January 2, 2001 11:45 AM PST
Napster, Bertelsmann draw indie label to new service
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Germany's Edel Music, a large independent record label that owns stakes in several U.S.-based labels and distribution companies, said Tuesday that it will allow its music to be traded through Napster's fee-based service when it emerges.
Although the announcement was a welcome development for Napster and Bertelsmann, the two companies are still trying to attract the four other major music labels--EMI Recorded Music, Sony Music Group, Universal Music Group and Warner Music Group--to their plan. The positions of those labels, which are suing Napster in federal court, will likely determine the success or failure of the new Napster.
Napster and Bertelsmann struck their landmark deal in October, flouting what had previously been almost uniform music industry hostility toward the start-up's peace offerings. Although details remain scant, the two companies have said they plan to maintain some version of Napster's current file-swapping service while adding a fee-based membership component that would allow some compensation for artists and record labels.
The deal was 
consummated by a loan to Napster of more than $50 million, for which Bertelsmann received rights to take a controlling interest in the company, sources said.
Since that time, Bertelsmann and Napster executives have worked to bring other labels on board. They want all the major labels involved so that users of the subscription service can have legal access to the widest selection of music.
At this point
, all five major labels, including Bertelsmann's BMG Entertainment, are still suing Napster for allegedly contributing to online copyright infringement. A federal appeals court's verdict on whether much of Napster's service should be shut down pending further trial is expected any day.
Edel's announcement follows the intermittent decisions of several smaller independent labels to allow their bands to be promoted through Napster's service. Although the membership model is being developed, several of Edel's artists will show up as Napster-featured artists before the launch of that service, the companies said.
