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The ongoing Napster battle reached a critical juncture on February 20th when the popular online file-swapping service offered to pay record labels a licensing fee of $200 million per year over the next five years. Napster offered $150 million per year to five major labels involved in lawsuits against the company (Bertelsmann Ecommerce, Universal, Sony, Warner Music, and EMI Records) and another $50 million to smaller music publishers. This followed a ruling by the 9th U.S. Circuit Court of Appeals upholding a lower court's injunction from July 2000, which ordered Napster to halt users' trading of copyrighted music.
The Appeals Court ruling will make it impossible for the company to continue offering music for free. To adhere to that ruling, Napster CEO Hank Barry told reporters he would start charging users a fee by summer. Basic service with limited transfers would cost between $2.95 and $4.95 per month, while unlimited access would run from $5.95 to $9.95. Recording companies have expressed much concern over how Napster would compensate labels and musicians for the downloaded music. Under its new service, Napster would limit recording quality to 128Kbps and require extra fees for those who choose to burn the files to compact disks or export them to MP3 devices.
The popularity of Napster's file-sharing software has left movie-makers and TV networks worried that their properties could be the next targets, costing them millions of dollars. The publishing industry has faced similar concerns regarding their own content with the advent of online publishing. Execs at the Western Cable Show in Los Angeles met in December to discuss this very issue. Jonathan Taplin, President and CEO of the broadband entertainment file provider Intertainer, urged attendees not to worry about "video Napsterization," citing the immense download times required to download a movie, as opposed to the mere seconds needed for most songs.
Not all of Taplin's fellow panelists agreed, however. Richard Hajdu, V.P. of broadcast hardware and software manufacturer Chyron, said he foresees users downloading DVDs with today's compression technology. As such, his firm provides security code for streaming media over the Internet.