TVT Records, an independent U.S. label, said Thursday it has dropped its copyright-infringement lawsuit against Napster.
Although TVT does not have the prominence of the Big Five record companies, the move is the latest sign that the recording industry is warming to the controversial, free file-swapping service instead of fighting to shut it down.
"I think now with the addition of the security and artist compensation, which is planned, that it is essential that people who represent the creative community come and embrace it," said TVT President Steven Gottlieb. "With the 45 million users, Napster has already demonstrated it's an important part of the music industry, and I think we want to be part of the solution for making it work rather than being a litigant."
Napster has been fighting a high-profile lawsuit filed by the Big Five labels--Bertelsmann's BMG Entertainment, Warner Music Group, Universal Music Group, Sony Music Entertainment and EMI Recorded Music. The labels allege that Napster promotes the infringement of their copyrighted works.
In October, however, German media conglomerate Bertelsmann broke rank and formed an alliance with Napster to develop a subscription service that will let people share songs copyrighted by BMG. But the recording giant said it wouldn't drop its lawsuit against Napster until the service successfully launches.
TVT, which is home to musicians such as Nine Inch Nails and Snoop Dogg, said it decided to end its lawsuit and support Napster after that announcement.
"Moving this conversation from the courtroom to the boardroom helps us advance file sharing as a benefit to artists and songwriters as well as music fans," Napster CEO Hank Barry said in a statement. "This new arrangement is further evidence that the alliance we developed with Bertelsmann is the right direction for the industry to take."
Analysts said that although TVT's move aids Napster's drive to offer works from all major labels on its forthcoming subscription service, the outcome of that quest is uncertain.
Phil Benyola, a research associate for investment firm Raymond James & Associates, said that even if other labels sign on to the new service, the file-swapping company may relive MP3.com's legal nightmare. After filing a copyright-infringement suit against the Web music service, four of the major record labels settled with the company. But Universal refused to bend to peer pressure and held out for a hefty court settlement.
Universal is "the biggest, and they're the ones that are typically the toughest to deal with on this kind of stuff," Benyola said. "There are others that have publicly stated 'no chances are going to happen'...It would surprise me if all the majors were to drop their lawsuit even if Napster came up with an alternative to its services."