In order to survive Napster announced that it is developing a new member-based business model which it hopes will turn into a strategy for survival. German media giant Bertlesmann have developed this model with Napster that enables digital music files to be transferred from computer user to computer user (peer-to-peer sharing), but with new restrictions, such as limiting the ability to copy files onto a CD.

The technology under development would still allow users to share MP3 files, but with an added "protection layer" which would limit further use. Basically music that is protected by copyright will be protected. So a filtering system will be installed, but Napster warned that this will adversely affect performance of the system.

Under the new proposals, Napster users will subscribe to a 'basic membership' or a 'premium membership' plan, expected to cost between $2.95 and $9.95 per month. In the basic package, the number of songs downloaded would be limited while in the premium package there would be unlimited file transfers.

In the week ending 24/02/01, Napster offered the five major record companies a $1 billion deal over the next five years in an attempt to reach an agreement. The proposal was rejected. Sony Music Entertainment said that $1 billion was clearly inadequate for an industry worth $40 billion.

Bertlesmann is the only one of the five major record companies to have reached a deal with Napster and dropped the lawsuit against the online firm in October 2000. It has promised to make its catalogue available if Napster switches to a membership-only service.