Napster Unveils New Idea for Service

Tuesday, October 3rd 2000, 12:00 am

By: News On 6

SAN FRANCISCO (AP) â€” With the fate of Napster Inc. awaiting a decision by a federal appeals court, the head of the company has a new idea for saving the Internet music sharing service: Get people to pay for the privilege so the artists can get a cut.

The music industry sued to shut down Napster, claiming it contributes to copyright infringement by allowing its purported 32 million users to download music directly from each others' computers. The recording industry considers the case pivotal in its battle against online piracy.

After arguments Monday before the 9th U.S. Circuit Court of Appeals, Napster CEO Hank Barry floated the possibility of setting aside his company's differences with record labels by coming up with a business plan for monthly fees to download music. Artists would be compensated from the proceeds.

``Whether $4.95 a month or $1.99, the whole structure of this thing is trying to compensate artists,'' Barry said. ``We're willing to pay very substantial amounts to the artists. With a very conservative estimate, the first-year payments to the artists would be in the neighborhood of a half a billion dollars.''

Napster, started in a Northeastern University dorm room last year, pioneered the concept known as peer-to-peer computing, in which people share files from their own computers rather than a central server. In Napster's case, users can download music from each other that is stored in the MP3 format.

Some of Napster's users were online in the company's chat rooms Monday bemoaning the prospect of paying for something they were used to getting for free.

``I might pay. If I had to I probably would,'' said Jake Becker of St. Clairsville, Ohio, told The Associated Press. ``I'm 16 and I don't work yet. I'm looking for a job so I can get my car and I don't need to be spending my money on Napster.''

During Monday's hearing, Judge Robert Beezer, a member of the three-judge panel examining a lower court judge's preliminary injunction against Napster, told a recording industry lawyer that demands that Napster scale back or shut down might be a tall order considering the nebulous nature of the Internet.

``How are they supposed to have knowledge of what comes off of some kid's computer in Hackensack, N.J., to a user in Guam?'' Beezer said.

The lawyer, Russell Frackman, representing the Recording Industry Association of America, said the answer might lie in having Napster redesign its popular service so as not to transmit copyright files.

The appellate judges adjourned without reaching a decision, which could come at any time.

Through pointed questioning, the judges appeared to suggest that U.S. District Court Judge Marilyn Hall Patel's injunction in July shutting down Napster could prohibit legal uses of the music-sharing software, such as the trading of noncopyrighted music. The 9th Circuit stayed that order hours before it was to take effect in July.

Napster's lead attorney, David Boies, who prosecuted the government's antitrust case against Microsoft Corp., argued that Napster is merely an Internet service provider and should not be held responsible for all the activities of its users.

Crucial to Napster's case is a 1984 Supreme Court decision that allowed Sony to continue manufacturing VCRs that can duplicate copyrighted materials. Attorneys for the company claim that ruling also covers Napster's service.

But Frackman argued that Napster was specifically created to aid users in infringing copyrights. He said the music industry is not ``trying to stop the Internet'' â€” but simply trying to stop Napster from allowing pirated music to be swapped.

Barry said the company has been in discussion with individual record labels about a possible settlement, but no deals have been reached.