You Can't Control Napster - Company Business and Marketing

Industry Standard, The, Nov 20, 2000 by Jimmy Guterman

It's been a couple of weeks since Bertelsmann co-opted Napster and began to exert major-label control over the leading peer-to-peer music-file-sharing service. In that time, it's been easy for pundits to point out the holes in the skeletal announcement. When a Napster press release read, "There will always be a free, promotional file-sharing element to Napster," it was easy to translate the corporate-speak into "We've given up because it's the only way our company can continue to exist. We're sick of having no income and many lawyers. Oh sure, we'll have a promo area filled with tracks you'd never pay for. But please move along to the paid site if you want anything you'd ever choose on your own.

Still, we mischief-lovers can take heart: Even if Napster "sold out," it doesn't matter. The beauty of peer-to-peer, after all, is that no central authority can control it. If Napster finds out you have a forbidden Metallica cut on your system and shuts you off, you're seconds away from a different identity, a differently labeled MP3 file or a different IP address. Neither the algorithms nor the commitment exists to track down every copyright infringer -- no more than Bob Dylan's attorney might have come to my house 20 years ago when I purchased a crappy bootleg cassette of Dylan's unreleased recordings. And if Napster does successfully blackball you, there's always Gnutella or Aimster or...

In culture, as in politics, repressive regimes always fail in the end. Even the KGB couldn't stop the dissemination of samizdat copies of the work of leading dissidents like Aleksandr Solzhenitsyn. And as much as Seagram Chief Edgar Bronfman talks about Napster and MP3.com in apocalyptic terms, even the heads of major record labels don't supervise as oppressive a totalitarian system as the pre-glasnost Soviet Union. There will always be a way around controls, especially on the Net.

Now that the major labels are beginning to buy into Napster's peer-to-peer model (isn't it interesting that no one talks about MP3com since the Bertelsmann announcement?), there will be the usual talk of turning the Wild West of Napster into a well-lit, climate-controlled environment in which record companies are paid for the distribution of the work they own.

But remember who the largest record companies are out to protect: themselves. The borderline hysterical reaction to MP3.com and Napster was not an expression of the record companies' concern that Napster was stealing their property; they were furious that Napster stole their business model: ripping off performers. "They're stealing artists' work? Hey, that's our idea! Sue 'em!" The boys in Metallica may not know it, but in fighting Napster they're not aiding other artists; they're protecting the structure under which record labels own copyrights on recordings they don't produce, but merely distribute.

So a year from now expect to see two Napsters: a centrally controlled subscription service with dubious value to all but the most casual music lovers because it's filled with the obvious and approved rather than the rare and unexpected; and a "free" service full of "Keystone Kopyright Kops" who won't be able to keep up with what is posted. And there will be more file-sharing choices, perhaps even better ones. It's even possible that Gnutella will figure out a way to run a search without bouncing it through every 14.4 modem in North America.

When the copyright-friendly Napster system fails and it's time to dream up yet another business model, record companies will have to face the same issue they could address today if they chose to: How can they make people want to pay for their downloadable music? Could the for fee files use a higher-quality and more-compressed code than MP3? Could people who pay for their files get rewards like discounts or products in return for signing up? Could members get incentives for sharing certain files?

The list could go on for days. Selling music over the Net is a huge opportunity for record companies, a once-in-a-generation chance to build a new market that can be fulfilled faster and less expensively than the current system. It will happen, eventually, but it will take longer if the geniuses in the corner offices continue to think that shutting down or buying off Napster is a rational long-term business model.

Jimmy Guterman is president of the Vineyard Group, a consultancy.