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Federal Appeals Court About to Determine Napster's Fate

Aired February 12, 2001 - 1:02 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU WATERS, CNN ANCHOR: We expect to hear, any second now, whether the sounds of silence will overtake Napster. A federal appeals court in San Francisco is about to rule on a lower court's order that the on-line music site purge itself of all copyrighted material.

As you may know, Napster is a hugely popular service whose members upload and download CD quality music without paying a dime to the copyright holders; and therein lies the rub, at least as far as the major record labels are concerned.

They claim music piracy -- while Napster maintains home recording for private use -- are protected under federal law. Now, this case has had a longer life than most hit songs in some groups. Let's get more on what may be the final word; and we're expecting it any moment now. Here's CNN's Rusty Dornin in San Francisco.

What do you know, Rusty?

RUSTY DORNIN, CNN CORRESPONDENT: Well, Lou, at this point, we, along with the rest of the world, are waiting for the court to post the decision on the Internet. Now, this is not the first time they will do that: post it on the Internet, but it is the first time we've been given the head's up.

Now, we keep -- we got our page up here now on the Ninth Circuit Opinions. Of course, you have to keep reloading it. And you do end up having the same kinds of problems in a situation like this that often Napster users have. Too many people trying to log into one site. Several times, we were trying to get on, we could not even get into the site. Now, we've been reloading the pages, but it appears that the decision has not yet come.

Now, three appellate court judges have been deciding this since last October; one in Seattle, one in Phoenix, and one in Los Angeles. They are deciding whether to uphold an injunction, and that would shutdown Napster and stop its music-swapping service -- pending the outcome of a lawsuit. I mean, the whole thing started in December of 1999, of course, when the recording industry filed a lawsuit against Napster for copyright infringement, and that was followed, also, by the band Metallica filing a similar lawsuit.

Now, apparently, over the weekend, millions of users -- there's one agency called Webnoise (ph) that monitors digital entertainment. They claim that 250 million songs were downloaded over the weekend by 1.5 million users. Napster did tell us this morning that there's no real way to measure it; all they know -- there are a lot of people out there that are trying to get in at the last minute and download their favorite songs.

Now, it's unclear if the court upholds the injunction; how soon Napster would be shutdown. Apparently, it wouldn't happen immediately; the service would probably continue for the next few days or for the next week. Now, Napster, of course, has made a deal with Bertelsmann, which is a German music giant -- they withdrew their part of the lawsuit against Napster, in exchange for coming up with some kind of a deal where Napster could charge some sort of fee. That could be available by some time this summer.

Now, Napster, of course, was hoping the other record companies would jump on board and be part of that, but that hasn't happened so far. We spoke with the recording industry representative this morning, who said they really had not made a final decision on what they would do; they wanted to see what the judges decided, and what the outcome of this decision was. And, we're waiting for that decision.

So far, nothing has come up quite yet. But as I said before, it's been very difficult to get into the site all morning long. So, Lou, we are waiting along with everybody else to see what the judge's decision is in this precedent-setting case.

WATERS: Well, we will watch you watch here, as you glance over to find out what's going to happen here. But, it would seem to suggest that Napster users are -- what you said, about 250 million songs downloaded over the weekend -- it would seem to indicate that Napster users aren't as optimistic as perhaps Napster itself, about the outcome of this appeal.

DORNIN: I think, of course, everyone is just making sure they download their favorite songs, no matter what happens, before any fee- based service might come on-line. You know, there are alternative sites, but none of them have really been nearly as successful as Napster, and not as easily accessible as Napster has been. So, people, you know -- it is really up in the air at this point what will happen.

The interesting thing, though, Lou is of course, that during this whole thing, that the record company apparently has made like $500 million more this year in CD sales.

WATERS: Wow. We'll just have to wait and see what happens, and we know you will be watching the screen there. As soon as we know about it, we will pass it right along.

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