Bertelsmann BMG and Napster are teaming up to develop a peer-to-peer file sharing service, the German company announced yesterday.

Bertelsmann's newly formed eCommerce Group, BeCG, and Napster have developed a membership-based service that will provide file-sharing capabilities that "preserves the Napster experience while providing payments to the rights holders", the company said.

Napster and Bertelsmann will look for support from others in the music industry, aiming to help Napster become established as a membership-based service, the companies said.

Once Napster launches the service, BMG will withdraw its lawsuit against Napster and make its music catalogue available. Bertelsmann will provide Napster a loan to develop the new service. Napster CEO Hank Barry said the alliance is the "right step" for Napster.

Earlier this year the Recording Industry Association of America (RIAA) filed a suit against Napster on behalf of the five major record labels, including BMG, alleging copyright infringement. The RIAA asked for damages and an immediate stoppage of the peer-to-peer file sharing service.