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Could a David-Goliath deal save Napster now?

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CIOL Bureau
New Update

Andrew Quinn

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SAN FRANCISCO: As Internet upstart Napster Inc. and America's recording

titans slug out their copyright battle in San Francisco, pressure may be

building for some kind of a deal.

David, meet Goliath.

With a new technology, a cocky image and a devoted following of millions of

users, Napster has been at the forefront of a revolution in music distribution,

allowing fans to download their favorite songs into their home computers

virtually for free.

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It's a revolution that has shaken the $14 billion-per-year recording industry

to its core. Nevertheless, Napster is hoping to duck out of the battle to death

in favor of a deal with record companies that gives both a piece of a bigger

pie.

Otherwise Napster, in the words of its own president, might wind up taking

the rock-and-roll road - "living fast, dying young and leaving a beautiful

corpse."

Settlement did not appear to be on the menu on Monday, when lawyers for both

sides met in San Francisco to argue their case before a federal appeals court

panel mulling a decision which could pull the plug on the service.

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But industry analysts said a deal could be an option as the two sides hash

out what looks like an increasingly complicated copyright protection case.

"There certainly may be a situation where they might talk settlement,

but I don't know if the ante is high enough at this point," said attorney

Fred Colen, a Pittsburgh-based lawyer who represented motion picture companies

and television networks in a copyright suit against Canadian Web site iCraveTV.

"The dollars may not be right, or the industry may not be ready yet. But

this industry has settled before."

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Offers fall on deaf ears



That's a solution which would clearly please Napster, which despite its renegade
image has been seeking to cosy up to the record companies ever since it became

clear the Recording Industry Association of America (RIAA) was going to press

its case in court.

Napster's CEO and president Hank Barry on Monday repeated an earlier offer to

charge service users a monthly fee for downloading their music - a proposition

he said could earn the RIAA's members up to $500 million in the first year.

He said, however, that his revenue-sharing proposition had fallen on deaf

ears. "Every one of these proposals has been rejected, and the record

companies have made no counterproposals," he said in a statement.

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The problem may simply be that Napster has not yet come up with a proposition

that is both technically viable and financially attractive, industry experts

said.

"I see this all as a defence posture on Napster's side," said

Emusic.com president and CEO Gene Hoffman. Emusic is another online music

provider. "The record companies do not have much of an incentive to settle

when it is not proven at all that Napster can make a dime off their customer

base."

RIAA president and chief executive officer Hilary Rosen on Monday denied that

the record companies were opposed to any idea of settlement.

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"There'll be a lot of speculation of a settlement between now and when a

decision is made. Napster has a lot of opportunity to make a business

proposition that makes sense. It's not fair for Napster to say we're not

trying," Rosen said after Monday's court hearing in San Francisco.

Continued...

Court train unstoppable



RIAA lawyer Cary Sherman said, "If the best of Napster could be harnessed
for legitimate use," it would be good for creators and copyright owners.

But he added, "I don't think anything will stop this court train."

The RIAA represents the major record companies, including Seagram Co. Ltd.'s

Universal Music, Bertelsmann AG's BMG, Sony Corp.'s Sony Music, Time Warner

Inc.'s Warner Music Group and EMI Group Plc.

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Industry analysts said that Napster, like other Internet-based music

downloading services, will almost certainly have to come to an understanding

with the recording industry if it wants to survive.

While legal fees are hitting Napster hard, the service is sweating after a

judge ruled last month that its online music rival MP3.com had willfully

violated copyrights, and awarded Seagram's Universal Music damages that could

range from $118 million to $250 million.

But while dark clouds gather, Napster boosters, who have tracked the service

from a 19-year-old's dormitory room to a global phenomenon with some 30 million

users, the quick thinking symbolized by the company's logo - a wily fox - may

yet save it.

"They may win in the short run and win in the long run legally against

us," Napster's Barry said in a recent speech at the University of Michigan,

in which he said Napster's fate would then be that of Achilles - a young,

glorious death.

"We'd prefer to find our model in the original hacker Odysseus, who

always found a clever way around his problems and led a long and wonderful

life."

(C) Reuters Limited 2000.

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