Napster in pact with courtroom foes as it seals MusicNet distribution deal

Napster, the controversial internet site for downloading music, has signed a deal to distribute music for three of the major record labels that have taken it to court, Warner Music, Bertelsmann and EMI.

The deal between Napster with MusicNet, a joint venture of the three music giants, will see the internet site continue to reposition itself as a legal mainstream business organisation. In the past, Napster has offered copyrighted music for free from its site, infuriating the music industry, which took it to court.

Rob Glaser, MusicNet's interim CEO, said: "MusicNet is focused on providing a platform that will help consumers who are used to the experience of Napster to find, acquire and enjoy music in a manner that's legal, reliable, secure and supportive of artists and rights holders."

The deal, agreed on Tuesday, came less than three months after Napster was forced to abandon its free song-swapping service after a US court ordered it to ban copyrighted music from its site. Record companies still accuse Napster of not complying with that court decision, saying that it is removing copyrighted music too slowly. A legal threat continues to hang over the service.

Under the agreement, Napster becomes the third distribution partner for MusicNet, which will launch later this year in North America. Napster users will have to pay to download MusicNet material.

The internet firms AOL and RealNetworks have already agreed to act as distributors for MusicNet. The other two big record labels, Sony and Vivendi Universal, have formed their joint venture, called Duet, which is working with Napster's rival, MP3.com, on digital distribution.

MusicNet and Napster said their deal involved all three labels' permitting their content to be carried on Napster but only once it has transformed itself into a non-infringing service. There are also technical hurdles to overcome in protecting the music files.

"What we're trying to do is go from the chaos and contentiousness ­ which is the way this market has been ­ to a way for people to get the music they want in a way that compensates artists," said Mr Glaser.

MusicNet said it was attracted to the 70 million members that Napster attracted, in its days as a free service. Since it started charging in March however, users have dried up. The research firm Webnoize estimated that the total number of songs downloaded from Napster dropped from 2.79 billion in the month of February 2001 to 360 million in May 2001.

As part of the new deal, Napster, headed by CEO Hank Barry, was prohibited from negotiating a similar licensing deal with members of Duet, although Mr Glaser said he hoped both Sony and Universal would agree to eventually license their music to MusicNet, which could then be used on Napster. Separately, Napster is talking to Microsoft to help it create its own fee-paying service to download music.

MP3.com president and founder Michael Robertson gave the MusicNet deal with Napster little chance. "You have Napster, with no technology, licensing from MusicNet, another company with no technology and no products," Mr Robertson said. "It's a house of cards on top of another house of cards."