Napster looks to the future while users cling to the past

The Associated Press
Wednesday February 14, 2001

SAN FRANCISCO — If Napster Inc. wants to parlay Monday’s legal defeat into financial victory, the song-swap sensation of the Internet has its work cut out. 

Napster has said it plans to start charging subscription fees by summer, but major record labels haven’t yet been persuaded to work side-by-side with the Redwood City-based company and, as a result, will not willingly part with titles from their coveted artists. 

And it’s not clear whether the one label that does support Napster, Bertelsmann AG, will continue to finance the Internet upstart in the face of a losing legal battle. 

“This is neither the beginning nor the end of Napster,” said Andreas Schmidt, head of Bertelsmann AG’s eCommerce group. “Now it’s really important to move to the future with a membership-based service.” On Monday, the 9th U.S. Circuit Court of Appeals ordered U.S. District Judge Marilyn Hall Patel to rewrite her injunction against Napster and focus specifically on getting the company to stop enabling copyright infringement. 

Bertelsmann insists it will continue to support Napster financially. But the German media giant must realize that even legitimate online music retailers have failed to win over the number of rabid fans that Napster has with free MP3s. 

Napster estimates its free music model has attracted more than 50 million registered users. MP3.com, for all its dealmaking prowess with major record labels, refuses to say how many people have signed up for the its subscription-based streaming song service called My.Mp3.com. 

MP3.com only relaunched the service after reportedly paying millions to the Big Five record labels – Sony, Universal, BMG, EMI and Warner – to settle a copyright infringement suit of its own. 

EMusic.com tried a similar route, allowing computer users to buy songs at 99 cents each, or subscribe for music downloads for as low as $9.99 a month. EMusic’s business hasn’t dried up completely, but the company has reported more bad news than good and recently laid off 36 percent of its staff. 

EMusic’s current number-one selling album is “Long Tall Weekend” by the quirky band They Might Be Giants. That band is nowhere to be found among Billboard’s top 100 albums, much less its top 10. Labels managing Britney Spears and Backstreet Boys aren’t yet ready to part with their premium artists online. 

Nonetheless, EMusic CEO Gene Hoffman lauded the ruling against Napster. 

“We are pleased that the district court will be issuing a new injunction against Napster that will effectively block the unauthorized distribution of music files,” Hoffman said. 

The true test of Napster’s oft-mentioned “next generation” application is whether it can will offer any reason to exist other than free MP3s. Chat rooms? Been there — as have countless other Web sites. Unsigned artists? Others have done that too, and failed. 

Riffage.com went bust after little more than a year of promoting unknowns and webcasting concerts. The Internet Underground Music Archive, a pioneering online haven for garage bands, was acquired by EMusic and promptly closed its service to new artists after the funding floundered. 

Is Napster confident it can improve on these efforts while protecting its users’ rights to “personal use” sharing as allowed by federal law? 

“We’re fighting for this principle and we believe that the actions that the users are engaged in is not copyright infringement,” said Napster CEO Hank Barry. “While we believe this is legal, respecting the court decision otherwise, it is clearly not industry supported.” 

Though Napster vows to fight the appeals court ruling, and any subsequent new injunction, the company’s music free-for-all may be doomed. 

“I’m bumming,” said John Nock, 35, of Morgantown, W.Va., who said the ruling could prevent him from mixing more tapes for his June wedding. 

“We’ll all find a way to get around it,” said Faisal Reza, a student at the Massachusetts Institute of Technology. “People who want music will always be one step ahead of people trying to stop them.” 

Napster’s service is still up and running and the appeals court did not mention any liability of users who choose to continue downloading the application. But the MP3 trading appears threatened. 

A three-judge panel of the appeals court said it was apparent that “Napster has knowledge, both actual and constructive, of direct infringement.” 

In upholding a lower court judge’s injunction that would shut down Napster, the panel said the recording industry “would likely prevail” in its suit against the file-swapping service. 

The heavy metal group Metallica, the first band to demand its songs be removed from Napster, saw the ruling as vindication. 

“We are delighted that the court has upheld the rights of all artists to protect and control their creative efforts,” the band said in a statement. “Napster was wrong in taking not only Metallica’s music, but other artists who do not want to be a part of the Napster system.” 

The Recording Industry Association of America concurred. 

“It’s time for Napster to stand down and build their business the old-fashioned way. They must get permission first,” said RIAA President Hilary Rosen. 


On the Net: 

Napster: http://www.napster.com 

Recording industry: http://www.riaa.com 

EMusic: http://www.emusic.com 

MP3: http://www.mp3.com 

Ninth Circuit: http://www.ce9.uscourts.gov