Napster's deal with music giant Bertelsmann raises questions

<br>SAN FRANCISCO (AP) _ Napster's deal with one of five record labels suing it for copyright infringement could help the music-swapping service wriggle out of its legal straitjacket, but it remains

Wednesday, November 1st 2000, 12:00 am

By: News On 6

SAN FRANCISCO (AP) _ Napster's deal with one of five record labels suing it for copyright infringement could help the music-swapping service wriggle out of its legal straitjacket, but it remains unclear how the new partnership will work.

Also uncertain is whether Napster can turn a revolutionary free service into a profitable endeavor without alienating its 38 million users.

Under a deal announced Tuesday, Bertelsmann's BMG music division said it was teaming with the Internet service to develop a secure, membership-based music distribution system that will guarantee payments to artists.

Left unresolved is how much a membership service would cost and how Napster would begin to charge users for something it's been giving away.

And ``how are they going to take the existing Napster environment and make it secure?'' asked Ron van Zuylen, a California computer engineer and Napster user. ``A peer-to-peer environment, just by design, is not secure. I'm not very confident that this will work.''

Under the deal, Napster gains the BMG catalog, including artists such as Christina Aguilera and Carlos Santana. But it's likely those songs will contain technology to prevent them from being swapped for free.

``The artists will get paid. The label will get paid. Napster will get paid,'' said Talal Shamoon, of InterTrust Technologies Inc., the Santa Clara, Calif.-based company that provides the security technology for BMG. ``What you have on Napster right now is akin to chaos.''

A clear upside of the deal for Napster is that there will be one less record company in the industry's lawsuit. On Tuesday, Bertelsmann said BMG will withdraw from the suit once Napster launches a membership-based service.

Napster is awaiting a federal appeals court ruling on whether it can continue operating pending trial in a lawsuit filed by the recording industry.

Bertelsmann also bought a small stake in the Redwood City-based company.

It's far from certain that the four other major music companies will join the new endeavor, as Bertelsmann and Napster hope. Without the participation of Sony, Warner, EMI and Universal, the service would not likely become an accepted standard.

The recording industry has struggled to find a formula for music distribution that protects royalties; no workable pay-for-play scheme has yet emerged.

To protect copyrighted music, InterTrust could create downloads that become unplayable after an expiration date. Or, if Napster users want their songs from BMG to last longer than a month or a year, they may have to pay extra.

But securing music may not be as simple as the industry hopes. Researchers at Princeton University, Xerox PARC and Rice University recently said they were able to remove invisible security placed on music files.

Any reasonably sophisticated computer pirate could do the same, the researchers said.

Napster CEO Hank Barry wouldn't confirm or deny the possibility of the addition of security measures to the service. He said the word ``secure'' as discussed in Tuesday's announcement had to do with accounting.

``We're going to have some very transparent accounting to monitor usage,'' Barry told The Associated Press. ``We're going to have a new business model; we're going to have the same service.''

Barry will need to keep the confidence of users who swarmed the message boards and chat rooms Tuesday after learning that their Napster would become, in part, the industry's Napster.

``How much are you going to charge us? With 35 million members, almost anything you charge monthly is going to be a mighty income for the company,'' wrote ``Riomel'' on a Napster message board. ``You deserve it. But make it light on us.''