We can make Napster pay – Bertelsmann

Touts subs service to major labels

By Tony Smith, 28th November 2000

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Bertelsmann has figured out how it's going to make Napster's MP3 sharing service not only legitimate but work to the benefit of the music industry, the company claimed yesterday.

Interviewed by Reuters, Andreas Schmidt, head of Bertelsmann E-commerce Group (BEG) and the guy who brokered the deal with Napster, said his company has a business model and is now trying to sell it to the world's biggest record companies.

All of whom are, of course, suing Napster. As was Bertelsmann's Music Group (BMG), until Schmidt's BEG side-stepped it to cut a deal with the MP3 sharing company. Napster agreed to build a subscription-based service in return for an end to Bertelsmann's involvement in the contributory copyright infringement suit brought against it.

"It's all worked out. We have a model," said Schmidt. "We are bringing it forward now to the other parties... hearing their concerns, getting their input."

The discussions will be interesting, to say the least. Universal, for one, has voiced its dissatisfaction with Bertelsmann's manoeuvrings, which it believes undermines the major labels' joint efforts to protect their business from mass music piracy made easy by Napster.

Sony and Warner have been more cautious, and EMI particularly so since it's in exploratory merger talks with BMG.

Whatever, Schmidt is convinced that they will all come around to his way of thinking eventually. "I am optimistic that in the end all of them will join," he said.

Certainly, Bertelsmann needs most of them to join it if the commercial service is to work. To do that, it needs to have content users will be willing to pay a membership fee for, and that means getting EMI, Sony and co. on board. The acquisition of EMI is a key part of that plan to build critical mass behind a legitimised Napster. As we expect will Bertelsmann's option to take a stake in the MP3 company and its rumoured interest in MP3 tracking and copy-protecting specialist Liquid Audio.

Schmidt clearly believes that the economic argument will win the day, and that that doesn't depend on winning over all of Napster's existing users. BEG reckons that Napster's subscription service will succeed even if only 30 per cent of the company's 40-odd million users pay up. ®