Napster formalises deal to pay royalties

Internet-based music file-swapping service Napster has agreed its first deal to pay royalties to artists.

The company has agreed a non-exclusive global licensing deal with the UK Association of Independent Music and the Independent Music Companies Association which signs up 150 of the 2000 labels represented by the two bodies.

Artists will receive royalties paid out of the firm's subscription revenues once the service is launched later this year. Financial terms and the length of the deal were not disclosed, although it is said to be for years rather than months.

The first wave of artists signed include Moby, The Stereophonics, Tom Jones, Badly Drawn Boy and DJ Paul Oakenfold among other UK and European acts that have added commercial credibility to their street credibility, and which Napster now hopes will do the same for them.

Napster's future has been in doubt since a US court granted a collection of major record labels an injunction, upheld earlier this week on appeal , that ordered Napster to remove copyrighted material from its servers.

Traffic on the website has fallen by 85 per cent, according to researcher Web Noize, although even at this reduced level some 360 million files were traded in May.

The deal gives weight to Napster's future as a legitimate concern in the face of competition from the major record labels' own offerings, MusicNet and Duet. Napster has signed a deal to distribute artists included in MusicNet as a premium subscription service.

Napster founder Shawn Fanning said he was "grateful" that the independent labels were "now showing leadership when it comes to suing technology to make music more accessible".

Oakenfold commented: "It is good that [Napster] has at long last become legitimate and the artists and their labels will get paid."

Guy Holmes, chairman of Gut Records, which has Tom Jones on its roster, said: "If we're smart we treat Napster like any other retailer. We should treat all digital distribution as an extension of our retail sales."