On All-Hallows Eve Record Labels Get a Big, Fat…BOO concerning Napster Lawsuit

Posted: November 5, 2000 in Music
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I know that many of you fall into one of two categories when it comes to the drama surrounding Napster. You either don’t give a flying rat’s ass about the outcome of the legal battle the net company is engaged in or you have been holding your breath for weeks as you wait for the latest news. I don’ t think there are a great many who fall in between those two points on the map.

Well, we’ve got some news for you and frankly it’s looking a bit better for those “meddling kids”. Napster Inc., has formed an alliance with BMG Entertainment (one of the globe’s largest record labels) that will lead to a new copyright-friendly version of the music trading service.

On All-Hallows-Eve, the other labels suing Napster got a big, fat, BOO! from one of their chief allies in litigation as Bertelsmann AG broke ranks, agreeing to become part owner of Napster, dropping its lawsuit in the process.

“Napster has pointed the way for a new direction for music distribution, and we believe it will form the basis of important and exciting new business models for the future of the music industry,” Thomas Middlehoff, Berterlsmann’s chairmen and CEO, said in a written statement.

The entire process took about two months; according to Napster’s reps. At one point the company thought it would announce the deal prior to the Oct 3rd hearing, only to have the deal fall apart until it was resurrected late last month. It all came together just hours before the actual announcement was made.

Bertelsmann agreed to lend Napster the money to finance the new software package, in return for a piece of the company once it is transformed from an all-free music service to one charging a monthly fee of around $4.95. Strangely enough, that’s the same number this guy kicked around in a piece he wrote six months before this story broke.

The new version of Napster, developed with Bertelsmann’s eCommerce group, will be based on a membership model, with royalties paid to labels, artists, songwriters and music publishers. BMG will NOT drop its lawsuit until this model is in and place and running.

Napster didn’t elaborate on how BMG’s catalog will be made available through the service, but Napster CEO Hank Barry emphasized that Napster will continue to allow users to trade music files they created from their own CDs. “Bertelsmann is convinced that we should let Napster be Napster”, he said.

In BMG’s statement, Middlehoff urged the other labels to join with Bertelsmann and Napster in the formation of the new service.

“We have invited other record and publishing companies, artists and other industry members to participate in the development of a secure and membership based service,” he said.

As for the “kid” who started this whole ball rolling a little over a year ago, Napster’s founder Shawn Fanning professed he is “very excited about this partnership” and had a message for Napster users that claimed “If you think it is great so far, just wait.  We are just getting started.”

Fanning, who doffed his trademark baseball cap and jeans in favor of a sleek, double breasted suit, enthusiastically hugged the middle-aged Middlehoff and presented him with a Napster t-shirt.

The man who made all of this possible is Hank Barry, Napster’s CEO. Barry came on board earlier this year when Hummer invested in the beleaguered dot-com company. How exactly did he go about getting the parent company for BMG, home of Christina Aguilera, ‘N Sync and Dave Matthews to get in on this thing?

“I never believed the interests of the consumers and the record companies were all that different,” says Barry, a former copyright lawyer. “The reality is that artists and songwriters have an interest in having their work heard.” he says. “And the members of the Napster community have an interest in listening to it. With those commonalities, I was convinced I could make it work.”

That being said, it was much easier said than done. But, give the man his props because in the end he made it work. What went form an ugly, multi-headed lawsuit that saw record labels  suing for an injunction with one hand, only to find their own parent companies fighting the injunction with their other hand because it adversely affected other parts of their money making apparatus, now looks like it may be coming to a peaceful close.

This deal will inevitably lead to similar deals with the other players in this whole thing. In the end, the consumer will be able to carry on downloading songs to their hearts content, for a reasonable fee, while artists and labels will begin to reap the financial benefits that the world wide web can provide.

Oh, it’s a beautiful day in the neighborhood….

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