Doing a Daring Deal With the Devil?

Citing the desire to take advantage of the power of sharing audio files over the Internet, one of the larger independent record labels, TVT Records, announced last week that it has withdrawn its copyright claims against the file-sharing company Napster. TVT said that the basis for its decision to end the lawsuit and provide its support to Napster is "the new service Napster is evolving under the strategic alliance it recently announced with Bertelsmann AG." TVT points out that, since Bertelsmann is still technically a party to litigation with Napster, it becomes the first record label to fully settle with the beleagured Web company.

Under terms announced in the settlement, TVT says it will allow the master recordings and musical compositions it owns or controls to be used for file-sharing on the Napster service. TVT says it will also join Napster in promoting "further acceptance of the new Napster business model." TVT's Steve Gottlieb has also agreed to act as advisor to Napster as part of the company's proclaimed effort to address the concerns of artists, songwriters, and record and publishing companies.

Gottlieb comments, "I am afraid that copyright owners' resistance to finding workable solutions with Internet music providers may result in consumers, artists and the industry itself ultimately being harmed. Napster offers the opportunity to reach music fans in unprecedented, and as yet unimagined, ways. Word-of-mouth has always been critical to breaking our artists—now we have harnessed the power of the fastest-growing 'word-of-net' vehicle in existence. It is high time that the industry embraces a service that the public has so emphatically said they want."

Napster CEO Hank Barry adds, "We are very happy to be working with TVT. Moving this conversation from the courtroom to the boardroom helps us advance file-sharing as a benefit to artists and songwriters as well as music fans. This new arrangement is further evidence that the alliance we developed with Bertelsmann is the right direction for the industry to take."

To make friends with record labels, Napster says, it has developed a business model for a membership-based service that will provide Napster community members with "high-quality file-sharing that preserves the Napster experience," while at the same time providing payments to rights holders, including recording artists, songwriters, recording companies, and music publishers. Napster and Bertelsmann's eCommerce Group had previously announced a strategic alliance to further develop the Napster person-to-person file-sharing service.