Napster and the music industry

Napster and the music industry

“People are copying music because they feel somewhat disenfranchised with the options they have at their disposal in the digital space. It’s up to the content industry to create value in the digital arena and they’ve made phenomenal steps in that direction.”

Talal Shamoon, a key technologist for the SDMI (Secure Digital Music Initiative) Salon, 31 Jul 2000-08-01

District judge Marilyn Hall Patel ruled in favour of the Recording Industry Association of America (http://www.riaa.com/) (RIAA) regarding the Napster copyright case, based on the sheer size of the infringement that was taking place. Judge Patel directed that Napster should stop its song-swap activities and refused a motion that would delay the injunction until after an appeal had been presented. Napster intends to appeal against the decision. Related article: ‘Napster legal scrap could backfire on record industry.

CONSUMERS BUY MORE MUSIC PRODUCTS AFTER ‘TESTING’

A PC Data Online (http://www.pcdataonline.com) survey reports that only 16% of respondents supported the RIAA’s claim that Napster was in breach of intellectual property regulations and should be shut down. 57% agreed that it was unrealistic to control the free exchange of music. Many users said that they would not be dissuaded from downloading music even if it was deemed illegal. Almost 60% claimed that using Napster helped them in their music buying and 83% liked the ability afforded by the technology to test songs before purchasing CDs or cassettes.

Source: PC Data Online News Release, 27 July 2000

CONTROL OF MUSIC DOWNLOADING BEYOND INDUSTRY CONTROL

Despite all the media attention given to the Napster case, the Gartner Group (http://gartner11.gartnerweb.com/) believes that music downloading via the Net will prevail. Gartner suggests that it would have been more strategic for the RIAA to find a compromise with Napster, claiming that it will be far more troublesome for the RIAA to control other like technologies. Napster’s closure will mean that the RIAA’s task of controlling the industry will be impossible if it tries to chase every individual who has downloaded music illegally, possibly on someone else’s equipment.

Source: Gartner Group Press Release, 28 July 2000

The Napster case is not expected to affect the changing face of the music industry. Already other companies such as Freenet and Gnutella are providing consumers with similar music downloading technologies – the difference being that there is no central server and therefore no company or person to prosecute. If Napster disappears it will only serve to fuel an alternative industry creating millions of users impossible to locate and prosecute. A Jupiter/Media report indicated that during March this year, 80% of people with Napster software used it to download music compared with 40% of RealPlayer and Media Player users.

Source: Salon Technology, 27 July 2000

GNUTELLA, FREENET FILL THE NAPSTER GAP

The Napster result may be viewed by millions of users as a ‘call to arms’, fueling a greater consumer commitment regarding the continued free distribution of music. Following the Napster ruling Gnutella was overloaded with Net users downloading its free song trade program and Freenet experienced a doubling of ‘peer-to-peer’ traffic. Gnutella and Freenet link users rather that offer a centralized Web site like that of Napster. Gnutella considers itself to be a movement not a business. The creators do not have control over how people use the site. Freeness contests the assumption that information is property. The RIAA argues that Judge Pattel’s decision sends a message to music entrepreneurs that the commercialization of their sites is not an option.

Source: New York Times, 28 July 2000

Scheduled to be shut down on July 29, Napster has won a last minute reprieve in the appeals court. Napster is expected to argue that users have the legal right to share their own music and that a company cannot held responsible for such actions. Similar file sharing businesses are likely to face legal challenges. Several companies are working on finding Internet business models that serve to both protect copyright and partner content owners in online distribution. These models seek to find a bridge between completely free music and music that is completely paid for. Advertising may play a part in these models.

DOES THE NAPSTER RULING MAKE THE NET ILLEGAL?

Judge Patel’s Napster ruling is based on the view that a clear violation of copyright infringement law occurred through the provision of a system that enabled piracy. Her ruling may make all Internet file swapping and peer-to-peer communication activities vulnerable to charges of illegality. One observer claims that Napster has undertaken a pioneering function for the recording industry and suggests that the RIAA would be best advised to purchase Napster as a way of taking control of the online music sharing industry. The courtroom defeat of a financially exhausted company does not mean the end of the technological threat. The RIAA will need to find other ways to address changing realities.

Independent music companies association Impala has called on the EU to impose stringent conditions on proposed entertainment and Internet company mergers, in order to protect the viability of independent production and distribution of music. Impala is concerned that domination by a number of giant players could lead to predatory pricing strategies and the dictating of online music distribution, which could see the market value of music undermined. The EU is currently reviewing both the Time Warner/AOL and the Time Warner/EMI music business mergers. The EU must decide to what extent online music represents a new market sector separate from that of CDs and videos sold from conventional outlets.

Source: Financial Times, 13 July 2000

FIND PROTECTION IN THE TECHNOLOGY, NOT THE LAW

Although recent courtroom battles have found in favour of the ‘Old Media’, experts consider that it is unlikely that 20th century media laws will continue to define how information is transferred in the new century. Meg Smith of the Harvard Law School considers that it is too difficult to enforce copyright on media that consumers can possess. Jane C. Ginsburg, Professor at the Columbia Law School considers that recent cases in which the Old Media copyright laws were successfully applied to New Technology were clear cases of copyright breach. She considers that it will be more difficult to apply current law in future cases. Cyberlaw expert Jonathon Zittrain argues that technology currently supports the free distribution of information on the Net and content creators will need to look to technology for protection answers and not the law.

Source: Wall Street Journal, 28 July 2000

CAN THE MOVIE INDUSTRY AVOID ITS OWN NAPSTER?

The development of Div;-) and DeCSS are pushing the motion picture industry headfirst into the same copyright tussle as the music sector is facing. DeCSS decodes the content Scrambling System that underpins DVDs, enabling them to be shown on computers. Div;-) combines MPEG-4 and MP3 to compress video files to facilitate their downloading onto a computer prior to being copied onto CD-Rom. Forrester Research considers that DivX;-) is yet to hit critical mass as most consumers do not possess the necessary bandwidth. Forrester warns that the industry must produce a plan quickly to cover the legitimate transfer of its product over the Net. The Gartner Group points out that a number of movie companies are moving quickly to become involved in Internet movie applications and digital downloading will be common by the close of 2001.

INTERNET MUSIC FREEDOM FIGHTERS FORGE NEW DEALS

Pop music group Beastie Boys has negotiated a new recording deal handing them the rights to the release of their music through the Web. Other bands are seeking similar deals, releasing albums in MP3-only formats and searching for a variety of ways to enforce their perceived digital rights. Jupiter Communications considers that the traditional music industry’s ways of operation have lost their relevance. The record industry and some MP3 executives predict that the cost of encryption and other specifically online-related costs will erode the cost savings consumers and industry supporters are hoping for.

Beuc, a European based consumers group, fears that mergers between Net and entertainment companies will lead to a few powerful enterprises having a stranglehold on the music industry. Beuc considers that customers’ choices and privacy will be under threat. Music prices may also rise as large companies gain the power to control competitors and artists. Consumer privacy would also be threatened by the diverse range of information on individual shopping habits that one company would be able to access. The group has approached the EU in regard to their concern over the emerging links between large music enterprises.

Source: Financial Times, 27 July 2000

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