January 28, 2001

Napster 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 alike."

"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!"

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