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MP3.com Slowly Gets Legal

Music Web site signs license agreements to settle lawsuits with record labels.

By George A. Chidi Jr., IDG News   

MP3.com signed separate deals Friday with the two major record labels, which were part of a larger copyright-infringement suit filed in January by the Recording Industry Association of America. The settlements include monetary compensation as well as license agreements, says an MP3.com representative.

Warner and BMG did not disclose the terms of the agreements, but sources close to the deals say MP3.com will pay about $20 million to Warner and as much as $80 million to BMG in exchange for the right to use the songs owned by the music labels.

The deal reflects MP3.com's rise "from bad-boys throwing rocks through windows to a company maturely negotiating a settlement with the industry," says Eric Scheirer, analyst for Forrester Research. "This is the day we say MP3.com grew up."

MP3.com has $350 million remaining from money raised in its initial public stock offering, Scheirer says. "The settlement looks like a lot, but it isn't." Signs point toward a settlement within the next week between MP3.com and the labels remaining in the RIAA suit, he says.

Negotiations Remain

The other companies involved in the suit include Sony Music Entertainment and Seagram's Universal Music Group. The copyright infringement lawsuit sought to prevent MP3.com from marketing its Beam-it and Instant Listening services. The company markets the services under the banner My.MP3.com.

Beam-it software matches a music CD you insert into your PC with the same CD stored in MP3.com's own library. The software asks if you own the CD. If you verify ownership of the CD in question, and the CD matches one in MP3.com's library, you can log into your My.MP3.com account from any PC and listen to the CD.

As part of the settlement, Warner signed a North American license agreement with MP3.com, allowing the Internet music company to use Warner recordings on My.MP3.com. MP3.com also signed a similar license agreement with BMG.

Though the RIAA filed the lawsuit against MP3.com on behalf of the music labels, each label must come to a separate licensing agreement with MP3.com, says a Warner employee.