforts to build a legitimate system," Rosen said in a statement. "Our member company plaintiffs have always said that they stand ready and willing to meet individually with you to discuss future licenses. This path would be more productive than trying to engage in business negotiations through the media."

"If you really want business deals with the record companies, why hold a news conference instead of talking with the companies directly?" Rosen said in the statement.

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