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The song-swapping service is reportedly hours away from entering an agreement with a licensing venture that represents three of the five major music labels. Song-swapping site Napster is close to signing an agreement that could pave the way for its relaunch as a subscription-based service this summer. Sources say Napster is hours away from announcing the completion of a deal with MusicNet, the nascent music-licensing venture formed by Bertelsmann’s BMG Entertainment, Warner Music Group, EMI Group and RealNetworks. The deal would be the first sign that Napster may be able to reinvent itself as a paid service before it evaporates under the heat of a court injunction that has rendered the site practically useless. Since the injunction went into effect in April, downloads from the Napster site have dropped more than 50 percent. So much music has been blocked from Napster’s system that Monday the search term “funk” yielded no results. The agreement would be the best news for Napster since it received a $60 million investment from Betelsmann in November, but it would not end Napster’s legal travails. None of the Big Five major labels have dropped their suits against Napster, though Bertelsmann has pledged to pull out of its suit once Napster’s conversion to a paid service is complete. If the MusicNet deal is consummated, it would unlock about 40 percent of the global music market to Napster users. The largest block of remaining songs is owned by Sony Music Entertainment and Universal Music Group, which formed their own music licensing service, Duet, this year. Vivendi Universal Chairman Jean-Marie Messier told an audience of analysts in March that Duet would license its catalog to Napster and other services like it, provided that the sites’ systems “respect copyright” and that their “technology is reasonably secure.” “We will license Napster with urgency when those two criteria are met,” he said. A MusicNet-Napster alliance would be a major coup for Seattle-based RealNetworks, which is fighting to make its streaming technology the industry standard. Napster, more than any other application, popularized MP3, making it the format of choice for digital music. If the system can regain its popularity using the MusicNet platform, RealNetworks would gain a leg up in its battle against Microsoft’s Windows Media Player. A new version of Microsoft’s streaming software with CD burning capabilities will be released with the next version of the software giant’s operating system, Windows XP, scheduled to be released Oct. 25. Related Articles from The Industry Standard: Kicking and Streaming MSN Takes Aim at AOL’s Customers Best of Enemies Copyright � 2001 The Industry Standard

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