Napster Makes Public Business Model for New Service

Company Proposes $1 Billion Over Five Years in Guaranteed Payments to Labels,

Artists and Other Rightsholders,

$150 Million Per Year to Major Labels, $50 Million for Independent Artists

Feb 21, 2001, 00:00 ET from Napster

    SAN FRANCISCO, Feb. 21 /PRNewswire/ -- Napster today made public the
 business model that it has been presenting to major labels for the last six
 months in an effort to settle their dispute and end the industry's effort to
 shut Napster down in court.
     The proposal would provide guaranteed revenue of $1 billion to the major
 labels, songwriters and independent labels and artists over the next five
 years.  Major labels would receive $150 million per year for a non-exclusive
 license, divided according to files transferred.  $50 million per year will be
 set aside for independent labels and artists to be paid out based on the
 volume of files transferred.
     "As we have been saying in private meetings with the major recording
 companies and the RIAA for the last six months, Napster has a viable business
 model with solid revenue streams and we are building the technology to make it
 happen," said Hank Barry, CEO of Napster, Inc.  "We made public our business
 model and technology today in hopes that the recording industry will meet us
 at the table to come to a resolution that benefits artists and consumers
     "Bertelsmann chose to build a partnership with Napster in October, 2000
 because of the tremendous value it creates for promoting artists and building
 community," said Andreas Schmidt, president and CEO of Bertelsmann eCommerce
 Group.  "The revenue potential of Napster for the entire recording industry is
 unprecedented and it's time to start thinking towards the future and figure
 out a way to leverage this potential instead of trying to quell it.  In the
 interest of the consumer and artists it's time for the industry to lay down
 their arms."
     Napster's CEO Hank Barry described the membership model that will enable
 the company to make the proposed payments.  Definitive pricing has not been
 set, but the model will have two tiers.  The model includes a "Basic
 Membership" plan that would cost in the range of $2.95 to $4.95 per month with
 an as yet undermined limit on file transfers.  The "Premium Membership" will
 cost between $5.95 and $9.95 and will offer unlimited file transfers.
     The company also unveiled key aspects of its rights accounting
 architecture and security technology.
     The new Napster, slated to launch this summer, will be designed as a
 promotional service with fidelity limitations of 128 kbps and lower.  Users
 will be asked to pay an additional fee in order to burn CDs and to transfer
 their music to portable devices.  The service will be easy to use, and offer
 secure, complete and accurate file transfers, a new player with a personal
 jukebox and enhanced search and community features.
     "I have so many cool things in development and I want to be able to bring
 them to the Napster community," said Shawn Fanning.  "I am also grateful for
 the outpouring of support from the Napster community, keep it coming!"
     About Napster
     Napster is the world's leading person-to-person file sharing community.
 Napster provides music enthusiasts with an easy-to-use, high quality service
 for discovering new music and communicating their interests with other members
 of the Napster community.  Napster's software application enables users to
 locate and share music files through a user-friendly interface, and features
 instant messaging, chat rooms, and Hot List User Bookmarks.  Shawn Fanning,
 then an eighteen year-old freshman at Boston's Northeastern University,
 founded Napster in 1999.  In October 2000, Bertelsmann AG and Napster
 announced the formation of a strategic alliance to further develop the Napster
 person-to-person file sharing service.  In January 2001, edel Music and TVT
 Records joined the alliance.  This year, Napster won several Wired Magazine
 Readers Rave Awards, including Best Music Site, Best Innovative Start-up, and
 Best Guerilla Marketing.
     About BeCG
     Bertelsmann eCommerce Group (BeCG), formed in June as a division of
 Bertelsmann AG, brings together Bertelsmann's entire portfolio of e-commerce
 companies and holdings such as,, CDNOW, and BMG
 Music Service in order to drive Bertelsmann's global e-content, community and
 commerce business.  The group's objective is to build the leading global
 community and commerce network across all technologies and platforms while
 providing an unmatched consumer experience around all forms of media and
 entertainment.  Through the acquisition of CDNOW and strategic alliances with
 AOL, TerraLycos and Napster, Bertelsmann has direct access to some 200 million
 customers worldwide.  With 32 million unique visitors per month, Bertelsmann
 is the global Internet leader among all media companies.  BeCG is a subsidiary
 of Bertelsmann AG, the world's most international media company with over
 76,000 employees in more than 58 countries.  Bertelsmann's business units
 include publishing firms, music and film companies, multimedia services,
 online commerce companies, daily newspapers, consumer magazines, radio and
 television stations, book clubs, trade journals, and other service companies
 that provide information, education and entertainment to a worldwide audience.

SOURCE Napster