CEO Hank Barry said Tuesday that the 38 million Napster users will soon have to pay "monthly dues" of, perhaps, $4.95 to access each other's hard drives; it is the result of a deal Napster reached with one of five record companies suing it for copyright infringement.
The "new Napster" may also include a link to CDNow (cdnw) and could be used to swap other types of content, including video, Barry said during a marathon media conference.
Barry also indicated there will still be free downloads of MP3 files available through the Napster file-sharing tool, but they will be more for "promotional purposes."
"The Napster service will be the Napster service," Barry tried to assure his community of users during a media conference in the hours following the deal's announcement. "This is about file sharing, file sharing, file sharing."
"There will still be file sharing, people will still be opening up their hard drives," Barry said.
Napster Inc. will also likely have its first commercial affiliation with a large record retailer, CDNow, which Bertelsmann AG bought last year. The Napster site may have a link to CDNow on it, Barry indicated.
The changes could come anytime soon, with the CDNow (cdnw) affiliation likely to be the first to surface, Barry indicated.
As a result of the deal, Bertelsmann will own a piece of Napster and will loan money to the company to enact the changes to the file-swapping service, Bertelsmann officials said. It will also make its catalog of songs available to Napster users.
The record company is the first of the five suing Napster to reach an accord, promising to settle its part of the lawsuit once Napster does its makeover.
Bertelsmann executives were inviting the remaining four companies to join the alliance.
"Somebody had to step up to the plate and take a leadership role," said Andreas Schmidt, president and CEO of Bertelsmann's e-commerce group, which will partner with Napster.
"As of today, the industry has not embraced, really, the usage of file sharing. We now, together with Napster, are going to change all that."
Time Warner Inc. (twx) division Warner Music, one of the four remaining plaintiffs in the suit, did not indicate in a statement it released whether it would be joining the alliance.
"Today's Napster/BMG announcement seems to be a positive step for the industry," the company said in a statement. "It demonstrates ... that the industry is moving towards adoption of a subscription model."
The Recording Industry Association of America, which is representing the remaining record companies suing Napster, was equally coy.
"It is important for everyone -- Napster included -- that the ground rules of the Internet music business be established once and for all," CEO Hilary B. Rosen said in a prepared statement. "The U.S. recording industry is committed to bringing music online to its fans and hopefully today's development is just one more positive step in that direction."
A source in the RIAA familiar with the development was "chuckling" about several ironies, including that Napster has been arguing what it's been doing was legal. But now those same arguments could be used against Napster by other file-swapping sites like Gnutella or Freenet.
"There are more twists in this case that any movie," the source said.
Some industry experts were already predicting which of the record companies still suing Napster would be the first to join the alliance.
Rick Dube of music-watchers Webnoize said it's likely that Universal and Sony (sne) won't immediately jump on board. The two companies are the "most conservative and act individually," he said.
But EMI (emipy) is the most open-minded of the remaining plaintiffs, and Dube said he wouldn't be surprised if EMI is already in settlement talks with Napster.