Napster officials, struggling to keep the company afloat in the face of a potential court-ordered shutdown, offered to pay record labels $1 billion over five years to license their music for use on the file swapping service.

At a Tuesday (2/21) press conference, Napster interim CEO Hank Barry laid out for reporters a plan to pay the five major labels $150 million annually for five years in exchange for the licenses, as well as $50 million annually to independent labels and artists. Barry also said that Napster is willing to grant equity in Napster to the major labels. Napster already has entered a similar agreement with major label BMG Entertainment.

Napster unveiled the details of a new, subscription-based service on Tuesday. Though definitive pricing structures haven’t been decided upon, “Basic Memberships” would probably would run from $2.95 to $4.95 per month, and would allow a limited number of file transfers. “Premium Memberships” would cost between $5.95 and $9.95 per month, and would offer unlimited file transfers. Napster hopes to launch the service this summer.

According to various press reports, the major labels feel that Napster's proposal raises many questions, such as whether Napster users will pay for the service, and whether the company can build a system to securely transfer files. Napster has been in settlement discussions with the major labels for months.

The Recording Industry Association of America, which represents the major labels, quickly dismissed Napster’s proposal via a statement issued by president and CEO Hillary Rosen, saying that “it is unfortunate that Napster still has not developed a legitimate system that protects the interests of both consumers and creators."

Last week, an appeals court largely upheld a July ruling by U.S. District Judge Marilyn Hall Patel, who found Napster guilty of copyright infringement. Patel could issue a new injunction at any time that could immediately shut down the file-swapping service. Rosen referred to this ongoing legal battle in her statement:

“To the management of Napster I say again: You claim you want to be legitimate, and negotiate licenses based on real business models. I urge you to act accordingly. Stop the infringements, stop the delay tactics in court, and redouble your efforts to build a legitimate system. Our member company plaintiffs have always said that they stand ready and willing to meet individually with you to discuss future licenses. This path would be more productive than trying to engage in business negotiations through the media.”