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MP3.com seeks to placate Universal

$250 million in damages will be hard to swallow otherwise

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MP3.com CEO Michael Robertson yesterday said the online music company will continue to talk to Universal in the hope of reaching a settlement to the two firms' bitter copyright dispute.

He needs to. Last week's judgement that the company must pay between $118 million and $250 million in damages could seriously harm MP3.com's finances.

The company has already put aside $150 million to cover legal costs arising from its failure to prevail in the copyright violation suit brought against it by the Recording Industry Association of America earlier this year. In addition to costs, it has had to pay out around $80 million to Sony, EMI, BMG and Warner in both out-of-court damages and music licensing fees. All of that should be covered by the $150 million, but there's no way the Universal payment can be, even if MP3.com's appeal to get the damages reduced is successful.

The company's revenues last quarter, its second of fiscal 2000, hit $20.3 million. It posted a $5.2 million operating loss for the period. Under normal trading, you'd expect the loss to narrow some and the revenue to grow, but we doubt either will help the company much to offset the extra cash it will need to pay Universal. MP3.com's final loss for Q2 hit $177.1 million, once the lawsuit set-aside was taken into account.

Since MP3.com is losing money as it is, the company may have a tough time persuading its backers to maintain that level of debt. Its three-figure revenue growth rate should help a little. So will the now-humbled company's desire to work more closely with the major labels.

Robertson said in a statement that the ruling against it hasn't affected the company's day-to-day operation, but then it wouldn't. Its core customers aren't the sort to cease doing business with MP3.com just because the company's wrists were slapped over a copyright violation. ®

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