After leading the digital music revolution, Napster’s former fans won’t flock back when it relaunches, says Edward Helmore
Six months ago anyone with even a casual interest in technology couldn’t avoid Napster. News of the company had moved from the business pages to the front page as the digital music revolution became a cultural phenomenon.
This was a compelling narrative: the story of a 19-year-old college student who developed a disarmingly simple piece of software that, by making music free, threatened to strip musicians and their sponsors of money, and possibly even topple the music industry with a grassroots revolution.
Six months on and the quick-striking digital music insurgency has become a prolonged, trench-to-trench, slug-it-out ground war of attrition. Napster recently disabled all but the very latest versions of its software, which now contains technology to protect copyright material, effectively ending the entertainment free-for-all.
Meanwhile, behind the scenes, an array of competing alliances has formed, each promoting different technological systems, with different ways of earning revenue and protecting copyright, and offering different libraries of music. Each of the original insurgents Napster, Aimster, MP3.com, Scour has been defanged, purchased or otherwise co-opted by the Big Five (Sony, Vivendi-Universal, BMG, EMI and AOL TimeWarner) that the spirited proponents of the revolution once scorned. Web surfers are now beating a hasty retreat.
According to Johnny Deep, the founder of the Napster lookalike Aimster, the lesson is simple: innovation in the entertainment business is prohibited without recording industry support. “There is now a climate of oppression among inventors, who are unable to market, fund or even freely distribute their work,” he says.
The record labels are set to launch three competing systems by the end of the year. These will be in conjunction with major online companies such as Yahoo!, Microsoft and Real Networks. Meanwhile interlopers, such as the music channel MTV, are developing their own platforms.
Sony and Vivendi-Universal formed Duet, a music delivery service, in February. Duet was rechristened PressPlay recently and has a deal with the portal Yahoo!.
Universal bought Emusic, an online subscription music service, for $23-million in April, and bought MP3.com, the digital locker service where users could store CDs they bought online, for $372-million in May. Before the deal, MP3.com had lost its own court battle, signed deals with the Big Five and turned itself into a pay-for-play service.
Along with Napster, BMG also bought MyPlay, another online music locker service, for $30-million in May. Its lockers remain free, but MyPlay will be assimilated by the BMG collective, which now includes the online retailer CDNow. BMG, AOL Time Warner and EMI joined with Real Networks, makers of the Real Player, to form Music Net in April. Music Net will deliver music to Napster.
AOL Time Warner, owner of the Warners-Electra-Atlantic labels, has plans to distribute music through its own AOL and cable services.
Currently all the services can stream music via radio-style playlists, but none has taken the step of offering downloads. Under current plans, there will not be one site with music from all Big Five catalogues. Initially, Music Net was going to be the wholesaler for three of the Big Five, then PressPlay, but now a single service for all music from all labels in every genre looks a remote prospect.
“It is not clear that any service is going to play an aggretory role,” says Eric Scheirer of United States media analyst firm Forrester Research. “Such a service needs to evolve for the industry to be successful. We need to have some middleman emerge that’s not related to any of them.”
Under the new Napster model to be launched later this summer, users will pay a regular monthly fee, and then an additional fee to be able to access the MusicNet centralised server to download licensed material from BMG, EMI and Warner Music.
But Napster has already lost so much of its customer base and is so strongly associated with free-wheeling piracy that many wonder if it can survive as a paid-for service. A year ago the network had 50-million registered users. In February 16,9-million were actively trading. That figure is now down 90%. The research firm Webnoize says 360-million files were shared in May compared with 2,8-billion in February.
A series of deals with BMG, MusicNet and last week’s agreement to distribute music from more than 150 independent European labels may not be enough to restore the company’s fortunes. Napster also still has to jump some serious legal hurdles to guarantee its future. It still faces a trial over copyright infringement that could result in huge damages.
Some music executives criticised the European label deal as a publicity stunt. “This deal brings Napster bulk but I’m not sure it is attractive to consumers. Not many of the songs that were on Napster at its height came from those labels, so why would users suddenly want to pay for them?” said one major label executive.
Moreover, hurdles need to be overcome before customers can download independent label artists. “This alliance with the Association of Independent Music does not allow them to distribute music because they have to have the music publishing relationships as well,” says Scheirer. “I think it is unlikely that Napster is ever going to re-emerge as a player in the consumer marketplace.”
Still, evidence is emerging that the recording industry may have done itself more harm than good crushing Napster and then trying to rebuild it in its own image. Record sales are down 5% to 10% this year compared with the same period a year ago. Weak record releases? The incipient recession? Or did Napster promote sales?
“Exposure over the Internet prior to a record’s release increases sales,” argues Hank Barry, Napster’s CEO. “Napster users are the record industry’s best customers.”
Although the new systems have yet to be tested on the public, analysts say that consumers are not going to like them. Most models call for limited downloads, files with expiration dates or music that cannot be copied from the PC that downloaded it. Will consumers pay for music that they cannot put on an MP3 player, trade or burn on to a CD?
The Byzantine way the record industry is structured presents considerable difficulties. In short, some music is more expensive than others. Record companies would clearly like to charge more for, say, Michael Jackson’s upcoming efforts, than for a back catalogue recording of Archie Bell and the Drells.
If record companies make all of their music available in the online marketplace, the laws of supply and demand ensure that each song becomes worthless. And record companies, because of complicated pricing structures and contracts with composers and performers, cannot afford to slash per song costs.
“It is all bad news for consumers,” says Lee Black, director of research for Webnoize. “The Big Five are trying to force business models on consumers that they are not willing to adopt. They are going to continue to force consumers to move to piracy for music.”
Moreover, the subscription model that the systems are likely to adopt allows unlimited usage of songs only so long as a subscription is maintained. Supporters of this system say it is like renting a video you can play it as much as you want over the rental period and then, if you like it enough, rent it repeatedly or buy it outright.
“The important thing is that there is not going to be one service that is successful,” says Schierer. “The difference is whether users can or cannot choose what piece of music will play next.”
But the music industry is almost certain to succeed. What is also clear is that the age of the free-wheeling Internet music companies is past. Once the Big Five get to grips with consumers’ needs and fashion systems that cater to them, there will be little need for the MP3.coms or the Gnutellas that have skyrocketed in popularity in Napster’s wake.
“If you are making a tiny widget that is a bolt-on feature for listening to music, fine that can be a small company,” says MP3.com’s CEO Michael Robertson. “But if you want to be the grand vision, the place where everyone stores their music and listens to it, that is a big undertaking and a small company cannot do that. All the small to medium companies are going away. The window of opportunity is over.”