Napster has proposed two plans to help calm the record labels. Their first plan was a means of compensation for the labels and the second is a way for Napster to continue its music file swapping service legally.
Just before Napster proposed part 2 of their plan,  they announced a fee based service plan that could be started as early as July '01. Using this service, Napster would be able to operate using copyrighted music legally. The plan will most likely be divided into TWO parts and they are as follows:
For Napster users who just want to be able to download music and have no desire to burn songs on to cds, part A--the basic service--will be what they will follow. Part A users will be charged between $2.95 and $4.95 and will be allowed to download a limited number of songs each month.
According to Time Magazine, when a user sends out a music file it will be "wrapped" in a protective layer that will digitally lock the file. Users won't know this is happening, but unless they have a special digital key provided by Napster, they won't get their music.
For those users who want to download music and want to create their own cds, they will be asked to pay possibly somewhere around $9.95. These users will be allowed to download an unlimited number of files and create their own disks.
Just as before in the basic service, the files will be wrapped in a protective digital lock and only be accessible with a special code.
Good Idea, Bad Idea
This is a great system Napster has contemplated using. Using this technology Napster will be able to "police" their service and keep track of music being shared over their system.
The only downside to this plan is that many current Napster users will more than likely leave for alternative FREE music swapping services. But Rachel Martin, a 12-year-old Napster user, said, "I would rather pay $6 to $10 a month for all the music I want, than to pay $20 for a CD with only around two songs on it I like."
On February 20, 2001, Napster offered a $1 billion dollar settlement to the record industry. Under this proposal, each of the major record labels (Sony, Warner, BMG, EMI, and Universal) sueing Napster would be paid $150 million annually. The other $50 million would be split among independent labels and paid annually (Beacon Journal). Each record label would get a certain portion of the money determined by the percentage of material traded by Napster users (New York Times)
Good Idea, Bad Idea
Great thinking by the Napster team to help compensate the record industry's losses. But not quite what the record industry is looking for.

According to Richard D. Parsons, co-chief operating officer of AOL Time Warner this 'doesn't solve the immediate problem.' He added that the record industry makes annual sales figures of $35 to $40 billion and this could be hurt by Napster. He commented, it "does not strike me as being in the ballpark" (New York Times).
March 2, 2001, Napster announced they would start voluntarily blocking songs.
Napster made the announcement during a court hearing on March 2nd. They have developed a way to sift through all the songs and screen each file name used on the Napster system.
"We have had a group of people working night and day on a process to block access to these files," said David Boies, Napster's attorney.
Included in the block were 5,600 songs given to Napster by the major record labels, and artists such as Dr. Dre and Metallica.
In order to successfully block these and other copyrighted songs the Napster team developed a step between uploading and viewing the index. In this way, they will block out specific file names. (News.com)
David Boies, Napster's attorney
Source: Time
Good Idea, Bad Idea
Much props to Napster and its team of experts. Finally, they have listened to the record companies and semi-complied with their demands.

But once again, Napster has run itself into a problem. The major glitch with trying to block the songs is that the people that have songs being shared haven't named them all properly. This creates a very time-consuming process, because now instead of looking for one specific file name, Napster has to search for variations of that file. (News.com)

For example, the Napster system may be searching for all files with the name La Vida Loca. The problem occurs when users mis-label the song--i.e. La Vida Loco. Or how about The Real Slim Shady. If a user types that really big eminem song, the system won't pick it up.

In order to avoid problems like this, Napster began "overblocking" songs and consequently blocked songs that were authorized (News.com). 

Now this file-naming could all be a scheme by die hard Napster users but those songs will be found eventually.
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