BMG, Napster in Alliance

- LOS ANGELES (Variety) - After nearly a year of getting the collective cold shoulder from the music industry, Napster has finally made a friend. The legally embattled music file-sharing service has partnered with the e-commerce arm of Bertelsmann AG, the German parent of big-five music label BMG Entertainment, to offer a legitimate, membership-based file sharing service to paying customers. The proposed service would allow paying members access to BMG's complete catalog of recordings, which includes work from such hit artists as Santana, Dave Matthews Band and Toni Braxton.









A firm price for the service has not yet been established, but Napster CEO Hank Barry said the company is currently looking at a figure in the neighborhood of $4.95 per month, with a "large percentage" of any revenue generated going to record labels, artists and other rights holders. Under the terms of the agreement, announced Tuesday at a New York press conference, Bertelsmann will lend Napster sufficient funds to get the new, above-board sharing service up and running. For its generosity, the German giant will get warrants to purchase an equity stake in Napster. The size of the stake was not disclosed. Perhaps most importantly for the financial future of online file sharing, BMG said it will drop its portion of the ongoing industry lawsuit against Napster once the new, legal sharing service is up and running.