While a House committee listened to testimony about the benefits of free music to the recording industry, Napster inked a deal with a New York hip-hop label Thursday to provide a service that it hopes will create revenue streams from free music distribution.

Further complicating the debate over the merits of file-trading applications like Napster, the executive director of the Digital Media Association, Jonathan Potter, presented a study to the House Judiciary Subcommittee on Intellectual Property, which concludes that streaming and downloading music on the Internet encourages CD sales.

Napster's Cousins Go Legit
Napster: Music's Friend or Foe?
Hear how MP3 Rocks the Web

The study, compiled by the Yankelovich Partners, surveyed 16,000 Americans between the ages of 13 and 39 who say they listen to more than 10 hours of music a week and have spent at least $25 on music in the past six months.

Among the findings: 59 percent of those who said they heard a certain piece of music for the first time while online ended up purchasing that music as a CD.

"The report says there are a lot of artists and record labels who aren't getting played on radio because they are in the wrong genre," Potter said. "The corporate radio guys are just doing standard radio. So people are looking for music on the Web and when they find music they like, those people are going out to purchase the music."

The report also found that nearly 60 percent of those surveyed would buy the music if they could buy it then and there.

As technology evolves, business models will follow," Potter said in a written statement. "The legal and business rules that once outlined the playing field need to be flexible enough to include this new medium of consumer-driven digital media alternatives, especially when the alternatives clearly benefit the music industry as a whole."

Napster hopes its deal with independent music label 75 Ark will encourage that kind of e-commerce model while creating "substantial non-infringing uses" for the file-trading application. Creating those users is a necessary component to its legal defense against the Recording Industry Association of America, which has asked a federal judge to shut the service down.

The deals calls for the label -– which is home to acts such as The Coup and the Anti Pop Consortium -– to begin posting MP3 files once a month on the Napster homepage, which is not a part of the file-trading network. According to Erik Gilbert, the label's vice president and general manager, the two companies are working on a plan that also would provide links to the music label's homepage so that listeners could purchase the CDs of music they like.

"I saw what was happening with Napster as well as how many people are using the service and it seemed a great thing to get involved with," Gilbert said. "This technology isn't something you can fight, so we figured why not join it and use it to market our artists."

Napster claims to have a user base of 10 million people. The partnership is a first for Napster's newly upgraded New Artist Program, which allows musicians to voluntarily share their music with users.

"This kind of arrangement is not going to take away from CD sales," Gilbert said. "This is going to add to the value of the music and make it easier for fans to find music they like."