By RON HARRIS
The Associated Press
SAN FRANCISCO - Just in time for the Grammy Awards, Napster, Inc. has floated two proposals to rescue its music sharing service: A bid to settle a crippling lawsuit and a promise of no more free tunes starting this summer.
On Tuesday, Napster offered to pay record labels Sony, Warner, BMG, EMI and Universal $150 million annually for five years in exchange for dropping their copyright infringement lawsuit.
An additional $50 million would go to independent labels in each of those five years. But the money would come at the cost of free music.
Napster envisions paying the record companies by implementing monthly subscription fees ranging from $2.95 to $9.95, a structure company officials said could be in place by July.
But no final decisions have been made since the recording industry balked at the settlement offer.
“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,” said Universal Music Group.
“Nothing we have heard in the past and nothing we have heard today suggests they have yet been able to accomplish that task.”
Some students, however, aren’t sure if the fee would be worth paying.
“Theoretically, I probably would, but in reality I probably wouldn’t,” electrical engineering sophomore Nick White said.
“I don’t think it’s an exorbitant charge.”
Napster CEO Hank Barry, flanked by company founder Shawn Fanningand executives from Napster financial backer Bertelsmann AG, said he hoped to quickly reach an agreement with the record companies.
“We’re saying this is something consumers really want. Let’s do something to keep it going,” he said.
Civil engineering sophomore Lee Michaels, who’s been using the service nearly since its inception, said he’ll keep using it only if everyone else does.
“If it stays exactly the same, I would pay up to $30,” he said. “I bet when the charge starts, a lot of people will drop out.”
Barry detailed a scenario in which a subscription model Napster service would generate the cash to pay for license rights to all music from the major labels.
In the first year, Barry estimated 5 million paying users would generate $297 million in revenue based on a subscription fee ranging from $2.95 to $4.95 per month for a limited number of file transfers.
A premium membership with unlimited transfers would cost up to $9.95 per month. Exporting music files to portable players or copying them to CDs would cost extra.
The offer was announced a week after a federal appeals court signaled that the end is near for Napster’s free service and that the music industry almost certainly will win its lawsuit.
Industry analysts had doubts that major record labels would allow Napster and Bertelsmann, the parent company of the BMG music unit, to control the online distribution of millions of songs.
“Napster is basically trying to purchase the copyrights and resell them,” said Susan Billheimer, an analyst with Zona Research. “The record companies have an interest in distributing their music themselves over the Internet.”
AOL-Time Warner co-chief operating officer Richard Parsons also downplayed the notion of letting Napster distribute material from its catalog of more than 1 million songs.
“From this perspective, we divide the world into two kinds of people: those who respect the rights of creators and owners of intellectual property to determine how and when their property is used, and those who do not,” Parsons said. “Napster and its ilk are in the latter category.”
Sony and EMI did not comment on Napster’s offer.
“I think it would take a small miracle to get all five labels to agree to this,” Gartner analyst P.J. McNealy said. “Some of these companies have other issues than just distributing the music.”
State News staff writer Vince Estes contributed to this report.
