The future of Napster provides an opportunity to reach music fans in unprecedented and as yet unimagined ways

Steven Gottlieb, TVT records

The internet service, which has more than 45 million users, has already begun a strategic alliance with Bertelsmann and Edel Records.

The world's five biggest record labels are suing Napster over copyright infringement in a lawsuit worth billions of dollars.

Napster has agreed to pay royalties to artists at Edel and Bertelsmann under the terms of the alliance.

$50m investment

Bertelsmann, one of the five labels involved in litigation, has said it will drop its action as soon as Napster becomes a membership-only service and has invited other record companies to join the alliance.

The company has already invested more than $50m (�34m) in Napster to help develop its new service.

Other record companies are thought to be developing their own internet services.

"Napster will be an important revenue stream for artists once the new service rolls out," Steven Gottlieb, president of TVT, said.

"I am afraid that copyright owner's resistance to finding workable solutions with internet music providers may result in consumers, artists and the industry itself ultimately being harmed," Mr Gottlieb said.

Financial terms

"The future of Napster provides an opportunity to reach music fans in unprecedented and as yet unimagined ways," he added.

Financial terms of the settlement have not been disclosed, but TVT has said it will allow master recordings and musical compositions it owns to be used on Napster.

Mr Gottlieb also agreed to act as advisor to Napster in its effort to address the concerns of artists and record companies.

"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," said Hank Barry, chief executive officer of Napster.