Napster Makes $1 Billion Settlement Offer- Big Deal.

By Richard Menta- 2/21/01

One has to wonder about all the hubbub over Napster offering the music industry $1 billion for 5 years to settle its legal battle with them. They ARE the music industry now, or at least a part of them. The company sold its soul last October when they agreed to give Bertelsmann AG controlling interest to finance their survival. It is Bertelsmann who is offering the $1 billion not Napster.

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The German company was the first to act upon the opportunity Napster's then 40 million strong audience offered in terms of promotion and marketing. They were rewarded by watching that audience grow to 60 million in just a few months, every one of them now perpetually staring at a banner ad and link for Bertelsmann's other Net property CDNow. Only the Super Bowl can promise an audience larger than that and at $2 million per 30 seconds of exposure.

What the Napster trial is now is a lawsuit between the conglomerates that make up most of the music industry. The RIAA, who claims to have always attempted some form of settlement with Napster, is now simply picking sides against its second largest member supporting the other four major labels Sony, Time Warner, EMI, and Universal.

It doesn't matter that Bertelsmann is in the process of crippling the file trading software with several measures including file encryption and stripping the ability to burn CD's. It doesn't matter that Bertelsmann plans to charge for the Napster service this summer and has offered to pay licensing fees to the other labels including the independents. This is now an internal, not an external, matter for the music industry.

What matters is that the most powerful communication tool ever invented is in sole control of a single member of the music industry and the others are furious about being left out in the cold.

Big Music is furious that an outsider (MTV) was allowed to garner so much control over them 15 years ago. Big Music does not receive royalties from MTV for the right to show its videos. Just the opposite, they pay MTV for the exposure because artists placed in the rotation sell millions of records.

Big Music was furious about radio back in the 1920's. Way back then they demanded royalties trying to force a tax on tubes to collect fees. Sound familiar, Germany now imposes a tax on blank CD's and soon hard drives to do the same thing.

The music industry did not get their tax on tubes and radio went on to become a boon to the industry as its greatest promotional tool. So powerful was radio that it brought us the great payola scandal of the 1950's where agents of the record companies paid DJ's money on the side for extra spins on their show. Some of these guys had a rate card, that's how open the practice was (it still goes on, just far less visible).

You would think that Big Music would be happy they finally strong-armed a new media entity to pay them for once, but $1 billion over five years is not enough for them. They want more, partially because they feel there is more to wring out of Napster, partially because they want group control, and mostly because they still haven't figured out what to really do with Napster and how much of a threat it truly is to their profitable oligopoly. Many in the industry feel it is just safer to kill it.

That means not just killing Napster itself, but all of its clones from Gnutella to Freenet. It also means prosecuting individuals - you, your best friend, your cousin - for having a few music files on your computer, a campaign of litigation terrorism, targeting random music lovers to serve as the 'Example' to scare off others. Don't be so shocked, it has already happened (see Oklahoma Student to be Sacrificial Lamb in MP3 Wars).

First it was Jeffrey Levy in Oregon who paid a $25,000 fine. Then it was Oklahoma University student Scott Wickberg who got probation and a $5,000 fine. Both also share the burden of hefty legal fees which will probably take them 20 years to pay off.

That is why the industry, through the RIAA, has dismissed Napster's latest offer as a public relations gimick. The truth is it is the record industry, not the beloved service with 60 million users, that needs a public relations gimick. This case has demonized the industry in the eyes of the very consumers who buy their wares. The same consumers they call thieves and hackers for trading digital music files.

The real Napster is already on borrowed time, but its spirit won't die.

The truth is Napster's time is already near without the legal woes. When Bertelsmann gets through with Napster this summer, they will have successfully stripped the service of its soul. No longer will you be able to find music that has been out of print for 20 years. No longer will you have access to alternate takes and unreleased singles from the archives of collectors. All that will be available will be music under the Bertelsmann umbrella, a fraction of what truly drives fans to the service, selection.

It will all fail. As Dave Marsh wrote in his column Prohibition:

The old saw that says you can't legislate morality doesn't mean you can't try to regulate moral behavior. It means that those laws don't work. The greatest political lesson about this is supposed to be Prohibition, but we haven't learned it. For three decades, laws against recreational drugs have grown increasingly stringent; the result is more drug use.

Now swapping music files is illegal and the result will be the same.

Killing Napster at this point only makes it a martyr and making Napster a martyr will only send Napster clones overseas, beyond the reach of US and European copyright laws. Along with drugs from Columbia we may soon get our music files. Remember how well the 'Just Say No' campaign worked at stopping illicit drugs? If you think about it, smuggling in 'illegal' music over the Internet is far easier than paying mules to sneak by airport security.

Napster is an American invention that should be the catalyst of a new American industry just like radio. Radio had its growing pains too, taking years to figure out a profitable model. Napster is only 1 1/2 years old. Now the old industry has forced its spirit underground, both through acquisition and the US courts. Think what would happen if they did that to radio. Our Rock and Roll and Hip-Hop tunes would instead come from high-powered stations in Mexico, Canada, and the Caribbean. Americans would have been legislated out the jobs the industry eventually created.

You don't need Gnutella's and Freenet's non-centralized and less user-friendly models to keep the spirit alive. The next rush is to re-engineer perfect duplicates of Napster's present service, name it something that sounds like it, and order a T1 line on the island of Jamaica, or Haiti, or the Dominican Republic. Then watch it become one of the chief exports of an otherwise destitute foreign economy.

Copyright MP3 Newswire 2001

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