A new study out may back up one of the arguments against Napster -- namely, once fans can download songs online for free, they won’t be willing to shell out money for CDs anymore.

The study, commissioned by digital rights management firm Reciprocal Inc., found that sales of CDs within a five-mile radius of colleges declined 4 percent over the last two years.

The study was conducted by VNU Entertainment Marketing Solutions, a sister company of SoundScan, a music sales measurement firm. It surveyed SoundScan reporting retail stores.

VNU said in contrast to the college stores, overall retail sales increased between January 1997 and March 2000.

A poll published by research firm Webnoize Inc. this month showed 73 percent of college students use Napster software at least once a month.

"It is now clear that the controversial practices of companies that provide directories and an easy interface to libraries of unlicensed music are in fact detrimental to the growth of the music business and those artists whom they claim to support," Reciprocal President Larry Miller said in a release. "Record sales are up despite the widespread use of MP3, not because of it."

Record industry concerned

Napster officials could not immediately be reached for comment. Napster's service helps users find and copy digital music files from one another.

Napster has been sued by artists Metallica and Dr. Dre over the issue, as well as by the Recording Industry Association of America. A spokeswoman for the RIAA told The Associated Press that the Reciprocal study "confirm(s) our worst fears."

Napster isn't the only digital music firm getting itself into hot legal water. TVT Records Inc., one of the largest U.S. independent record labels, filed suit against online music company MP3.com Inc. Wednesday, alleging violations of copyright law.

The TVT suit involves the My.MP3 service, which allows users to store music online and listen to it from any PC. MP3 has already lost rulings on this issue in suits brought against it by other record labels.

Earlier this week, artists testified before Congress regarding the digital music industry. While some artists have spoken out against firms such as Napster, others have supported the new innovations in music technology.

But even Napster's enemies urged lawmakers not to move too fast on new legislation.

"It's too early for legislation. It still isn't clear how this thing will shake out," said Tom Silverman, CEO of Tommy Boy Records.

By Margaret Kane, ZDNet News