Napster Could Be on Verge of Major Licensing Deal

Taking another key step toward legitimacy, the embattled Napster Inc. online song-swapping service is poised to strike a sweeping licensing deal with the agency representing most U.S. music publishers, sources said.

The company could announce as early as today an agreement with the Harry Fox Agency, an arm of the National Music Publishers Assn. The licensing deal would clear the way for Napster to launch a new, fee-based service that compensates artists, songwriters and labels when their works are copied.

A spokeswoman for Napster declined to comment on the pending deal, and officials at the Harry Fox Agency could not be reached. Terms of the deal were not available, nor was there any indication whether the deal would settle the publishers’ copyright-infringement claims.

The agreement won’t end the company’s legal troubles, however, or lift the threat of massive financial penalties for violating the record industry’s copyrights. Because consumers copied billions of songs through Napster’s controversial free service, by some analysts’ estimates, Napster could be wiped out if it loses the industry’s copyright-infringement lawsuit.

Napster suspended its free service in early July on the order of U.S. District Judge Marilyn Hall Patel, who ruled that Napster was not doing enough to prevent users from violating the publishers’ and record labels’ copyrights. The publishers and the labels both hold copyrights covering the Internet distribution of recorded music.

The shutdown has cut Napster’s once-fervent following, as consumers eager for free music have shifted to other online venues. Yet the company’s Web site and service still drew almost 10 million users in August, according to Jupiter Media Metrix, a research firm.

The publishers have inked few licensing deals for online music services, in part because they’ve sought a larger piece of the financial pie than they’ve gotten from CD sales. Even the two services jointly owned by the major record labels--each of which is an affiliate of a leading music publisher--have been unable to secure the publishing licenses to the music they want to distribute.

Napster already has deals with some of the leading labels, but those won’t take effect until the company replaces the free service with one that prohibits unauthorized copying. Company officials had promised to launch the new service by the end of the summer, but on Friday the company e-mailed users to say it had been pushed back until the fall.

Initially, the new Napster service is expected to offer music only from independent labels, and the songs could not be moved to portable players or recorded onto CDs. The new service could eventually include songs from BMG Entertainment, Warner Music Group, EMI and Zomba, provided it satisfies the labels’ concerns about security and accountability.