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Napster, MusicNet Forge Deal With Strings Attached

Napster has cut a conditional exclusive licensing deal for major-label content from MusicNet, the digital subscription service owned by Real Networks, Warner Music Group (WMG), BMG Entertainment, and

Napster has cut a conditional exclusive licensing deal for major-label content from MusicNet, the digital subscription service owned by Real Networks, Warner Music Group (WMG), BMG Entertainment, and EMI Recorded Music, Billboard Bulletin reports.

The deal effectively excludes the file-swapping service from entering into either a content or technology licensing deal with the Duet subscription service being developed by Universal Music Group and Sony Music Entertainment. "We're hoping we'll have agreements with Sony and Universal through MusicNet," Napster interim CEO Hank Barry said yesterday (June 5).

Barry said Napster intends to launch its pay service with security-wrapped music from independent labels this summer. EMI, BMG, and WMG all noted in statements yesterday (June 5) that they are not willing to license their content to Napster until they are satisfied that it is operating in a "legal" manner. Any MusicNet content will be offered as a premium feature on top of the basic Napster pay service, Barry said.

The rollout of MusicNet content on Napster also will hinge on the major labels settling their copyright-infringement suit against the file-swapping service. Major-label sources say the MusicNet arrangement is, in part, an effort by Napster to win sympathy with the courts.

"This whole thing was for the judge," says one source. He predicts that Napster will now claim, "How can [the majors] be giving us the license for the content on the one hand and suing us for billions on the other?" A compliance hearing related to the preliminary injunction against Napster is scheduled for today in San Francisco.