MP3.com's settlement with Sony for "past acts" brings it into harmony with another of the "Big Five" record labels. But not everyone is singing a happy tune. A hearing for damages remains scheduled for next week, and outstanding issues between the recording industry and the online economy will likely remain in heavy rotation.
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MP3.com will also pay a non-disclosed licensing fee for non-exclusive North American use of Sony-controlled recordings with its My.MP3.com, Beam-It, and Instant Listening services. These allow users, after verifying that they own a CD title, to listen to the recordings over the Internet on any computer without the need for the original disk.
Word of the settlement, announced Monday evening, sent shares of MP3.com racing ahead this morning, touching as high as $11 per share. The stock has traded as low $6.50 and as high as $64.63 in the last 52 weeks.
The suit, originally filed in January by the Recording Industry of America (RIAA) alleged that MP3.com copied RIAA member property without permission, thus infringing on their copyrights. The labels asked for damages of up to $150,000 for each CD illegally copied into the MP3.com database. In April, the company was found liable for copyright infringement by a U.S. District Court judge.
With the Sony agreement, MP3.com has now settled with four of the "Big Five" record labels. Deals were struck in June with Bertelsmann's BMG Entertainment and Time Warner's (NYSE: TWX) Warner Music Group, and in July with EMI Recorded Music, which is merging with Warner. MP3.com's settlement with each of these companies is estimated at about $20 million.
Negotiations with Seagram's (NYSE: VO) Universal Music Group are reportedly underway, as are negotiations with music publishing companies. Barring a settlement, a hearing is set for August 28 in the U.S. District Court in New York to determine damages.
Suit, countersuit
MP3.com was one of the recording industry's first targets in its efforts to retain control of its property, which is easily digitized and distributed over the 'Net. In addition to MP3.com, the labels are also locked in a court battle with file-sharing service Napster for alleged copyright infringement.
Unlike MP3.com -- which is a centralized, Web-based source of music -- Napster lets users search and download music files (in most cases unlicensed) directly from each other's computers. Last month, the RIAA requested and won an injunction that would have led to Napster's shut down. An 11th-hour stay of the injunction allowed Napster to remain in operation as the lawsuit works its way through the court.
The RIAA is also suing privately held MP3Board.com for allegedly facilitating copyright infringement by providing links to other alleged infringers. MP3Board -- which is unrelated to MP3.com -- claims that it doesn't provide song downloads but is merely acting as a search engine, presenting linked results to its users through "automated processes."
MP3Board's position is that finding what it does illegal threatens the fabric of the Web itself, which is based on a system of links to third-party sites. In a neat twist on the story, the company is attempting to drag America Online (NYSE: AOL) into its defendant's corner.
The Gnutella file-sharing protocol that MP3Board uses in its searches was originally developed by AOL. MP3Board has therefore asked a judge to declare its Gnutella searches legal, or, if not legal, to have AOL "share part of the blame" for the copyright infringement that allegedly follows. And with AOL about to become one of the world's top record labels, pending approval of its merger with Time Warner, these issues will likely remain in heavy rotation for some to come.
Your Turn:
Will MP3.com make peace with the last of the Big Five? Can the music industry get in tune with the online economy? Follow the beat of your different drum to the MP3.com discussion board, and share your thoughts with the world.
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