Napster Media Briefing Q&A

February 20, 2001

What did Napster unveil today?

Napster unveiled the business model for its new membership-based service. This business model has not changed substantially for the last six months and has been presented to all the major labels. The technology has been under development since prior to the October 31, 2000 agreement. The new Napster will make payments to major labels, songwriters, and independent artists.

How much revenue could be generated for the recording industry and how did you arrive at that figure?

Napster's proposal will provide $1 billion to the major labels, songwriters and independent labels and artists over 5 years. Major labels will receive $150 million per year for a non-exclusive license, divided according to files transferred. For example if the transfers were evenly divided among five major labels, each would receive $30 million. $50 million per year will be set aside for independent labels and artists to be paid out based on the volume of transfers.

How will the rightsholders for each track get paid?

Labels will receive a lump sum payment, $30 million per year, for a non-exclusive license. Independent labels and artists will be paid based on the basis of the number of transfers over the system out of a fund of $50 million per year.

How do you know that Napster users will pay?

Our research strongly suggests that a high percentage of Napster users are willing to pay. We will not be certain until we actually begin charging, but we do know that Napster has become an important part of daily life for a lot of people. We have been conservative in our membership projections.

What will the pricing structure be?

Napster is planning a tiered membership model that includes a "Basic Membership" plan and a "Premium Membership" plan. Definitive pricing has not been set. However, Napster is looking at a price range of $2.95 to $4.95 per month for the Basic membership that would have a monthly file transfer limitation built in. The Premium membership, which could cost between $5.95 and $9.95 per month would offer unlimited file transfers.

When is the new service launching?

This summer.

Why are you unveiling this now?

You might have noticed that we got some pretty bad news last week from the court of appeals. Now that the industry has the legal precedent they were seeking, it is time to reach an agreement. The RIAA has been saying the consumer comes first, the consumer comes second, and the consumer comes third. If the industry has the consumer, and their own bottom line in mind, there is an agreement to be had here.