Napster Offers Labels $1 Billion Settlement Deal
In an effort to show consumers that it is attempting to settle the copyright-infringement lawsuit filed against it by the major record companies, Napster yesterday (Feb. 20) put a $1 billion offer onIn an effort to show consumers that it is attempting to settle the copyright-infringement lawsuit filed against it by the major record companies, Napster yesterday (Feb. 20) put a $1 billion offer on the table, Billboard Bulletin reports. Under the proposal, the file-sharing service will pay the five major labels -- BMG, Sony, Universal, and WEA (Warner Bros./Elektra/Atlantic) -- a lump annual sum of $150 million for the next five years for non-exclusive licenses to their catalogs.
The sums paid to each major will be based on the number of file transfers of each company's material. An additional annual fund of $50 million will be established to pay independent labels and artists over the same five-year period. Napster says it is developing accounting technology to track the file transfers.
Napster says money for the settlement will be raised from consumers signing up for its subscription model. The two-level plan, expected to launch in July, will ask consumers to pay $2.95-$4.95 per month for a limited number of file exchanges or $5.95-$9.95 per month for unlimited exchanges. Under the new proposal, the number allowed under the lower-priced model will be determined by the labels. In addition to the cash settlement, equity stakes in Napster will be offered to the labels.
"This offer is going to help make it clear that we are being proactive," says Napster CEO Hank Barry. "Consumers need to know that the labels are turning down their money, and if we're shut down, it's because the labels said no." Barry says 1.5 million-5 million people are likely to sign up for a paid Napster service in the first year, based on focus-group research.
The proposed deal comes a week after the Ninth Circuit Court of Appeals upheld a lower court's decision that Napster violates copyright and issued an order for the company to remove unlicensed content from its directory. Napster is appealing the ruling.
Despite yesterday's proposal, the labels aren't convinced that Napster has solved its business problems. "It is Napster's responsibility to come to the creative community with a legitimate business model and a system that protects our artists and copyrights," Universal Music Group says in a statement. "Nothing we have heard in the past and nothing we have heard today suggests they have yet been able to accomplish that task."
Barry says the labels have yet to outline for Napster an acceptable offer for the licensing of their content.