The substance turned out to be harmless bird droppings, Sheriff Rick Trapp said." -- Lawrence (Kan.) Journal-World It's either a pipe dream or prophecy, but Bertelsmann isn't giving up on Napster, the music file-sharing site currently shut down amid legal wrangling. BusinessWeek has learned that the German media giant is kicking in an additional $25 million to keep Napster alive. That's on top of the $60 million "loan" Bertelsmann gave Napster a year ago.
Why throw more money at something that has essentially no revenue? Before lawsuits forced it to suspend file sharing, more than 80 million people downloaded Napster software allowing them to swap music tracks for free. No music site ever attracted a fraction of that traffic. Now, using new software that preserves file-sharing while protecting copyrights, Bertelsmann plans a last-ditch effort to convert people into paying subscribers. Napster will use the $25 million to re-launch as a paying site. "We think even more than before there's a real business here," says Andreas Schmidt, CEO of Bertelsmann eCommerce Group.
He's hoping quarreling music companies--who so far have balked at a legal settlement--will recognize that it's in their interests to work with Napster. With two new music industry sites slow to get off the ground, users are flocking to outlaw alternatives. That's the last thing the industry needs after suffering a 5% sales decline in the first half. "Napster is ready to roll," says Schmidt. "Now, it's up to the industry to finally take the opportunity to build a viable business." Even as United warns it "will perish" next year without major cost-cutting, scrappy low-fare upstarts--including JetBlue, AirTran (AAI
), and Frontier (FRNT
)--are showing surprising resilience.
And they're seizing opportunities opened up by the recent retrenchment of the major carriers. AirTran, for instance, will start service to Baltimore in December, earlier than planned, thanks to the demise of US Airways' low-fare MetroJet. JetBlue, which has raised nearly $100 million from investors since September 11, is adding seven new flights to Florida, where rivals have trimmed capacity by a third. "There's a feeling that we could come out of this better positioned than going in," says Frontier President Jeff Potter.
Lower costs and greater flexibility are key, especially as fares and revenues fall. And the small fry depend less on last-minute, high-fare business travelers who were already pulling back. Plus, as biggies cut meals and service, they'll have a hard time claiming a better product than low-cost rivals pushing new safety features.
Others are smelling opportunity, too. "I've had so many people call me about starting an airline lately," says Darryl Jenkins, director of George Washington University's Aviation Institute. Crazy? Maybe. But no one ever called the airline business sane. Wait times at security points are up since September 11. Here are the airports with the longest and shortest lines:
E-mail survey of 2,878 adults traveling Sept. 12 to Oct. 2
Data: Travelocity.com Members of the House of Representatives have a new way to keep up with the latest anthrax cases and other breaking news: All 435 have been given BlackBerry wireless units. Chairman of the House Administration Committee Robert Ney (R-Ohio), concerned about moribund cell-phone service after September 11, ordered the devices and one year of e-mail service, at a cost of $600,000.
But there's a problem. Amid the chaos of anthrax and the devices' rapid disbursement, many members skipped the training sessions and don't know how to use them. Ney admits some staffers are scrambling to teach their bosses. "There's a couple of them who need to be re-keyed technologically," he says. As for the Senate? No orders yet. Is this the death of snail mail? Are e-mail, online payments, postcards, and see-through envelopes the wave of the future?
With anthrax scares leaving us afraid to open our mailboxes, that seems to be the case. "Certain chunks of the mail stream will either be delivered electronically or will disappear altogether," says Michael Critelli, CEO of mail and document manager Pitney Bowes (PBI
). Consumers are suddenly showing interest in electronic billing: Princeton eCom Corp. says sign-ups for its electronic mortgage payments have increased more than 20% in recent weeks, although it attributes that to other factors besides anthrax.
Hallmark will soon begin printing postcards for Christmas. Transparent envelopes are hot, too: MasterCard ordered 14 million from Brenner Paper for an upcoming marketing pitch--by chance just before September 11. Steve Johns, president of PrintMailers, a Houston outfit that handles direct mail for 250 companies, is advising clients to "put more identification on their outside envelopes, [and] move from envelopes to postcards." Some publishers are instructing printers to leave off the cornstarch usually applied to shrink-wrapped magazines to prevent them from sticking together. Gone, too, are those handwritten fonts on mass solicitations.
Some mail promotions are backfiring. To trumpet a merger with another firm specializing in environmental law, attorneys at Stoel Rives in Portland, Ore., mailed out 50,000 cards--in bumpy envelopes containing seeds, too. Scared recipients called 911. Publishers Clearinghouse created alarm by mailing 1 1/2-lb. packages of powdered detergent as a bonus to customers. If all this results in less junk mail, that would be at least a small compensation. Hawaii, badly hurt by the falloff in tourism since September 11, is trying to do something about it--in particular, lure back the 25% of tourists who come from Japan. Trips by these big spenders, the most frequent foreign visitors to Hawaii, are down 40% since last year. The state stands to lose up to $1 billion in revenue if Japanese arrivals don't pick up, according to the Hawaii Visitors & Convention Bureau in Tokyo. "[Japanese] people are worried about their safety," says a spokeswoman.
To drum up business, Governor Benjamin Cayetano led a five-day emergency mission to Osaka and Tokyo starting on Oct. 8 and timed to coincide with a big ad campaign. Hawaii is spending up to $7 million to promote itself as ready-to-please, with full-page ads in all five major Japanese dailies carrying an appeal from Cayetano addressed "Dearest Citizens of Japan."
JTB, Japan's biggest travel agency, says many who were planning trips to Hawaii are booking domestic vacations instead. "Travel within Japan is up 20% to 30% over last year," a JTB spokeswoman says. Among the most popular destinations: Tokyo Disneyland.