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                                                                   EXHIBIT 10.28
                                            ***TEXT OMITTED AND FILED SEPARATELY
                                                CONFIDENTIAL TREATMENT REQUESTED
                                          UNDER 17 C.F.R. SECTIONS 200.80(B)(4),
                                                            200.83 AND 240.24B-2


                              SETTLEMENT AGREEMENT

        This Settlement Agreement and Mutual Release (hereinafter "Settlement
Agreement") is entered into effective as of July 26, 2000 by and between
MP3.COM, INC. ("MP3" herein) on the one hand, and Capitol Records, Inc.
("Capitol") and all of its affiliated and related entities (collectively with
Capitol, "Company") on the other hand, both of which are sometimes collectively
referred to as the "Parties" and is made with reference to the following:

1.      RECITALS:

        a)      Capitol is a Plaintiff and MP3 is the defendant in the following
                litigation (the "Litigation") pending in the United States
                District Court for the Southern District of New York captioned
                UMG RECORDINGS, INC., SONY MUSIC ENTERTAINMENT INC., WARNER
                BROS. RECORDS INC., ARISTA RECORDS INC., ATLANTIC RECORDING
                CORPORATION, BMG MUSIC D/B/A THE RCA RECORDS LABEL, CAPITOL
                RECORDS, INC., ELEKTRA ENTERTAINMENT GROUP, INC., INTERSCOPE
                RECORDS, AND SIRE RECORDS GROUP INC., Plaintiffs, vs. MP3.COM,
                INC., Defendant, Case No. 00 Civ. 0472 (JSR). Each of the
                Parties to this Settlement Agreement desires to permanently
                settle and resolve any and all claims, disputes, issues or
                matters that exist between them as of the date of this
                Settlement Agreement as to the MyMP3.com service as set forth
                below and to dismiss with prejudice the Litigation.

        b)      NOW, THEREFORE, in consideration of the mutual promises,
                covenants and agreements set forth herein, and subject to the
                terms and conditions set forth below, the Parties desire to, and
                hereby do, resolve their differences and agree as follows:

2.      SETTLEMENT TERMS:

        a)      In consideration hereof, concurrently with the execution hereof
                and of the License Agreement referred to in subparagraph (e) of
                this Section 2 below, and the execution and filing of the
                Dismissal With Prejudice of the Litigation as described
                hereinbelow, MP3 will pay Company's Virgin Holdings, Inc.
                affiliate an amount equal to [...***...] (the "EMI Amount"),
                plus [...***...] by wire transfer of immediately available funds
                to an account designated by Company.

        b)      [...***...]


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                i)      [...***...]



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                ii)     [...***...]

                        a)      BMG Entertainment, - [...***...];

                        b)      Warner Music Group, Inc. - [...***...];

                        c)      UMG Recordings, Inc. - [...***...]; and

                        d)      Sony Music Entertainment, Inc. - [...***...].

                iii)    [...***...]

                iv)     [...***...]



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                v)      [...***...]

                vi)     [...***...]

        c)      [...***...]



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        d)      [...***...]

        e)      Concurrently herewith, Company and MP3 are entering into a
                License Agreement with respect to, inter alia, the licensing to
                MP3 of the right to stream master recordings controlled by
                Company via the MyMP3 service(the "License Agreement").

3.      RELEASES

        a)      Company Release. Company, on behalf of itself and its agents,
                employees, representatives, partners, owners, officers, parents,
                shareholders, directors, subsidiaries, affiliates, attorneys,
                transferees, predecessors, successors, and assigns, solely to
                the extent it can legally bind such entities, does hereby
                irrevocably release, acquit and forever discharge MP3 and each
                of its agents, employees, representatives, partners, owners,
                related entities, officers, parents, shareholders, directors,
                subsidiaries, affiliates, attorneys, transferees, predecessors,
                successors, and assigns, jointly and severally (the "MP3
                Releasees"), of and from any and all debts, suits, claims,
                actions, causes of


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                action, controversies, demands, rights, damages, losses,
                expenses, costs, attorneys' fees, compensation, liabilities and
                obligations whatsoever (hereinafter referred to collectively as
                "Claims"), suspected or unsuspected, known or unknown, foreseen
                or unforeseen, arising at any time up to and including the date
                of this Settlement Agreement, which Company may now have or at
                any time heretofore may have had, or which at any time hereafter
                may have or claim to have against the MP3 Releasees, solely to
                the extent they relate to, arise from, or concern the MyMP3.com
                service up to the date hereof, the Litigation or the subject
                matter thereof and with respect to the Compositions and sound
                recordings included in the MyMP3.com service as of the date
                hereof (hereinafter "Company's Released Claims"). Nothing
                contained in the Release is intended to release any claims for
                any activity of MP3 occurring after the date of this agreement
                nor for any Licensed Performances.

        b)      MP3 Release. MP3, on behalf of itself and its agents, employees,
                representatives, partners, owners, related entities, officers,
                parents, shareholders, directors, subsidiaries, affiliates,
                attorneys, transferees, predecessors, successors, and assigns,
                solely to the extent it can legally bind such entities, does
                hereby irrevocably release, acquit and forever discharge Company
                and each of its agents, employees, representatives, partners,
                owners, related entities, officers, parents, shareholders,
                directors, divisions, subsidiaries, affiliates, attorneys,
                transferees, predecessors, successors, and assigns, jointly and
                severally (the "Company Releasees"), of and from any and all
                Claims, suspected or unsuspected, known or unknown, foreseen or
                unforeseen, arising at any time up to and including the date of
                this Settlement Agreement, which MP3 may now have or at any time
                heretofore may have had, or which at any time hereafter may have
                or claim to have against the Company Releasees, relating to,
                arising from, or concerning the MyMP3 service, the Litigation or
                the subject matter thereof and any counter claims which MP3
                could have asserted in connection with the Litigation
                (hereinafter "MP3's Released Claims").

        c)      Statutory Waiver. Company's Released Claims and MP3's Released
                Claims are collectively defined as the "Released Claims". With
                respect to the Released Claims, all rights under California
                Civil Code Section 1542 (and any other law of similar effect),
                are hereby expressly waived by the Parties, and each of them,
                notwithstanding any provision to the contrary. Section 1542
                provides as follows:

                        "A general release does not extend to claims which the
                        creditor does not know or suspect to exist in his favor
                        at the time of executing the Release, which if known by
                        him must have materially


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                        affected his settlement with the debtor."

        d)      The Parties, and each of them, and their representatives, and
                assigns expressly waive and release any right or benefit which
                they have or may have under Section 1542 of the Civil Code of
                the State of California, to the fullest extent that they may
                waive all such rights and benefits pertaining to the matters
                released herein. It is the intention of the Parties, and each of
                them, through this Settlement Agreement, and with the advice of
                counsel, to fully, finally and forever settle and release all
                such matters, and all claims relative thereto, in furtherance of
                such intention.

        e)      Dismissal With Prejudice. Company, concurrently with the
                execution and delivery hereof and payment of the EMI Amount and
                the Advance payable under the License Agreement shall execute
                and deliver to MP3 a Dismissal With Prejudice of the Litigation,
                which MP3 shall file, in the form annexed hereto as Exhibit A.

4.      NOTICES

        a)      Any notice, demand, request, consent, approval, or communication
                that either Party desires or is required to give to the other
                Party is to be addressed and served on or delivered to the other
                Party at the address set forth below. Any Party may change its
                address by notifying the other Party of its change of address in
                writing.

                i)    The addresses for MP3 are as follows:

                      MP3.com, Inc.
                      4790 Eastgate Mall
                      San Diego, CA 92121
                      Attn: General counsel and VP Legal

                      With simultaneous copies to:

                      Gary Stiffelman, Esq.
                      Ziffren, Brittenham, Branca & Fischer
                      1801 Century Park West
                      Los Angeles 90067

               ii)    The address for Company is as follows:

                      EMI Recorded Music - North America
                      1290 Avenue of the Americas
                      New York, NY 10104


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                      Attn:  Alasdair McMullan, Vice President Legal Affairs

                      With simultaneous copy to:

                      EMI Recorded Music, New Media
                      1750 North Vine Street
                      YV Building
                      Los Angeles, CA 90028
                      Attn:  Robyn Glaser, Vice President, Business and
                             Legal Affairs

5.      MISCELLANEOUS PROVISIONS

        a)      By entering into this Settlement Agreement, no Party admits or
                acknowledges that they committed any wrongdoing on their part.

        b)      This Settlement Agreement and any controversy which might arise
                therefrom shall in all respects be interpreted, enforced and
                governed by the laws of the State of New York applicable to
                agreements made and to be fully performed therein. All parties
                consent to the sole and exclusive personal jurisdiction and
                venue in the United States District Court for the SDNY, or if
                federal jurisdiction is unavailable, in the Supreme Court of the
                State of New York located in New York County, and agree that all
                disputes or litigation regarding this Settlement Agreement shall
                be submitted to and determined by said court, which shall have
                sole and exclusive jurisdiction. Subsequent changes in New York
                law or federal law through legislation or judicial
                interpretation that creates or finds additional or different
                rights and obligations of the Parties shall not affect this
                Settlement Agreement.

        c)      This Settlement Agreement, together with the License Agreement,
                is the entire agreement between the Parties with respect to the
                Released Claims or subject matter of this Settlement Agreement
                and supersedes all prior and contemporaneous oral and written
                agreements and discussions pertaining to the Released Claims or
                subject matter of this Settlement Agreement. This Settlement
                Agreement may be amended only by a written agreement executed by
                each of the Parties hereto. No breach of the License Agreement
                may or shall be deemed a breach of this Settlement Agreement
                other than failure to pay the advance due thereunder.

        d)      No breach of any provision, representation or warranty
                ("Provision") hereof can be waived unless in writing signed by
                the party to be charged with such a waiver. Waiver of any one
                breach of any Provision hereof shall not be deemed to be a
                waiver of any other breach of the same or any other Provision
                hereof.

        e)      This Settlement Agreement shall be binding upon and inure to the
                benefit of


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                the Parties hereto and its respective agents, employees,
                representatives, partners, parents, subsidiaries, divisions,
                affiliates, officers, related entities, licensees, directors,
                shareholders, investors, attorneys, transferors, transferees,
                predecessors, successors, trustees in bankruptcy, and assigns
                and each and every entity or person which now or during the
                pendency of the Litigation was a division, parent, successor,
                predecessor, division, affiliate, officer, director,
                shareholder, investor, employee, attorney, transferor,
                transferee, or subsidiary for each Party and its respective
                legal successors and assigns, to the extent each party can bind
                such parties.

        f)      The Parties represent and warrant that each of them have not
                assigned all or any portion of any claim pertaining to the
                Released Claims to any person or entity. In the event any claims
                are made by any third persons or entities based upon any
                purported assignment or any such liens or claims are asserted in
                connection with the Released Claims or proceeds of the
                Settlement Agreement, then the Party who has breached his
                representation or warranty contained in this Section 5(f) agrees
                to indemnify and hold harmless the other Party from any said
                claims being made.

        g)      In the event that any covenant, condition or other provision
                herein contained is held to be invalid, void or illegal by any
                court of competent jurisdiction, the same shall be deemed
                severable from the remainder of this Settlement Agreement and
                shall in no way affect, impair or invalidate any other covenant,
                condition or other provision herein contained. If such
                condition, covenant or other provisions shall be deemed invalid
                due to its scope or breadth, such covenant, condition or other
                provision shall be deemed valid to the extent of the scope or
                breadth permitted by law.

        h)      Each of the Parties hereto represent and declare that in
                executing this Settlement Agreement, it has relied solely upon
                its own judgment, belief and knowledge, and on the advice and
                recommendations of its own independently selected counsel,
                concerning the nature, extent and duration of its rights and
                claims and that it has not been influenced to any extent
                whatsoever in executing the same by any representations or
                statements covering any matters made by the other Party hereto
                or by any person representing it.

        i)      The Parties hereto and each of them, further represent and
                warrant that they have carefully read this Settlement Agreement
                and know and understand the contents hereof, and that they
                signed this Settlement Agreement freely and voluntarily and have
                had the benefit of the advice of legal counsel before executing
                this Settlement Agreement. Each of the representatives executing
                this Settlement Agreement on behalf of their respective
                corporations or partnerships is empowered to do so and thereby
                binds his respective corporation or partnership. The Parties
                hereto acknowledge and agree that


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                this Settlement Agreement shall be deemed to have been drafted
                jointly by the Parties hereto. Ambiguities shall not be
                construed against the interest of either party by reason of it
                having drafted all or any part of this Settlement Agreement.

        j)      This Settlement Agreement may be executed in counterparts and
                when each Party has signed and delivered at least one such
                counterpart to the other Party, each counterpart shall be deemed
                an original, and all counterparts taken together shall
                constitute one and the same agreement, which shall be binding
                and effective as to all Parties. This Settlement Agreement may
                be executed via facsimile signatures, which shall have the same
                force and effect as if they were original signatures to be
                followed by executed originals.

        k)      Each party hereto represents and warrants that it has all
                necessary right, title, and authority to enter into this
                Settlement Agreement, to grant the rights and interests herein
                granted, and to perform all of its obligations under this
                Settlement Agreement.

        l)      The provisions and existence of this Settlement Agreement (a)
                may not be cited by any party hereto as an admission of any
                issue of fact or law; and (b) shall not be disclosed to any
                third party or entity, except (i) as required by law or
                regulation or to enforce the terms hereof, (ii) to the parties
                respective professional advisors and executives on a "need to
                know" basis, provided that such parties agree to be bound by
                these confidentiality provisions, and (iii) to the Internal
                Revenue Service, or any state or municipal taxing authority or
                other regulatory body having jurisdiction. The parties may also
                disclose these terms as required in connection with stock
                exchange, shareholder, internal, governmental or regulatory
                requirements, or external audit or similar disclosure
                requirements. [...***...] It is understood and agreed that if
                the foregoing provision is breached by any party hereto, the
                non-breaching party may be entitled to injunctive or other
                equitable relief to prevent such a breach. Any non-breaching
                party seeking such injunctive relief will not be obligated to
                secure any bond or give any security in connection with the
                application for such relief. The right to seek injunctive relief
                under this paragraph shall be in addition to all other rights,
                remedies and forms of relief which may be available. In
                furtherance of the foregoing, any and all press releases
                relating to the subject matter hereof shall not be released
                until the timing and contents of such press release has been
                approved in writing by Company's Vice President, Legal Affairs;
                provided, the parties agree that a press release with respect to
                this Settlement Agreement shall be mutually agreed and issued
                within a reasonable period after execution hereof, and in any
                event within any time frame required by law or regulation.


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        IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside its name, respectively.

                                    Capitol Records, Inc.


Dated: 26 July 2000                 By: /s/ Signature Illegible
                                          Its: Secretary


Dated: 26 July 2000                 MP3.com, Inc.


                                    By: /s/ Paul Ouyang
                                    Its: EVP & CFO


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UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

------------------------------------------

UMG RECORDINGS, INC., SONY MUSIC
ENTERTAINMENT INC., CAPITOL RECORDS, INC.,        Case No.: 00 Civ. 0472 (JSR)
and INTERSCOPE RECORDS,

                  Plaintiffs,
        v.

MP3.COM, INC.,

                  Defendant.

------------------------------------------

                   STIPULATION OF DISMISSAL WITH PREJUDICE OF
                         PLAINTIFF CAPITOL RECORDS, INC.

Plaintiff Capital Records, Inc. and Defendant MP3.com, Inc. hereby stipulate
that all claims of plaintiff Capital Records, Inc. herein are dismissed with
prejudice, pursuant to rule 41 of the Federal Rules of Civil Procedure.
Plaintiff Capitol Records, Inc. and defendant MP3.com, Inc. shall bear their own
costs and expenses, including attorneys' fees.

Dated:  New York, New York
July 28, 2000
                                            ARNOLD & PORTER



                                            By: /s/ Robert A. Goodman
                                               --------------------------------
                                               Robert A. Goodman
                                               399 Park Avenue
                                               New York, NY  10022
                                               (212) 715-1000



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                                               - and -

                                               Hadrian R. Katz
                                               555 Twelfth Street, N.W.
                                               Washington, D.C. 20004
                                               (202) 942-5000

                                               Counsel for Plaintiffs
                                               Capitol Records, Inc.

                                               COOLEY GODWARD LLP



                                            By: /s/ Michael G. Rhodes
                                               --------------------------------
                                               Michael G. Rhodes (MR-0426)
                                               4365 Executive Drive
                                               Suite 1100
                                               San Diego, CA 92121-2128
                                               Tel: (858) 550-6000
                                               Fax: (858) 453-3555

                                                    -and-

                                            ORRICK, HERRINGTON & SUTCLIFFE LLP


                                            By: /s/ Jeffrey A. Conciatori
                                               --------------------------------
                                               Jeffrey A. Conciatori (MC-6858)
                                               666 Fifth Avenue
                                               Suite 1100
                                               San Diego, CA  92121
                                               (212) 506-5000

                                               Counsel for Defendant
                                               MP3.com, Inc.


SO ORDERED.


 Jed /s/ Rakoff
----------------------------------------
Hon. Jed Rakoff
7-28-00


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