New Napster taking shape

[Keefe]

Napster inked a deal with MusicNet yesterday to distribute some of the songs from the music catalogs of Bertelsmann, EMI, and Warner Music. MusicNet was created in April by the three record labels and RealNetworks (RealNetworks CEO Rob Glaser is also CEO of MusicNet) and will go head-to-head against Duet, the online music subscription service formed by Sony and Vivendi Universal. Napster's deal with MusicNet should eventually give users access to "more than half of the mainstream music most often sought by consumers" when the service goes live sometime this summer. The move is a big one for Napster and for MusicNet, which hopes the service:

... will help consumers who are used to the experience of Napster to find, acquire and enjoy music in a manner that's legal, reliable, secure and supportive of artists and rights holders.
There's still a way to go yet before MusicNet becomes a viable reality, however. The new agreement states that users would have to join Napster's basic service (trading independent label and self-produced music) and then pay extra "to download a limited number of MusicNet songs." It's also not clear yet which security system the Napster service would use: its own (from Digital World Services that prevents burning to CDs or transfer to MP3 players) or MusicNet's (requiring periodic license renewal to keep listening to streaming and downloaded music). In addition, Napster has to formally give up the free-rein file-swapping that made it famous. EMI and Warner released separate announcements about the deal yesterday, with EMI claiming that its "conditions have not yet been met." RealNetworks and Napster CEOs don't see this as a problem, however, stating that getting to this point in the deal shows that the rest of the way can be achieved.

While the lure of access to three of the 5 major labels' catalogs (Napster isn't allowed to strike a deal with Duet, but MusicNet is trying to) may be powerful, but Napster's ever-stronger filtering technology has caused massive drop-offs in service use. Webnoize released numbers yesterday showing files shared per person over Napster at 21 in May (approximately 360 million files swapped in total) with 840,000 simultaneous users, down from 220 files swapped per person (approximately 2.79 billion files total) with 1.57 million simultaneous users in February. Napster would also have to overcome the fact that 87% of 3,000 Napster users said they would go to other swapping services before paying Napster's fees.