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NYTimes.com Article: Bertelsmann in Deal With Napster to Drop Suitand Begin Service

For those of you who are interested in life Beyond the Napster suit --
did you notice the following article in the NY Times?  This is a major, 
though not surprising development -- or rather, the surprise is not
in the legitimization of napster-like services but in the company
that chose to take the lead in so doing.

Ann Okerson, Yale University

Bertelsmann in Deal With Napster to Drop Suit and Begin Service

October 31, 2000


Bertelsmann AG, the German entertainment conglomerate, said Tuesday that
it would drop its lawsuit against Napster, the online song-swapping
company, once the two sides begin a membership-based Internet music

The deal marks a significant shift by one of the five music companies
suing Napster for allowing computer users to download music without paying
royalties. Bertelsmann called on the other companies to participate, but
it's still unclear whether they would join the effort.

The plan being developed by Bertelsmann's fledgling e-commerce group and
Napster would enable users to continue downloading and trading music on
the Internet but would compensate the recording artists and record
companies behind the songs.


But under the new agreement, Napster would now offer a service for which
users likely would have to pay, in addition to a free component, Hank
Barry, Napster's chief executive, said at a news conference Tuesday.


Bertelsmann, which has been developing its own technology for selling
music over the Internet, encouraged other record companies to follow in
its path. Bertelsmann said it hoped the service "would gain acceptance" by
other music providers.


Once Napster puts in place the membership-based service, Bertelsmann said
its music division, BMG, would withdraw its lawsuit against the
song-sharing company and make its music catalog available on the new
distribution platform.

Bertelsmann also said that it would give Napster a loan to develop the
service and that it would have the option of acquiring a stake in Napster.
Andreas Schmidt, chief executive of Bertelsmann's e-commerce group,
declined to give financial details, saying: "We're both private companies.
We don't have to disclose that, and we're not going to disclose it."


In July, a federal judge ordered Napster to stop allowing consumers to
trade copyrighted music over the Web. A federal appeals court later stayed
the injunction, and a trial is pending.

Bertelsmann is the parent of BMG, which is suing Napster along with Sony
Music, the Warner Music Group, Universal Music and the EMI Group. Time
Warner, the parent company of Warner Music, supported the agreement, but
it did not say whether it would take part in the new music service.


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