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Napster, Publishers Reach Preliminary Settlement

American songwriters and music publishers have reached preliminary agreement with the on-line file sharing service Napster to settle the class-action lawsuit currently pending in federal court in California. The agreement includes terms under which the songwriters and music publishers will license their music to Napster’s new membership-based service.

The announcement of the proposed settlement was made jointly by Edward P. Murphy, president and CEO of the National Music Publishers’ Association, Inc., Gary L. Churgin, president and CEO of The Harry Fox Agency, Inc., George David Weiss, president of The Songwriters’ Guild of America, Inc., and Napster president and CEO Konrad Hilbers. The deal is now subject to the approval of Chief Judge Marilyn Hall Patel of the United States District Court for the Northern District of California, by the plaintiffs in the class action, and by the NMPA Board of Directors.

The parties, who are optimistic that the agreement will be approved by the court, also thanked several key members of Congress for their support throughout the negotiations, including Senate Judiciary Committee Chairman Patrick Leahy (D-VT), Ranking Minority Member of the Senate Judiciary Committee Orrin Hatch (R-UT), and members of the House Judiciary Committee.

“We are very grateful for the encouragement provided by these legislators, all of whom helped to ensure that the parties kept talking productively until an agreement could be reached,” commented NMPA’s Murphy. “The good faith displayed by Napster while negotiations proceeded, and its agreement to pay fair compensation to creators and copyright owners for past and future uses of musical compositions on its service, led to a proposal that songwriters and music publishers can embrace. We are excited that songwriters will be able to reach new fans in the digital age through Napster.”

“We are pleased to have secured such an important element in creating our new service, one that will benefit songwriters, artists and consumers alike,” said Konrad Hilbers, CEO of Napster. “This landmark agreement marks a huge stepping stone toward building a digital music marketplace and we’re pleased to have played such a key role in moving the market forward.”

“You can mark this date on your calendar,” said SGA’s George David Weiss, composer of such classic musical standards as “Can’t Help Falling in Love,” “What A Wonderful World,” and “The Lion Sleeps Tonight.” “Today, the American music community and the on-line community together took a giant leap forward. This settlement, which only a few weeks ago seemed a near-impossibility, will hopefully lead to immediate and unprecedented growth in the licensed use of music on the Internet.”

“Today I am extremely pleased to celebrate the beginning of a new Napster,” announced Martin Bandier, Chairman and Chief Executive of EMI Music Publishing Company. “A Napster that, like its predecessor, will empower millions of people to share their passion for music. A Napster that, quite unlike its predecessor, will respect the rights of those who create that music. In partnership we will be able to tap the immense potential that the Internet offers in bringing music, legitimately, to a new and expanding audience.”

The terms agreed to by the parties include the payment by Napster to music creators and copyright owners of $26 million in settlement of damages forpast, unauthorized uses of music. Napster will also render an advance against future licensing royalties of $10 million, under a payment structure based on the Audio Home Recording Act. That legislation allocates to songwriters and music publishers royalties in a one-third to two-thirds ratio with copyright owners of sound recordings.

The Harry Fox Agency, Inc. the licensing subsidiary of NMPA, will license rights, collect and distribute royalties, and monitor compliance under the Agreement, on behalf of the copyright owners of musical compositions.

“Today’s announcement with Napster sets an important precedent for licensing music used on the Internet,” stated HFA’s CEO Gary Churgin. “It recognizes the exceptional value of the musical compositions owned and controlled by American songwriters and music publishers. The Harry Fox Agency is pleased to provide the new Napster with access to our electronic licensing system on behalf of our publisher principals.”

Napster intends to launch its new membership-based file sharing service later this year with recordings from hundreds of independent record labels. Napster will also separately offer music from the BMG, EMI and AOL/Time Warner labels through MusicNet.

Legendary songwriters Jerry Leiber and Mike Stoller, who wrote “Stand By Me,” “You Ain’t Nothin’ But A Hound Dog,” “On Broadway,” and “Poison Ivy,” as well as Frank Music Corp., are the representative plaintiffs in the action. The songwriters and publishers were represented in negotiations by Edward P. Murphy and Gary L. Churgin as well as trial counsel Carey R. Ramos of the law firm Paul Weiss Rifkind Wharton & Garrison, and NMPA/HFA counsel Charles J. Sanders. Napster was represented by Konrad Hilbers, COO Milton Olin, counsel Jonathan Schwartz, and VP for Corporate and Policy Development Manus Cooney.

Founded in May 1999, Napster, Inc. pioneered person-to-person file sharing and created one of the most frequently downloaded software applications in the history of the Internet. Napster provides music enthusiasts with an easy-to-use, high quality service for discovering new music and communicating their interests with other members of the Napster community. The service enables users to locate and share music files, send instant messages to other users, and create Hot List bookmarks. In October 2000, Napster partnered with Bertelsmann AG to develop a membership-based service. Edel Music and TVT Records joined the alliance in January 2001. In June 2001, Napster became a MusicNet partner and signed a landmark distribution deal with the Association of Independent Music (AIM) and the Independent Music Companies Association (IMPALA), two organizations that represent hundreds of European independent record labels.

The National Music Publishers’ Association, Inc., founded in 1917, works to protect and advance the interests of the music publishing industry. With over 800 members, NMPA represents the most important and influential music publishing firms throughout the United States. Established in 1927, The Harry Fox Agency, Inc., the licensing subsidiary of NMPA, provides an information source, clearing house and monitoring service for a large percentage of music manufactured, distributed, and transmitted electronically in the United States and around the world. HFA represents more than 27,000 music publisher principals, which in turn represent the interests of more than 150,000 songwriters.

The Songwriters’ Guild of America is the nation’s oldest and largest organization run exclusively by and for songwriters. SGA is an unincorporated, voluntary association representing approximately 5,000 songwriters throughout the United States and the estates of deceased SGA members. SGA is governed by a board composed entirely of songwriters. Among other functions, SGA provides music licensing, royalty collection and audit services for its writer members.

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