BMG, Napster deal damned by Universal

Bertelsmann Music Group's attempt to resolve the Napster controversy to the music majors' advantage without killing the technology appears to have backfired.

The MP3 sharing service said on Tuesday it had agreed with BMG to implement a subscription-based service in return for BMG's withdrawal from the legal action brought against it.

On its part, BMG said it would seek to persuade its fellow major recording companies to join it, if Napster makes good its promise.

However, the response so far has not been good. Universal, for one, is sticking to its guns - it wants Napster shut down. And that's it. Universal's hard-line stance mirrors its unwillingness to compromise this summer with MP3.com, which has also been on the receiving end of music industry legal action.

MP3.com was able to settle with all the other major labels - Sony, EMI, Warner and BMG - and that suggests that these companies could well side with BMG on the Napster issue. After all, they want to reach as wide an audience as possible for their product, and an industry-friendly Napster would provide a major channel to potential customers.

Universal is clearly sceptical of that plan. One unnamed executive told the Financial Times that BMG's deal is no more than a "PR announcement without any substance".

Possibly, but BMG reacted by claiming it would revive Napster if the company is indeed shut down, as the music industry's trade organisation, the Recording Industry Association of America, gets its way.

And don't forget, Universal is testing its own Napster-style service, so may well see the original music sharing system, particularly if it's allied with a rival music company, as a major competitor to its own service. Clearly, preventing copyright violation isn't Universal's only consideration here.

Clearly BMG, for one, sees Napster and Napster-style services as a powerful music marketing tool, appreciates the company has some impressive technology behind it, and wants that technology for its own, either directly or by working with Napster.

It also has to work with the other labels. As one industry insider put it: "[BMG] have to work deal with two or three of us to make this work." True - a subscription-based service containing only BMG tracks wouldn't be much use to fans of bands not aligned to that company.

Other labels have broadly welcomed BMG's plan, but their caution is clear. The onus is very much on Napster to deliver its subscription service, implement proper anti-theft measures and, presumably, limit or kill its free service.

Equally, the music industry has to go one way or the other, or risk a split between its major players and an end to their united front on the issue of copyright protection in the digital age. ®

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