Napster to charge a fee for MP3s

DAVOS, Switzerland -- Napster, the controversial but popular Internet music file-sharing system, is to introduce a membership fee for users from later this year.

The announcement was made by the head of Bertelsmann AG, Napster's parent company, at the World Economic Forum, being held in Davos, Switzerland, on Monday.

"We have an idea of the price range but it is too early to publicise it," Thomas Middelhoff, the chief executive of Bertelsmann, said.

"I'm convinced we can introduce in June or July of this year a subscription model, with a real working digital rights management system,'' he added.

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No one from Bertelsmann or Napster could say what the price for the paid service was going to be, but Middelhoff said he was confident that many users of the Napster software would be happy to pay for music.

Napster already has 56 million clients, with 1.6 million exchanging digital music at any time.

A survey carried out Bertelsmann showed that about 80 percent of Napster's current users would be willing to pay about $15 a month (around £10) for a subscription to download music files.

But Napster Chief Executive Hank Barry later told Reuters he was surprised about the Bertelsmann announcements.

"We haven't decided on a time schedule at all," he said.

Napster allows people to share music without paying copyright fees, a development that terrifies many industry chiefs. Under the same principle, people could share videos, movies and even books in digital form.

In a separate interview, Bertelsmann's e-commerce group chief executive, Andreas Schmidt, said other major music publishers could be joining the Bertelsmann-Napster initiative within the next two weeks.

"We're getting a very positive reaction,'' Schmidt said. ``We are keeping the opportunity open for their input and to join forces with us in Napster, and I'm very hopeful that in the next couple of weeks we will get some results.''

It was revealed last November that Bertelsmann was on the verge of announcing how it would work with Napster to make its back catalogue of music releases available online.

Several mainstream record companies, including Bertelsmann, Sony and Universal, launched legal action against Napster, alleging that the web service facilitates wide scale copyright infringement.

But Bertelsmann broke off its copyright infringement lawsuit against Napster as part of a joint agreement to build a subscription-based site that would guarantee payments to artists.

Middelhoff said the company decided to work with Napster, rather than fight it, because the Internet was changing the music industry's business models.

"The music industry was not ready to handle this new consumer behaviour. The publishers threatened to sue, but you can't sue 100 million customers, because at the same time these customers are heavy buyers of music. They love music.

"We decided to speak to the company (Napster) and develop an legitimate business model.''

Barry said that Napster, although it helped people to share music, had not led to lower record sales: "Sales are actually up by $1 billion."

At Davos, corporate leaders on a panel at the World Economic Forum expressed concern over the growth of the phenomenon.

The head of Sony said it represented a "danger" to legitimate companies. Nobuyuki Idei, chief executive of Sony, added: "The Internet is a kind of power shift. Now the consumer has more power than the company."

Jean-Marie Messier, head of Vivendi, which last June acquired the Universal movie and music studios, said Napster's key to success was "community and free access."

The Associated Press & Reuters contributed to this report.

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