Music labels are not taking Napster's bait

Record labels say Napster needs a compelling business model - $1bn is just not enough

Napster's offer to the music industry of a $1bn (£600m) payment over five years met with a cool reception today.

Industry experts had predicted that the offer would not come close to covering the amount that Sony, Universal, EMI, Warner and BMG believe they are owed by Napster for the copyright violation caused by its users copying songs from each other for free.

Now the record labels have confirmed that view. Universal Music was the first of the Big Five labels to respond to Napster's offer. "It is Napster's responsibility to come to the creative community with a legitimate business model and a system that protects our artists and copyrights," the company said in a statement. "Nothing we have heard in the past and nothing we have heard today suggests they have yet been able to accomplish that task, it added.

EMI took a more conciliatory approach, and suggested that it might be prepared to reach agreement with Napster. "If there is a compelling and convincing business model then we could be interested in participating," said a spokesman.

Officials at Sony were unable to comment on the proposed deal.

Analysts had already suggested that the record labels were unlikely to accept Napster's offer, because it would mean handing over the distribution of their music over the Internet -- something that could be extremely lucrative in the future. "Napster is basically trying to purchase the copyrights and resell them," Zona Research analyst Susan Billheimer told the Associated Press.

Paul Myers, chief executive of Wippit, a company that is developing a Napster-like service that will let users swap MP3 files on a royalty basis, dismissed the offer as no more than a PR tactic.

"It's just a headline grabber," said Myers. "The labels would be crazy to accept, because this figure hasn't been properly calculated and doesn't come close to the compensation the industry deserves". Wippit hopes to earn revenue by charging an annual fee and by carrying advertising.

Reuters contributed to this report

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