German media giant Bertelsmann and music website Napster plan to introduce a subscription-based Internet music service.

Bertelsmann's music division, BMG, was among those suing Napster for copyright infringement. But under the agreement, BMG will withdraw its lawsuit against Napster and make its music catalogue available online.

The two firms said they would seek support from others in the music industry to establish Napster as a widely accepted membership-based service and invite them to participate.

Napster faces a lawsuit from the recording industry claiming the music-sharing site - which claims 38 million members - encourages music piracy.

Bertelsmann eCommerce Group will provide an unspecified loan to Napster and will have the possibility of taking a stake in Napster under the deal.

The new service "will provide Napster community members with high-quality file sharing that preserves the Napster experience while at the same time providing payments to rights holders, including recording artists, songwriters, recording companies and music publishers".

"This strategic alliance with Bertelsmann is the right next step for Napster," said Napster's chief executive, Mr Hank Barry. "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."

"Napster has pointed the way for a new direction for music distribution,"' said Mr Thomas Middelhoff, Bertelsmann's chairman and chief executive officer.

"We invite other record and publishing companies, artists and other industry members to participate in the development of a secure and membership-based service," he said.