NAPSTER: Triple Jump for a  Web Favorite?

The now-landmark Napster suit has see-sawed for months, with no end to the
wrangle in sight. Mercifully, the numerous diametrically opposite twists and
counter-twists have been there to make sure that the interest doesn’t wane

The much anticipated but less talked-about deal finally seems to be under
way. Three of the world’s major recording companies, who are still trying
their every bit to shut Napster’s existing song-swap service down, through a
copyright lawsuit in a US court, may finally end up authorizing the service.

Though the report has not been confirmed by any of the concerned company
officials, chances of the deal being materialized are strong, according to
onlookers. Once the face saving mechanisms are worked out, Napster’s service
will likely transform into a secure, pay service that furnishes royalties to its

This may bring to close the case that began in December 1999, barely two
years after the US entertainment industry had won a major legislative battle in
the form of Digital Millennium Copyright Act (DMCA). Who would have thought that
an Internet start-up called Napster would render so important and potent a law
incapable so soon?

The recording majors, the online music providers, and the artists and music
lovers are keeping a close watch on the proceedings at the 9th US circuit court
of appeals, where US district judge Marilyn Patel is patiently listening to some
of the most complex copyright infringement arguments.

What favors Napster?

Is it just the mammoth online music community? To an extent, yes. But more
than that it’s the upcoming Web economy that bets its fortunes on this rapidly
growing community. And the suit is viewed by many as a now-or-never opportunity
to upset the old-economy apple cart.

The lawsuit has amply and clearly demonstrated the immense potential of
online subscription services. Even the major labels have been quick to see and
realize this. Bertelsmann AG was first to break off from others in October 2000,
and do a prudential about turn. It agreed to lend Napster about $60 million and
drop its lawsuit if Napster succeeded in transforming itself into a paid

So even as Recording Industry Association of America (RIAA) continued to
bludgeon Napster in the court, three record companies, namely AOL Time Warner,
Bertelsmann and EMI Group entered a strategic alliance in May 2001, with an eye
on the lucrative e-music market of the not-so-distant future. MusicNet, the
joint company they formed would develop and market a subscription infrastructure
that could eventually be licensed to other online music services such as Napster.
The three labels licensed their entire catalogs of music, representing nearly
40% of all copyrighted music available, to MusicNet, while RealNetworks, which
owns a 40% stake in MusicNet was to provide the delivery technology for the
service. “The day of using the Internet to distribute music safely,
conveniently and legally to the mass market has finally arrived,” said Dick
Parsons, co-chief operating officer, AOL Time Warner.

In a separate development earlier, Universal Music and Sony Music
Entertainment had announced the formation of their own subscription service,
known as Duet.

It was clear that MusicNet and Duet were going to make things simpler for
Napster, as it would simply need to make license agreements with each of them in
order to provide their members access to all the music.

According to an analysis, music companies aren’t left with many options
really. Even if they win the battle against Napster, they face dozens of other
copying software programs flourishing on the Net. Services like Wrapster, iMesh,
Spinfrenzy and Gnutella are a few of them. Analysts are also of the view that
the music industry sees 18-employee Napster as perhaps the only company with
which a business strategy can be worked out.

Deepak Kumar in New Delhi

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