Napster Returns In Beta Mode

It's baaack. Well, almost. Napster, the controversial music file-sharing service that's been shut down since last spring to comply with a court order, took a big step toward establishing a viable music subscription service Thursday when it launched a beta test of that service. For the next several weeks, 20,000 randomly selected users will help the company work the bugs out of the service until it's formally launched to consumers, which is expected to occur in six to eight weeks. The beta testers are able to access about 110,000 music files, a small sampling of the music content expected to be a part of the commercial service.

The subscription version of Napster features two types of files: .nap, which are protected files whose use is limited by label-defined rules, and raw MP3s, which can be downloaded and copied freely so long as a user remains a subscriber. While the service is expected to look much like its free predecessor, a spokesman says the company rewrote 98% of its code to address security, ensure payment of royalties, and improve features such as file-resume capabilities. Security and royalty payments are crucial to Napster's ongoing attempts to secure licensing deals with the five major music labels that brought the legal action that ultimately shuttered the free service. One of those labels, Bertelsman AG's BMG Entertainment, is an investor in Napster and has been working closely with the company to develop its subscription model.

Also on Thursday, Napster announced a number of key relationships with technology providers that will handle various aspects of the soon-to-be-launched service: It licensed transaction-processing and fraud-protection software from ClearCommerce Corp.; it chose Counterpoint Systems' rights- and royalties-administration software; and it selected Portal Software's Infranet customer-management and billing software.

Jupiter Media Metrix senior analyst Aram Sinnreich says Napster still must overcome two negative associations held by its users: It's no longer a source of free music, and it's been out of business for nearly a year. Sinnreich says the notion of paying for Napster will be difficult for users to swallow, especially if Napster isn't successful in forging the licensing deals with all of the major labels. Such deals are necessary, he says, if Napster is to compete with the label-backed MusicNet and pressplay services launched in recent months. Says Sinnreich: "They've really got a tough road ahead of them."