Searching for Revenue, Napster Signs Promo Deal

NEW YORK (07/24/2000) - In a move that may presage a variety of new initiatives by Napster Inc., the music file sharing site currently being sued by major music labels on Monday announced a song promotion deal with Sputnik7.com LLC, an online affiliate of Palm Entertainment Properties Inc.

The deal calls for the single "Sundown," by Palm artist Elwood, to be featured on Napster, according to Napster interim Chief Executive Officer Hank Barry, speaking here at market researcher Jupiter Communications Inc.'s Plug.In conference.

The promotion on the home page will feature a click-through link to Sputnik7.com, whose chairman is music business pioneer and Palm founder Chris Blackwell. Palm is a major shareholder of Sputnik7, which will provide an MP3 file format version of Sundown which Napster users can share.

The Napster site is designed to let users share music files among themselves, and counts more than 21 million users, with about a million more signing up each week, according to Barry. But Napster is in the throes of fending off copyright violation charges filed by the Recording Industry Association of America (RIAA), which represents the major music labels, as well as the heavy-metal band Metallica and rapper Dr. Dre.

Napster claims it does not violate copyright laws and Barry said here that its mission is to "expose music fans to music they have not been exposed to and show them ... where to find music they haven't heard in a long time."

The deal with Sputnik7 does not call for any money to change hands, Blackwell and Barry said. But amid its legal throes, the deal could count as a vote of support from a legendary music business figure. Blackwell, who produced leading Jamaican musicians, said that since the advent of the MP3 file downloading phenomenon on the Internet, sales of Jamaican music great Bob Marley's back catalog have actually risen by about 12 percent in the past year or two, after years of remaining flat. "So I don't know if this is a result of Napster, but certainly it hasn't hurt," Blackwell said.

Despite its millions of users, Napster has no revenue. Asked during a panel session whether he had ideas for how Napster could generate money, Barry quipped, "Yes, lots of ideas ... I'm sure everyone in the audience has ideas of how Napster can generate revenue too."

The promotional deal with Sputnik7 may be one of the first music label-blessed initiatives that Napster is doing, but Barry said that Napster is pursuing various ideas for how to expand and complement what it does now. For example, he said, it has retained the consulting services of Liquid Audio Inc. to study the different ways MP3 files can be used online.

Napster, based in San Mateo, California, can be reached at +1-650-570-5382 or via the Web at http://www.napster.com/.

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