Napster’s Software Includes CDNow Link
Napster Inc. released a new version of its software Thursday that includes an e-commerce link to Bertelsmann-backed CDNow, marking the first example of how the alliance between the media giant and the controversial music-swapping firm will make money.
The link to CDNow will be prominently placed on the top of the Napster application and connect users to a Web page where they can search the online retailer’s collection of more than 500,000 albums, movies and other entertainment products.
Officials with both companies declined to discuss financial details of the deal or say what sort of a cut Napster will get for driving customers to CDNow’s site.
The deal is key for Napster not just financially but possibly legally. The software company, which has long insisted that its service drives CD sales, could use the tie to CDNow to track users’ shopping habits and gather proof to support its claim.
How detailed this data will be is still unclear.
“We will be sharing some aggregate results with Napster, but we are two different companies with two different privacy policies,” said CDNow President and Chief Executive Mike Krupit, who said Napster and CDNow had been in talks for several weeks.
In October, Bertelsmann shocked the music industry when it formed an alliance with Napster. The major record labels are embroiled in a high-profile copyright lawsuit against the software firm.
Under that alliance, the German entertainment conglomerate said it would drop its suit if Napster transformed itself into a secure, fee-charging service that pays royalties. The software firm also must convince the other four major labels--EMI Recorded Music, Sony Music Group, Universal Music Group and Warner Music Group--to jump aboard.
Considering the ongoing legal battles, some analysts noted the irony that Napster users now will be able to use the e-commerce link to buy music that they can then easily post and freely distribute on the Napster service.
“It’s like pouring gasoline on the fire,” said P.J. McNealy, a senior industry analyst with research firm Gartner.
Although Napster recently won public support from Edel Music, a leading independent music label in Germany, the bulk of the record industry has refused to warm up to overtures by the Redwood City, Calif., start-up.
Executives with Universal, the world’s largest record company, said this week that they were unlikely to pursue a settlement with Napster before a U.S. court decides whether the service violates copyright law.
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Reuters was used in compiling this report.