Bertelsmann AG and Napster, Inc. announced plans today for a strategic alliance to establish an industry accepted community person-to-person file sharing service.

It seems that Napster and Bertelsmann AG’s newly formed eCommerce Group, BeCG, have developed a new business model for Napster with a secure membership-based service that will provide payments to rightsholders while preserving the quality of the file sharing service.

Napster and Bertelsmann will be actively seeking support from others in the music industry for this new alliance to bring membership based digital music distribution to the masses, something which the community has shown it is willing to accept as a viable means of digital distribution of music.

Under the new agreement with Bertelsmann, once Napster has successfully implemented a subscription model to its popular file sharing services, all pending litigation from BMG against the company will be dropped. BMG will then legally allow Napster the use of its music catalogue through the service.

Bertelsmann AG’s eCommerce Group is reported to be financially backing this transition to a subscription model for Napster, in exchange for the ability to acquire a portion of Napster’s equity in the future.

Here are a few quotes from several major players in this groundbreaking announcement from Napster and Bertelsmann AG concerning this agreement:

“Person-to-person file sharing has captured the imagination of millions of people worldwide with its ease of use, global selection of content, and community features. 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. We invite other record and publishing companies, artists and other industry members to participate in the development of a secure and membership-based service.” - Thomas Middelhoff, Bertelsmann’s Chairman and Chief Executive Officer

Hank Barry, CEO of Napster, said, “This strategic alliance with Bertelsmann is the right next step for Napster. The Napster community — which is the fastest-growing in the history of the Internet — will benefit enormously from Bertelsmann’s historic commitment to innovation and its experience in offering a seamless and convenient user experience.”

Andreas Schmidt, President and CEO of Bertelsmann eCommerce Group, said, “Our strategic alliance with Napster is key to providing consumers in the future with access to the largest global music catalogue of high quality music files -- with added convenience and features. We will work closely with Napster to establish a new membership-based service that achieves acceptance by other music providers. For recording artists and songwriters, we hope to realize Napster’s full potential as a promotional vehicle while protecting their interests. For the recording industry, we are looking to take a positive and forward-looking approach with a membership-based service that complements other forms of music distribution.”

Shawn Fanning, founder of Napster, said: “I am excited that Bertelsmann appreciates and values the uniqueness of the community Napster users have built. I look forward to Napster becoming a part of even more people’s lives, helping the way people discover and explore music.”

Strauss Zelnick, President and CEO, BMG Entertainment, said: “Bertelsmann’s forward-thinking approach will enable the new Napster membership-based file sharing service to become an important community for artists, record companies and consumers. BMG, as a leader in the online space, supports an array of secure, digital distribution alternatives that respects copyrights, including file sharing, downloads and subscription services."

With the announcement, it looks like it is going to be a good treat for Halloween for Napster, and could prove to be quite a trick to a lot of the recording industry. Perhaps this announcement will be the wake up call to some in the industry that digital distribution of music _is_ the way of the future, and now is the time to get involved with that future and stop simply fighting the inevitable.