Napster Announces Key Building Block of New Business Model

Redwood City, CA and New York, NY (February 16, 2001) -- Napster today announced progress on the development of a key aspect of the technology necessary to implement a new, membership-based business model supported by the recording industry. The solution, which enables secure administration of transferred files within a peer to peer structure, has been in the works for several months and will be implemented by Digital World Services (DWS), a Bertelsmann subsidiary with extensive experience in innovative digital rights management solutions. "Today's announcement underscores one key fact: the real questions about Napster's future are economic, not technical or legal. Our alliance with Bertelsmann and the Bertelsmann eCommerce Group was our first important step toward a model that makes payments to artists, songwriters and other rightsholders. This solution is further evidence of the seriousness of our effort to reach an agreement with the record companies that will keep Napster running, reliable, and enjoyable," said Hank Barry, Napster's Interim CEO.

Barry reiterated that Napster hopes to move to a membership-based service as soon as possible.

The solution the two companies have been working on will maintain the peer to peer structure of Napster, but will allow in the future restrictions to be placed on what can be done with the transferred files, such as limits on the ability to burn music files onto CDs. "To work with Napster on the design and operation of a key component of its new business model is an extraordinary opportunity for DWS," said Johann Butting, CEO of Digital World Services. "The successful combination of Napster's very compelling user friendliness and popularity with an architecture that addresses the needs of rightsholders will be a very significant step for secure sharing of content over the Internet." The technology will enable the sharing of MP3 files to which a protection layer will be added as the file is transferred from one Napster user to the other. The Napster client will be enhanced to support this protection. The solution will not use any existing multi-purpose DRM but a new security architecture that is specially tailored to the requirements of file-sharing.

"We are extremely pleased to partner with Digital World Services in bringing together and operating a key aspect of the technology we need to preserve file sharing and build an industry-supported business model. Through this agreement with DWS and the work we have done together to date, the architecture for one important component of our new model is now in place; we are building out this aspect of the system," Hank Barry added.

"We have been working with Digital World Services for several months to design this solution. They really understand the technologies involved and are sensitive to the user experience. We are confident that the new system will allow us to accomplish key goals of the record companies in terms of restricting use, while still maintaining and improving the performance and service levels of the Napster system," said Napster CTO Eddie Kessler.

About Napster
Napster is the world's leading person-to-person file sharing community. Napster provides music enthusiasts with an easy-to-use, high quality service for discovering new music and communicating their interests with other members of the Napster community. Napster's software application enables users to locate and share music files through a user-friendly interface, and features instant messaging, chat rooms, and Hot List User Bookmarks. Shawn Fanning, then an eighteen year-old freshman at Boston's Northeastern University, founded Napster in 1999. In October 2000, Bertelsmann AG and Napster announced the formation of a strategic alliance to further develop the Napster person-to-person file sharing service. In January 2001, edel Music and TVT Records joined the alliance. This year, Napster won several Wired Magazine Readers Rave Awards, including Best Music Site, Best Innovative Start-up, and Best Guerilla Marketing.

About About Digital World Services
Digital World Services provides Digital Rights Management (DRM) solutions and services enabling the convenient use to digital works by making the process transparent for the consumer, retailer and publisher while protecting the owners' copyrights. The company offers clearinghouse services such as rights clearing, financial settlement, and administration of usage information. Digital World Services are experts in the digital delivery of music, content hosting, system integration, project management and distribution platforms. Based in New York City and Hamburg, Germany, Digital World Services is a Bertelsmann subsidiary.