Those songs will not be in a format that buyers can trade, however. By contrast, the new version of Napster, like the current version, will be built on popular, unencrypted formats that can be swapped, CEO Barry said.
The new service will "look like Napster looks now," he said, adding that there would be a free service for "promotional" purposes, as well as a new membership-based service. The heart of the service, he said, will be users copying files from each other's computers, as they do today.
"We have two core values. One is that we're going to preserve the user experience of Napster. Number two is, we're going to compensate artists and songwriters," Barry said.
The leap of faith for Bertelsmann is that the new service won't cut the bottom out of its CD business, which makes up about 21% of the current U.S. album sales from January to April of this year, according to Soundscan. A new survey released Tuesday by PC Data, an Internet research firm, found that Napster users purchased less music online than non-Napster users, with the biggest decreases seen in artists that appeal to young audiences.
Other surveys have found that Napster use leads to more CD buying. The music industry as a whole has enjoyed strong sales even as Napster's ranks have skyrocketed.
Bertelsmann officials said they're not worried about CD sales. Instead, they said, they were eager to tap into the community of music fans that Napster had attracted--provided they were compensated for their works.
"Somebody had to move on this, and we decided to take the lead," said Bertelsmann Chairman Thomas Middelhoff. "I believe that the rest of the industry will eventually come along."
As part of the membership service, Bertelsmann will make available high-quality versions of all the songs in its catalog. But one lingering problem for Napster is how to deal with the song files that users record off their CDs, including the millions of files already being traded on the system for free.
High-level music executives at Seagram, Sony, EMI and Time Warner privately said they had not been consulted about Bertelsmann's deal with Napster, which they say is still violating copyrights.
Competitors weren't the only ones blind-sided by Tuesday's announcement. The deal follows months of behind-the-scenes wrangling inside of Bertelsmann and was initially opposed by executives at the German conglomerate's own music group, including BMG's Zelnick.
