Napster serenades songwriters, ready to end lawsuit

Struggling online music distributor Napster signed a preliminary agreement with a group representing U.S. songwriters and music publishers Monday that should end some litigation pending against it and provide songwriters with a cut of Napster's revenue when it launches a fee-based service later this year.

While still in the midst of a legal battle against the recording labels represented by the RIAA (Recording Industry Association of America), Napster has now managed to forge a deal with the National Music Publishers' Association (NMPA) and the songwriters the group represents. Napster will pay US$26 million in damages for past, unauthorized use of music and will advance another $10 million for future licensing royalties, the company said in a statement. Songwriters will also be entitled to a portion of Napster's revenue generated by song sales on its Web site.

The deal must still be approved by Chief Judge Marilyn Hall Patel of the United States District Court for the Northern District of California and by the NMPA Board of Directors.

Napster has temporarily shut down its file-swapping service, as the company works to put in place a technology infrastructure able to track file trading and add features for a subscription-based service. While it once boasted tens of millions of users, the company has seen its user base vanish over the past few months, according to analysts.

Napster does not plan to lure its entire user base back with its new service to be launched by year end but is looking to pull in 1 million to 2 million customers over the next year to 18 months, said Konrad Hilbers, chief executive officer of Napster, speaking during a news conference.

"I am convinced of the power of the Napster brand name," Hilbers said.

One industry analyst, however, doubted whether Monday's deal or the Napster brand name can revitalize the company.

"It is not the case that Napster is some kind of magic brand name or application that can overcome the fact that their service is not shaping up," said Eric Scheirer, analyst with Forrester Research Inc. "With the fees and types of restrictions they are proposing, it gets much less fun for people to use. I don't see any evidence people will choose to go to a much less useful Napster."

Napster must still fight an uphill battle with the RIAA and gain broader rights to song usage, Scheirer said. The analyst doubted how effective or lucrative the deal with songwriters could be without additional support from the labels.

In addition, myriad file trading services have sprung up in the wake of Napster's decline.

"The other file sharing services out there are more popular now than Napster was at its peak," Scheirer said.

Popular networks such as Gnutella and MusicCity continue to help users share songs with each other at no charge, making a fee-based Napster a hard sell for most consumers.

Napster's top executive did, however, put out an interesting call for marketing aid to help his floundering company make a comeback.

"If there is free advertising space in newspapers or magazines, we are very interested," he quipped.

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