MP3.com Restores Controversial Service

L O S   A N G E L E S, Dec. 6, 2000 -- MP3.com restored its beleaguered music locker

service Tuesday, seven months after lawsuits from record labels and

music publishers forced its shutdown.

The My.Mp3.com service, which was once completely free, will nowfeature two levels of service. For no charge, members can store upto 25 CDs. That service will be advertising-supported.

For an annual fee of $49.95, members will be able to store up to500 CDs and enjoy more features and less advertising.

My.Mp3.com’s Troubles

My.Mp3.com, which allows members to store songs on the Internetand listen to them over any Web-enabled device, triggered acopyright infringement lawsuit in January by the five major recordlabels, music publishers and several independent labels.

The plaintiffs argued that by allowing people to instantlylisten to music they buy, or add music from their collection to apersonal “locker” by briefly inserting a CD into a computer forverification, MP3.com illegally distributed music for which theydid not own the rights.

MP3.com, based in San Diego, disabled the service in May toprevent anyone from storing music produced by the major recordingcompanies that filed the copyright lawsuit.

Over the course of the summer, the company reached settlementswith most labels, agreeing to pay a lump sum for past violationsand a licensing fee for future use. Every major label settled,except for Universal Music Group, which forced the case to trial.

In September, U.S. District Judge Jed S. Rakoff ruled thatMP3.com willfully violated record company copyrights and orderedthe company to pay damages.

After the Fall

Last month, MP3.com ended the lawsuit by agreeing to pay UMG$53.4 million. The company also reached a separate licensingagreement with rock star David Bowie.

The company still faces lawsuits from several independentlabels.

Several critical issues still remain for the company, includingits efforts to negotiate licenses with independent labels thatrepresent major artists such as The Backstreet Boys and ’N Sync.

And it remains to be seen if consumers will embrace the newservice and will pay a subscription fee to listen to music theyalready own.

“Nobody yet knows how popular the premium service may prove tobe,” Phil Leigh, an analyst at Raymond James & Associates, wrote ina report Tuesday. “To date there has been little evidence thatconsumers are willing to pay for content on the Web, as evidencedby the experiences of organizations like Slate and TheStreet.Com.”