Online file-sharing service Napster Inc. has reached a preliminary agreement with the National Music Publishers Association Inc. to settle the latters lawsuit against it.
The agreement, announced this week, calls for Napster to pay music creators and copyright owners $26 million in settlement of damages for past, unauthorized uses of music.
Napster will also pay a $10 million advance against future licensing royalties to songwriters and music publishers, under a payment structure based on the Audio Home Recording Act. The law grants songwriters and music publishers one-third to two-thirds the royalties of copyright owners.
The NMPAs licensing subsidiary, The Harry Fox Agency Inc., will license rights, collect and distribute royalties, and monitor compliance under the agreement, on behalf of the copyright owners of musical compositions.
The Harry Fox Agencys CEO Gary Churgin said the agreement set a precedent for licensing music over the Internet.
"It recognizes the exceptional value of the musical compositions owned and controlled by American songwriters and music publishers," Churgin said, in a statement.
Napster officials said their company plans to launch its new membership-based file sharing service by the end of this year with recordings from several hundred independent record labels. It will also separately offer music from the BMG, EMI and AOL/Time Warner labels through MusicNet, officials said MusicNet is a joint venture of RealNetworks, AOL/Time Warner, Bertelsmann AG and EMI Group plc that says it will offer a digital music subscription platform featuring on-demand downloads.
Napster officials did not comment on how much their new service will cost to subscribe to.
"This landmark agreement marks a huge stepping stone toward building a digital music marketplace, and were pleased to have played such a key role in moving the market forward," said Napster CEO Konrad Hilbers, in a statement.
The deal must still be approved by Chief Judge Marilyn Hall Patel of the United States District Court for the Northern District of California; by the plaintiffs in the class action, which includes the music publishers represented by the NMPA; and by the NMPA board of directors.