UPDATE Online song-swapping service Napster has announced a licensing agreement Tuesday that could pave the way for a relaunch of the service later this summer.
Napster struck an agreement with MusicNet, the nascent music-licensing venture formed by Bertelsmann's BMG Entertainment, Warner Music Group, EMI Group and RealNetworks of Seattle.
The deal is the first sign that Napster might be able to reinvent itself as a paid service before it evaporates under the heat of a court injunction that has rendered the service practically useless. Since the injunction went into effect in April, downloads have dropped more than 85 percent. So much music has been blocked from the Napster system that on Monday the search term "funk" yielded no results.
"MusicNet is 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, and secure," said Rob Glaser, chairman and CEO of Real Networks and interim chair of MusicNet.
The agreement will allow Napster users to subscribe voluntarily to the MusicNet offering. They will be able to swap MusicNet songs only with other Napster users who are also MusicNet subscribers. No exact price has been set for the service, but Glaser said it is likely to be about the price of a new CD each month.
The agreement is the best news for Napster since it received a $60 million loan from Bertelsmann in November. The deal will not end its legal travails, however. None of the Big Five major labels has dropped their suits against Napster, though Bertelsmann has pledged to have BMG pull out of the suit once Napster's conversion to a paid service is complete.
Warner Music Group also cautioned that it will not release its catalog to Napster through MusicNet until "we are reasonably satisfied that Napster is operating in a legal, noninfringing manner and has successfully deployed a technology that accurately tracks the identity of files on the service."
Through MusicNet, Napster will gain access to approximately 40 percent of the global music market. The largest block of remaining songs are owned by Sony Music Entertainment and Universal Music Group, which formed their own music licensing service, Duet, earlier this year.
Vivendi Universal Chairman Jean-Marie Messier told an audience of analysts in March that Duet will license its catalog to Napster and to similar services provided that their systems "respect copyright" and that the "technology is reasonably secure."
"We will license Napster with urgency when those two criteria are met," he said.
A MusicNet-Napster alliance would be a major coup for RealNetworks, which is fighting to make its streaming technology the industry standard. More than any other application Napster popularized MP3, making it the format of choice for digital music. If the system can regain its popularity using the MusicNet platform, it would give Real a leg up in the battle against Microsoft's Windows Media Player.
A new version of Microsoft's streaming software with CD burning capabilities will be released with the newest version of its operating system, Windows XP, scheduled for release on October 25.
