On Feb 19th Napster put a $1 billion dollar offer on the negotiating table in hopes of settling the copyright infringement lawsuit brought against them last year by various major record labels. 

So far, one record label went on record in a press statement dismissing the offer as not being enough. "It is Napster's responsibility to come to the creative community with a legitimate business model and a system that protects our artists and copyrights," Universal Music Group says in a statement. "Nothing we have heard in the past and nothing we have heard today suggests they have yet been able to accomplish that task."

In a statement issued today by Hilary Rosen the president and CEO of The Recording Industry Association of America she accused Napster of playing P.R. games and called on the company to come to terms with the record industry. In the statement Rosen asked Napster, “If you really want business deals with the record companies, why hold a news conference instead of talking with the companies directly?” 

“We understand Napster’s desire to not have to cease its operations in order to comply with an injunction order from the court that would be limited to protecting only copyrighted works. Napster has had one year since the filing of this lawsuit, and it is unfortunate that Napster still has not developed a legitimate system that protects the interests of both consumers and creators. 

“To the management of Napster I say again: You claim you want to be legitimate, and negotiate licenses based on real business models. I urge you to act accordingly. Stop the infringements, stop the delay tactics in court, and redouble your efforts to build a legitimate system. Our member company plaintiffs have always said that they stand ready and willing to meet individually with you to discuss future licenses. This path would be more productive than trying to engage in business negotiations through the media.” Said Rosen in the statement issued today (Feb 20, 2001).

Rosen further asked Napster to address various issues during their planned news conference today, “You have said that Napster has had no impact on record sales but the RIAA released their year end numbers last week and sales are flat at a time when all other entertainment products are up. Don’t you think there has been a negative impact?”

For there part, Napster issued the terms of their offer to the press yesterday. Part of the offer included the company agreeing to pay the major record companies (BMG, Sony, Universal, and WEA) an annual payment of $30 million for the next five years in exchange for non-exclusive licenses to their music catalogs. 

The payments to each label will depend on the number of file transfers logged by Napster for their respective artists. 

For independent labels and artists, Napster is offering an additional $50 million for licenses to their music for the next five years. 

In addition to the proposed monetary payout to the record labels, Napster is also offering equity stakes in their company to the major record labels. 

Napster is developing new logging technology that will allow them to account for each file transfer made over their network. Additionally, last week Napster announced plans to implement new technology that will allow them to add a protective layer to mp3 files as they pass through the Napster file sharing system. Napster said that this new technology would aid in restricting unauthorized use. The protective layer will be used in conjunction with the new fee schedule that Napster plans to implement this summer. 

Preliminary details for the proposed fee schedule were also released yesterday. Napster outlined a two-tiered subscription model including rates for limited and unlimited file exchanges. The lowend-limited subscriptions will be offered at a monthly rate that will range between $2.95 and $4.95.  Unlimited exchange privileges will be offered to subscribers at monthly rates that could be as low as $5.95 or as high as $9.95 per month. 

If the record labels accept Napster’s offer, the money derived from these subscriptions will be used to pay the licensing fees outlined above. 

However, Congress may be the final decision maker. 

Utah Senator Orrin Hatch has recently expressed an interest in holding Congressional hearings on issues relating to copyrights and digital media exchange. Hatch who chairs the Senate Judiciary Committee may succeed in spearheading new legislation that could implement sweeping changes to current copyright law and the Digital Millennium Copyright Act. 

The Recording Industry Association of America is prepared for the possibility of Congressional action and has retained former Senate Majority Leader and 1996 Presidential Candidate Bob Dole to represent their interest to Congress. 
 

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