Bertelsmann and Napster Form Strategic Alliance
New York and Redwood City, California, (October 31, 2000) Bertelsmann AG
and Napster, Inc. today announced the formation of a strategic alliance to
further develop the Napster person-to-person file sharing service.
Bertelsmann AG's newly formed eCommerce Group, BeCG, and Napster have
developed a new business model for a secure membership-based service that
will provide Napster community members with high quality file sharing that
preserves the Napster experience while at the same time providing payments
to rightsholders, including recording artists, songwriters, recording
companies and music publishers.
Napster and Bertelsmann will seek support from others in the music industry
to establish Napster as a widely accepted membership based service and
invite them to participate actively in this process.
Under the terms of the agreement, once Napster successfully implements its
new membership-based service, Bertelsmann's music division, BMG, will
withdraw its lawsuit against Napster and make its music catalogue available.
Bertelsmann eCommerce Group will provide a loan to Napster to enable
development of the new service and will hold a warrant to acquire a portion
of Napster's equity.
Thomas Middelhoff, Bertelsmann's Chairman and Chief Executive Officer, said
"Person-to-person file sharing has captured the imagination of millions of
people worldwide with its ease of use, global selection of content, and
community features. Napster has pointed the way for a new direction for
music distribution, and we believe it will form the basis of important and
exciting new business models for the future of the music industry. We invite
other record and publishing companies, artists and other industry members to
participate in the development of a secure and membership-based service."
Hank Barry, CEO of Napster, said, "This strategic alliance with Bertelsmann
is the right next step for Napster. The Napster community - which is the
fastest-growing in the history of the Internet - will benefit enormously
from Bertelsmann's historic commitment to innovation and its experience in
offering a seamless and convenient user experience."
Andreas Schmidt, President and CEO of Bertelsmann eCommerce Group, said,
"Our strategic alliance with Napster is key to providing consumers in the
future with access to the largest global music catalogue of high quality
music files -- with added convenience and features. We will work closely
with Napster to establish a new membership-based service that achieves
acceptance by other music providers. For recording artists and songwriters,
we hope to realize Napster's full potential as a promotional vehicle while
protecting their interests. For the recording industry, we are looking to
take a positive and forward-looking approach with a membership-based service
that complements other forms of music distribution."
Shawn Fanning, founder of Napster, said: "I am excited that Bertelsmann
appreciates and values the uniqueness of the community Napster users have
built. I look forward to Napster becoming a part of even more people's
lives, helping the way people discover and explore music."
Strauss Zelnick, President and CEO, BMG Entertainment, said: "Bertelsmann's
forward-thinking approach will enable the new Napster membership-based file
sharing service to become an important community for artists, record
companies and consumers. BMG, as a leader in the online space, supports an
array of secure, digital distribution alternatives that respects copyrights,
including file sharing, downloads and subscription services."
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