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Napster deal: What now for Internet music?

MP3 player
The joy of MP3, but not all users are happy  

In this story:

Striking a deal

Getting paid

RELATED STORIES, SITES Downward pointing arrow

LONDON, England -- In the 1967 film classic, The Graduate, an overweening family friend proffers a single word of career advice to a doe-eyed Dustin Hoffman: "Plastics." Shawn Fanning, 19-year-old founder of the world's most popular online music-sharing site, Napster Inc., didn't bother waiting to graduate to pursue his own iconoclastic vision: "MP3s."

"Initially, I didn't intend to even build it out -- I was focused purely on establishing a 'proof of concept,'" Fanning testified last month before a session of the U.S. Senate Judiciary Committee.

Elaborating on his idea for a Web site that would corral under a single cyber-umbrella millions of digital music files -- in so-called "MP3" format -- ready for instant download on users' personal computers, Fanning added: "I figured that if I could make it work, others could too, and someone else would take it from there. There were many unknowns."

Fanning managed to "make it work" -- and how.

Since incorporating Napster in May 1999 using $15 million in seed money from angel investors, he has built the company into a Web-based musical emporium with 38 million regular visitors that traditional music companies have come to regard as a Death Star waiting to strike.

Napster has generally been viewed as a boon to music lovers as well as to struggling artists and bands denied the coveted imprimatur of big-name record labels.

Striking a deal

At the same time, its unfettered -- and unregulated -- model of person-to-person file swapping has opened it up to lawsuits and accusations that it is little more than an Internet pirate infringing on the hard-won property rights of traditional music companies.

Music store
Record companies say artists deserve to be paid for their music  

Against this backdrop, Napster's announcement on Tuesday of a strategic alliance with music-publishing leviathan Bertelsmann to turn Napster into a "membership-based service" is being viewed within the industry as a welcome step towards overcoming this buccaneering image.

Nonetheless, it remains to be seen how the deal with Bertelsmann's fledgling e-commerce unit, which will see Napster users pay a monthly charge of $4.95 (£3.40) for what has until now been an essentially free file-swapping service, will impact on the music distributors.

Robert Sandell, a spokesman for Virgin UK, a part of the EMI Group which has brought an industry-wide lawsuit against Napster, said he welcomed any deal that would harness Napster technology to an industry-approved framework for its application.

"This whole Napster thing, the way it's been reported, it's often appeared that the record industry is against the technology. It's not against the technology," Sandell said. "It's the application of the technology we are against."

"We would all love to set up a business model with Napster that respects copyright and means that artists get paid if they want to get paid…This deal is one of various ways that this problem can be tackled."

Sandell added that while he was unfamiliar with its details, the agreement with Bertelsmann seemed to signal that "Napster is recognising belatedly the fact that it has to work in concert with record companies and artists and not simply on its own without any regard for copyright."

Getting paid

Executives at other recording companies echoed Sandell's sentiments on Wednesday. Jeremy Lascelles, the managing director of Echo Recordings -- whose artists include Moloko, Big Yoga Muffin and Baby Bird -- and Christmas Music Publishing in London, called the deal "a victory for common sense."

"For me the issue has never been about caring about how music is delivered, it's about getting paid for it," Lascelles said.

Suggesting that the existing Napster concept of free file-swapping was untenable over the longer term, Lascelles added: "Clearly a deal like this was going to happen. If you take the old model to its natural conclusion it would be the end of the artists' ability to earn money from their music.

"Watching a movie, reading a book, listening to a record, there's a simple premise that there's a financial transaction that takes place somewhere down the line … and I don't think fundamentally people have a problem with that."

But another London-based recording executive, who requested anonymity, disagreed. He suggested that the Napster model had reinforced a notion among some consumers that music should be cost-free.

"There is this terrible (mind set) that because it's music and musicians, it should be free," the executive said. "But at the end of the day it's their livelihood."

MP3 enthusiasts themselves were divided over the significance of the deal on Wednesday, with some lambasting the arrangement as a betrayal.

"I guess you all know that your community of 38 millions (sic) will shrink to a minimum now!" wrote one incensed participant in the online Napster Forum, identified only by their cyber-ID, "zamzam."

"So what was all your talk about supporting Napster in the fight for 'Net freedom??? You are pathetic! I hope you will spend your money from the sale on a whole lot of fat food so you will dye (sic) of a heart attack before reaching 40!!! Shame on you! As if Napster is the only program out there …"

"Bennyy" drew on past historical innovations in sounding a similar note of defiance.

"Anybody hear of the guy who invented the tyre that wouldn't wear out, and how Goodyear bought him out and buried the technology so tyres wouldn't last forever? Everlasting light bulbs? Engines that run on water? Free electricity? Same thing again, man."

Napster and Bertelsmann strike deal
Oct. 31, 2000
The benefits of giving away music
October 24, 2000
Macster wins Napster endorsement
October 26, 2000
Analysis: The Napster knockoffs
October 24, 2000
Napster has changed Internet
October 2, 2000


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