MP3.com, EMI Reach Settlement

BOSTON (07/28/2000) - The U.K. music label EMI Group PLC announced Friday it has settled its copyright infringement lawsuit against music Web site MP3.com Inc. EMI will issue a nonexclusive, North American license for MP3.com to use EMI-controlled recordings on My.MP3.com's Beam-It and Instant Listening software services, the companies said in a joint statement.

Beam-It software allows users to "store" their music CDs in MP3.com's own online library. If users register ownership of CDs with Beam-It, and the CDs match those in MP3.com's library, users then may log into their My.MP3.com account from any PC to listen to the music.

A U.S. District Court in New York ruled against MP3.com in April for violating copyright law with this My.MP3.com service. MP3.com faced legal penalties in the billions of dollars from the suit filed by the Recording Industry Artists Association (RIAA), which represents the five major music labels.

The terms of the settlement agreement weren't announced, but they are probably in line with agreements MP3.com signed in June with Warner Brothers Music Group Inc. and BMG Entertainment Inc., said Eric Scheirer [cq], a media and entertainment analyst from Forrester Research Inc. in Cambridge, Massachusetts.

"This particular company signing won't be as important as the two others left, Sony (Music Entertainment Inc.) and (Seagram Co.'s) Universal (Music Group Inc.)," said Scheirer. "Warner is about to own EMI. Universal is the biggest, so I figure that's why they're holding out until the end."

Sources close to the Warner and BMG deals said MP3.com paid about US$20 million to Warner and as much as $100 million in total in exchange for the right to use the songs owned by the music labels. MP3.com announced Monday that it had taken a $150 million charge against earnings for legal costs.

Scheirer discounted a direct connection between the MP3.com deal and the RIAA courtroom win against the music distribution network Napster. The RIAA won an injunction Wednesday against Napster, which provides a database of MP3 music file locations on computers linked in its network. "These are long-term negotiations. I don't see this settlement as in response to it," he said. "In order to get to this point, they would have had to be negotiating for a while.

This is the end of a long road." [See, "Napster Files Appeal Against Judge's Ruling," July 27.]Still, the music industry faces the possibility of 20 million former Napster users migrating to other more distributed and less controllable means of downloading music files, like the Gnutella peer-to-peer network, which requires no central database. With the possible end of Napster, music labels may need to move fast to provide an alternative, and a deal with MP3.com may be an answer, Scheirer said.

"Doing this sooner rather than later is in their best interest," he said.

EMI Group, in London, is at http://www.emigroup.com/. MP3.com, based in San Diego, California, can be reached at +1-858-623-7000 or at http://www.MP3.com/.

The RIAA, based in Washington, D.C, can be reached at +1-202-775-0101 or at http://www.riaa.com/.

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