“Under the terms of the agreement, once Napster successfully implements its new membership-based service, Bertelsmann's music division, BMG, will withdraw its lawsuit against Napster and make its music catalogue available,” reads the statement.

“As of today, the industry has not embraced the use of file-sharing,” said BeCG President and CEO Andreas Schmidt at a press conference the two companies held on Tuesday (10/31). “We, along with Napster, are going to change that.”

Also present at Tuesday’s conference were Napster founder Shawn Fanning, Napster Chairman and CEO Hank Barry, Bertelsmann Chairman and CEO Thomas Middelhoff, and Bertelsmann eCommerce Group (BeCG) President and CEO Andreas Schmidt.

“My message to Napster’s users is this: If you think Napster is great now, just wait; we’re just getting started,” said Fanning at the conference.

Details on exactly how the retooled Napster service will work, how much it will cost and when it will be available were not specified. Barry did say, however, that the groups were working with a $4.95 per-month membership fee in mind, a fee that would presumably allow users to access the service and download selections from BMG’s catalog.

Based on the 38 million users Barry claims that Napster currently has--and based on the fact that the number of users continues to grow rapidly--the monthly fee would generate a significant amount of income for Napster, BMG and the record industry as a whole, Barry said. Both groups stressed their desire for the remaining four major record labels--Universal, Time-Warner, Sony and EMI--to enter into a similar agreement with Napster.

“Napster has pointed the way for a new direction for music distribution, and we believe it will form the basis of important and exciting new business models for the future of the music industry,” said Bertelsmann Chairman and CEO Thomas Middelhoff in the joint statement released Tuesday. “We invite other record and publishing companies, artists and other industry members to participate in the development of a secure and membership-based service."

Following Tuesday’s announcement, Recording Industry Association of America President and CEO Hillary Rosen issued a statement in which she said that she welcomes Napster’s move toward becoming a “legitimate player in the online music industry,” but added that it does not free Napster from the multiple pending lawsuits filed against it by the RIAA on behalf of the five major record labels.

“There are multiple plaintiffs in addition to BMG; and BMG itself has said that it won't withdraw its complaint against Napster until they actually implement a legitimate business model," said Rosen. "And frankly, it is important for everyone--Napster included--that the ground rules of the Internet music business be established once and for all. The courts need to make clear that, contrary to what Napster has been claiming, companies like Napster do need to get permission before they launch businesses built on other people's creative property.”

Rosen added that the court case against Napster is about “sending a message to the technology and venture capital communities that consumers, creators and innovators will best flourish when copyright interests are respected. It has never been about peer-to-peer technology itself, which can be implemented legitimately, as today's announcement confirms. I am glad that Napster has gotten that message and hope that this announcement sends the right signal to others who are operating or intending to operate sites or businesses that facilitate piracy.”

As for the “others” Rosen’s remarks allude to, Barry said at Tuesday’s press conference that he believes users would prefer to pay Napster for legitimate access to music than obtain it for free through other illegitimate peer-to-peer services.

“What I believe is that people want to work within a framework provided by the industry,” said Barry. “I think, if offered that, people will flock to it.”