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Napster Logs On With Label-Backed MusicNet

File-sharing service Napster has inked an exclusive pact to license the digital music technology of MusicNet, a nascent online distribution company backed by three of the five major record labels.

However, the MusicNet founders – particularly Warner Music and EMI – stressed that none of their songs will come anywhere near Napster’s service until the file-swapper’s network includes iron-clad protection for their copyrights.

Under the terms of the deal, users of the secure, next-generation Napster service will have access, for an additional fee, to the MusicNet platform, and will be able to trade files with other Napsterites who have signed up for MusicNet.

Napster, which expects to have its new network up and running by the end of the summer, is also precluded from making any distribution deals with the other two majors, Universal and Sony, unless they join the MusicNet consortium.

The move represents a significant step forward for Napster, which has been suffocating under the weight of a court injunction demanding the removal of copyrighted songs from its network.

The injunction, which resulted from an ongoing suit filed by all five majors, has trimmed the average number of files shared by each Napster user by 90 percent between February and May, according to media research firm Webnoize.

Prior to the announcement, MusicNet partners Warner and EMI stressed that their participation in any deal with Napster is predicated on the development of suitable built-in safeguards for rights holders.

“Our content will not be available to Napster as part of the MusicNet service until we are reasonably satisfied that Napster is operating in a legal, non-infringing manner and has successfully deployed a technology that accurately tracks the identity of files on the service,” said Warner in a statement.

The third partner, BMG Entertainment, declined to comment on the pact. BMG parent Bertelsmann last fall formed a partnership with Napster, investing $60 million in the netco and reserving the right to take an equity stake.

Rob Glaser, head of MusicNet technology partner Real Networks and interim CEO of MusicNet, acknowledged the hurdles Napster would have to clear, but noted that a dialogue with the former industry pariah must start somewhere.

“You’ve got to look at this as a stepwise process,” Glaser said in a press conference announcing the deal. “This is the announcement of a license for a technology platform; it’s a step forward in the process.”

MusicNet, established in April by Real and the three labels, expects to offer subscription-based music distribution to third parties on a business-to-business basis. The company’s first two clients were RealNetworks and Warner Music parent AOL Time Warner, which will offer downloads through America Online.

The remaining two labels, Universal and Sony, have cooked up a digital subscription service of their own. Called Duet, the service is also seen opening for business before autumn, but will initially offer only streamed music.

Duet’s first retail client was online portal Yahoo!. Like MusicNet, the company has indicated that it wouldn’t be averse to working with Napster, once it had a copyright-friendly system in place.

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