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Sony Music takes interest in P2P

The record label agrees to let CenterSpan Communications provide Internet service providers with music from its artists via CenterSpan's peer-to-peer service.

CenterSpan Communications on Thursday said it struck a deal to distribute Sony Music Entertainment's music on its peer-to-peer service.

The agreement lets CenterSpan provide music from Sony Music artists to online service providers seeking to offer their subscribers streaming and downloadable music.

CenterSpan agreed to pay Sony Music about $2 million in cash plus 283,556 shares and a warrant to buy 189,037 additional shares of its common stock at an exercise price at $8.11 per share, according to a filing with the Securities and Exchange Commission.

Internet content distributor CenterSpan bought controversial Napster-like audio and video Web site in 2000 after Scour declared bankruptcy in the wake of a copyright infringement lawsuit.

CenterSpan in April 2001 launched a free trial of a new secure service known as C-Star CDN. It includes the underlying peer-to-peer technology of Scour that allows people to trade encrypted files authorized for copying by copyright holders.

A CenterSpan representative said the company is talking with other major recording labels, movie studios as well as online subscription services, such as Pressplay.

"This deal continues the experimental phase the music industry is going through as it tries to figure which digital distribution model is going to work," said P.J. McNealy, analyst with GartnerG2, a division of research firm Gartner.

Portland, Oregon-based CenterSpan on Thursday also reported a fourth-quarter net loss from continuing operations of $6.4 million, or 73 cents per share, compared with a net loss of $2.2 million, or 35 cents per share, from the year-ago quarter.

Story Copyright © 2002 Reuters Limited. All rights reserved.