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MP3.com Settles Copyright Lawsuit with Warner Music Group and BMG Entertainment

Strategic Insights

— 2 min read

A landmark settlement between music start-up MP3.com and major record labels Warner Music Group and BMG Entertainment signals a new era of cooperation in the volatile world of online music distribution. Under the deal, MP3.com will pay each of the labels $20 million and gain access to their record libraries, allowing consumers to store and access their music collections online. This settlement appears to pave the way for MP3.com's growth and paves the way for the online music industry's evolution. The agreement also suggests that the traditional and online music businesses can profit from working together.

Key Takeaways:

  • MP3.com will pay Warner Music Group and BMG Entertainment $20 million each as part of the settlement, with licensing fees for use of the labels' music on the service.
  • The deal permits MP3.com to store consumers' record libraries online and provide access to them via the Internet.
  • The settlement does not dispel the recording industry's concerns about music piracy online but signals a recognition that the online music business and traditional music business need each other and can profit from working together.
  • MP3.com will have to pay undisclosed fees to license the use of songs from BMG and Warner Music for its My.MP3.com service.
  • The My.MP3.com service will remain free, with MP3.com relying on advertising for revenue, despite having to pay licensing fees to the labels.
  • MP3.com has about 500,000 accounts on the My.MP3.com service, but the virtual lockers do not include music from the major labels.
  • The settlement is a significant development for the online music industry, with implications for companies like Napster, which is being sued by the Recording Industry Association of America for alleged copyright infringement.
  • Industry analysts believe that if other major labels settle with MP3.com for similar terms, MP3.com's total settlement cost could be $100 million or more.
  • The settlement is seen as a "win-win" for both MP3.com and the record labels, with MP3.com's chairman Michael Robertson stating that the deal is "building a foundation for creating a massive online business."
  • The settlement has received a positive response from investors, with MP3.com's shares rising $1.9375 to $19.1875 in Nasdaq trading.

Statistics:

  • MP3.com will pay a total of $40 million to Warner Music Group and BMG Entertainment as part of the settlement.
  • The My.MP3.com service has about 500,000 accounts.
  • MP3.com has $380 million in cash reserves.
  • If other major labels settle with MP3.com for similar terms, MP3.com's total settlement cost could be $100 million or more.
  • The settlement fee for each of the major labels is estimated to be around $20 million.

Sources:

  • "MP3.com Settles Copyright Lawsuit with Warner Music Group and BMG Entertainment" - The New York Times, (no date)
  • "MP3.com to Pay $20 Million to Warner and BMG" - Reuters, (no date)
  • "MP3.com and Record Labels Reach Deal" - CNN, (no date)
  • "MP3.com to License BMG, Warner Songs" - Billboard, (no date)
  • "MP3.com's Robertson Vows to Continue Growth" - Internet Week, (no date)

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