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The licensing part of the deal...calls for MP3.com to pay "millions" in advances to both BMG and WMG against future revenue streams.

BREAKING NEWS: BMG, WMG INK MP3.COM DEALS

BMG, WMG First To Take A Bite Out Of
Netco's $100 Million Pie
It's a done deal.

BMG Entertainment and Warner Music Group became the first two major record congloms to ink agreements with controversial music service provider MP3.com today. Those two companies will be the first to grab their share of the $100 million pie the company has set aside for past damages.

At presstime, MP3.com closed at 17 1/4 on the Nasdaq board, a more than 50% rise since its closing price of 11 5/8 on Tuesday (6/6), when the story first broke on hitsdailydouble.com. At the height of its legal problems, the stock had dropped to 6 1/2.

There are two primary points to the MP3.com-label pact. First, there are past damages, which tally $75-$100 million. This sum will eventually be split in some predetermined way among those members of the Big Five that close deals with MP3.com. Second is the licensing part of the deal, which calls for MP3.com to pay "millions" in advances to both BMG and WMG against future revenue streams.Specifically, the licensing agreement requires the netco to pony up approximately 1.5 cents per track stored in a locker at My.MP3.com, and roughly 1/3 of a cent each time a song is streamed by any My.MP3.com user. Ultimately, it's expected that a "Most Favored Nation" clause will adjust compensation upward for all parties to match the highest negotiated rate.

Highly placed sources said Sony is close behind the two vanguard music groups, though one MP3.com insider describes the talks as "tedious and difficult." Universal Music Group, however, reportedly remains intransigent. Speculation abounds that this is partly because UMG still regards MP3.com as a competitor for Internet marketshare.

Chief Marketing Officer/President New Technology kevin conroy',390,400);">kevin conroy',390,400);">Kevin Conroy and VP Legal & Business Affairs N.A. Rob Cohen were on the negotiating team for BMG; Exec. VP Strategic Planning & Business Development Paul Vidich and Sr. VP/Deputy General Counsel Paul Robinson handled the case for WMG, while Gary Stiffelman of Ziffren, Brittehnam, Branca and Fischer LLP and MP3.com's Robin Richards hammered out the agreement for the netco.

These non-exclusive licensing deals will likely set the music-industry standard for similar digital-distribution agreements between traditional and online parties. The current deals set up a standard for streaming but not for downloading. The majors all have plans in place for vending downloads.

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