PREMIUM SEARCH Search by job title, geography and build a list of executive contacts
That thud you just heard was the hammer coming down on Napster, the wildly popular MP3 music-sharing business. On July 26, after a mere 90 minutes of arguments during which U.S. District Court Judge Marilyn H. Patel basically ridiculed Napster's legal team, Patel slapped a preliminary injunction on the company, ordering it to shut its services down no later than midnight July 29, pending the outcome of what could be a long civil trial involving charges that Napster violates copyright laws.
Napster did get at least a temporary reprieve late on July 28, when two federal judges stayed Patel's injunction. Still, Patel's ruling was everything that the Recording Industry Association of America and the big record labels could have hoped for, and Napster CEO Hank Barry's worst nightmare.
The recording industry now appears intent on finishing the job, despite repeated protestations by music execs that they don't want to shut Napster down. So here's some free advice to the record labels: Sit down at the table with Barry and work this out. Why? Because killing Napster represents a far worse alternative than making peace with Barry and 20 million users.
The rub of Patel's ruling -- Napster must strip all copyrighted material form its system -- would force the service to shut down indefinitely. Even if Napster were technically able to continue operations, the 20 million users who have flocked to the site will likely dissipate quickly if the music tracks that attracted them disappear from the sharing menus.
PRO-NAPSTER RANTS. Not surprisingly, Patel's ruling has recording industry execs high-fiving. "It was a great day for all copyright holders is our feeling," says Dawn Bridges, the senior vice-president for corporate communications at EMI Group. The ruling also warmed the hearts of the struggling online music companies that have played ball with the labels. After all, they've been watching Napster steal their thunder and, possibly, their revenues. "I believe the ruling is a good thing for the music industry in the longer term," says Sean Ryan, president of online music search engine Listen.com (all five major labels have invested in the company).
But let's look at the merits of the two alternatives the RIAA and the labels have at this point. They could continue with their legal battle and likely kill Napster. But that could well alienate the millions of people who use the
service. In fact, it may be too late already. In the wake of the decision, message boards are filling up with pro-Napster rants. Not surprising, since Napster's genesis can be traced to a feeling prevalent among music buyers that they've been charged too much for years by the recording industry.
Now many are furious. Go to www.proboards.com/napster/, where 56,000 people have pledged to a boycott of labels affiliated with the RIAA. For their part, most college kids scoff that shutting down Napster will only prompt them to use other, harder-to-control file-sharing systems. "Regardless of them shutting down Napster, people will find ways of trading MP3s on the Net. And because they shut down one of the most popular online trading sites, more people will get interested in trading," says Ross Levitt, a junior at Rowan University in Glassboro, N.J., and a file-sharing afficionado.
"FINGER IN THE DYKE." According to Levitt, Napster clones such as iMesh, Scour Exchange, and CuteMX already have enough files available to satiate most MP3 fiends. Furthermore, Napster's death would likely also spur development in the open-source file-sharing area, where Gnutella continues to become more user friendly and FreeNet looms large on the horizon (see BW Online, 5/4/00, "Forget Napster: File Swapping Goes Way beyond Music").
Add to that open-source file-compression formats like Vorbis, and this wild card contingent could prove far harder to control than the centralized servers under Barry's control. "Frankly, I think the Napster ruling is a finger in the dyke trying to hold back something that's inevitable," says Finley Foster, the president of Superdistribution, a Virginia startup in the digital distribution and copyright-management business.
Furthermore, the labels might find themselves in a steady legal battle as they are forced to sue entity after entity for enabling people to trade MP3s. "The precedent that has been set here will mean all these other services eventually will be subject to legal action, says Barry. "I'm not just talking about Gnutella and FreeNet. I'm talking about AOL AudioFind. I'm talking the Yahoo! service that allows people to e-mail songs to each other."
MICROPAYMENTS. That may be painting the picture a bit too starkly, but the alternative sure seems more palatable. That is, the record industry could cut a deal with Napster. Such an arrangement could be structured any number of ways, from subscription models to micropayments for downloads to Napster coughing up a chunk of revenues from advertising. While the labels have struck such licensing deals with other companies, Napster's existing platform, with its massive aggregation of users, would allow both Napster and the labels to see faster, fatter returns.
Such a deal would soothe riled-up digital-music fans and perhaps spur more deals in the still murky area of file-sharing. "There's a market out there for digital music that's becoming more and more mainstream, and the copyright holders need to quickly fill the gap left by Napster to offer fairly priced material and widely distributed," says Listen.com's Ryan.
But if the labels drag their feet, they might soon face a far more formidable threat than Napster. That would be U.S. Senator Orrin Hatch, a Napster sympathizer who in congressional hearings earlier in July indicated that he favors more rapid and open digital distribution, and wouldn't be adverse to changing U.S. law to achieving that. Fact is, neither side wants Congress, which has a record of fouling up high-tech markets with murky laws, to go anywhere near old copyright precedents. "Hopefully, we are closing a chapter of fighting it out in the courtroom and will move to a chapter where we are offering constructive new ways to experience music on the Internet," says Michael Robertson, CEO and founder of online music site MP3.com.
A "BUYCOTT"? Meanwhile, Napster has put all its money on a legal appeal of Patel's decision -- a long shot at best -- and a whacky idea of a "buycott" of the record labels. "We want people to go out Saturday and Sunday and buy records by the people who they discovered on Napster. We think that will show the recording industry Napster does not hurt them," says Barry.
But Barry concedes that the labels aren't in the mood to listen: "I am disappointed and angered by my inability to communicate the benefits of this to the recording industry. I doubt that is going to change."
Napster is a powerful distribution system. Why kill it? The recording industry could ride this horse to a lucrative future. The minute the service shuts down, Napster's assets might irrevocably start to ebb into trackless cyberspace. That would be a tragic demise for this pioneering service. It's time for the record companies to stop getting even -- and start getting smart.
Salkever covers Internet technology and culture for Business Week Online Edited by Douglas Harbrecht
Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
