KAZAA INKS DISTRIBUTION DEAL

The KaZaA music-swapping service plans to announce a partnership today with one of Europe's major Internet access providers in a deal that has raised the ire of record companies worldwide.

According to the New York Times, KaZaA's owner, Sharman Networks Ltd., will advertise high-speed Internet access provided by Tiscali, an Italian Internet provider, to its tens of millions of European users. In return Tiscali, which serves around 7 million customers in 15 countries, will pay Sharman a "bounty" for each KaZaA user who signs up for its high-speed access service.

The deal, the first of its kind, appears to give KaZaA a new ally in the legal and policy debate that has pitted the record companies against KaZaA and similar services, including their predecessor, Napster, the report says. The record companies have accused the services of abetting the illegal free exchange of billions of music files, and, in turn, of causing a decline in record sales.

"Prior to this, you could characterize KaZaA as a beleaguered company on the outskirts," Mark Radcliffe, an intellectual property laywer in Palo Alto, told the Times. "This gives legitimacy to KaZaA."

The deal also underscores the potential common interests of high-speed Internet access providers and organizations that deliver complex digital media, according to the report. Internet providers, including Tiscali, have said that one way to convince consumers to pay for more expensive high-speed access is to offer them content, like movies and music, that takes more time to download using slower dial-up connections.

Mario Mariani, Senior VP for access and media business of Tiscali, a public company based in Cagliari, Sardinia, said he hopes for "great success" in adding to Tiscali's modest base of 100,000 high-speed users. The rest of the company's customers access the Internet through dial-up phone lines.

Mariani said he did not believe, as the record companies assert, that KaZaA promotes music piracy, and stated, "We are really against piracy." He added that he believes that KaZaA and other music swapping services will put pressure on major record companies to develop new forms of distribution, and that the deal with Tiscali will help prompt such development.

"This is an important step in creating a legal market," Mariani said. "Music and the Internet is the biggest market where there is a big demand, but not yet an offer to meet the demand."