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Napster seeks new business via Liquid Audio deal

A sign it accepts the RIAA will win?

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Napster yesterday tacitly admitted it will have to change the way it does business by licensing online music veteran Liquid Audio's rights management technology.

It's also a sign that Napster may be anticipating that tomorrow's court hearing in its battle with the Recording Industry Association of America (RIAA) will go against it.

The move can also be seen as a realisation that if it's to continue in business and to compete effectively with newly formed rivals, such as AppleSoup, the company needs to work with the music industry, and that means incorporating copyright protection into its software.

AppleSoup, which was launched last week by one of Napster's founders and one of the MP3 sharing specialist's early investors, is planning to launch a music sharing service next month that will allow copyright owners to govern how their tracks can be distributed. The company hopes that will allay the music industry's piracy fears and encourage labels actively to use the technology to promote their bands and artists' work.

Napster's deal with Liquid Audio centres on the latter's rights management system, which "allows a linkback to artists so they can get paid", according to Liquid Audio's president and CEO, Gerry Kearby, cited by Reuters.

That suggests Napster's thinking is focusing on evolving its service, which is really little more than software in search of an application at the moment, into a kind of Internet answer to radio. So even though songs may be grabbed and kept by someone who doesn't have a right to do so - the Net equivalent of taping a single off the radio - the artist who performed the song and the song's writer still get a piece of the action.

Kearby also said Napster has licensed Liquid Audio's 'Genuine MP3' technology, which embeds recording ownership data into a standard MP3 file, and will allow Napster to track each file through the transaction process.

Curiously, Napster CEO Hank Barry said Liquid Audio's technology would not be used in Napster's current system. Instead, it will help the company provide what Barry called "consulting services" and look at MP3 in "new ways". Barry came to Napster from the company's main financier, so it's clear he's beginning to look beyond the software that bears the company's name to find ways to make money.

And if the RIAA gets its wish, and Napster's service is shut down by the court, Barry will have to. The "consulting" aspect suggests Napster will expand by providing its technology (both its own and licensed code) to companies wishing to move into the content sharing business. It's a canny move, and one that capitalises upon Napster's expertise rather than the service that has got into such trouble. ®

Related Story

RIAA vs Napster: case opens tomorrow

Check out The Register's complete coverage of the Napster controversy

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