Napster May Shut Down Monday.

By Richard Menta- 2/11/01

.Looks like it will be a long weekend of downloading for many Napster users. That's because there is a chance the service may be shut down by this Monday.

Catching Napster fans off guard, a short notice appeared on the Web site of the 9th U.S. Circuit Court of Appeals Friday (screen shot below) announcing that a ruling on the case would be issued 10 am PST Monday morning. Those who thought they had until the summer before Bertelsmann turned Napster into a pay service look to be disappointed if the three-judge panel decides to uphold district court judge Marilyn Hall Patel's decision to shut Napster down while the case came to full trial.

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Patel, who said the company had "created the monster," and would have to live any resulting consequences, saw a halt put on her order until the appellate court investigated further. The court has now come to a decision and there may only be days left.

Now look for Napster's 57 plus million community to surge towards the service in a last ditch effort to get while the getting is good. The last time Napster users had a two-day deadline following judge Patel's original ruling the service choked to a crawl. Now with almost three times as many users, this weekend may be a test of bandwidth capacity not only for Napster's servers, but for the Net as a whole.

The judicial panel has pondered for several months whether or not to uphold a lower court's injunction, which forbade Napster from trading in music copyrighted by the five major labels that sued the service.

Of course, the news may not be bad for the Napster fan base at all. Several events and facts have changed the makeup of online trading since Patel's original order.

In Napster's Favor

First, CD sales have jumped, not dropped, since Napster first went online, validating Napster's claims that it has a positive promotional effect on the industry. Research by Forrester Research inc. confirmed this effect for the first six months that a person users Napster. After that, sales drop back down to normal.

Second, for all the artists like Metallica pressuring Napster to remover their music from the service, other artists like Radiohead and The Offspring encourage online trading feeling it promotes sales. This was confirmed when all the tracks on Radiohead's latest album Kid A became available on the service 3 months before the record reached the stores. When the record was finally released, an alternative band that never saw its music reach the top 20 watched as their album shot to number one in its debut week (see Did Napster Take Radiohead's New Album to Number 1? )

Then came the biggest news of all. That was the purchase of Napster by one of the litigants against it, media giant Bertelsmann who announced that this summer that the service would be converted to a subscription base with royalties paid to the copyright holders.

This is key because the courts have pushed all along for the parties to settle this matter among themselves. By only allowing music on the service that has the proper permissions, the Bertelsmann acquisition makes many of the elements of this particular case moot. Indeed, that is what the judges may be ruling Monday. Rather than shutting down the service they may simply declare that the risk to the music industry is minimal now that Napster is owned by the industry and punt the ball to the free market.

But, while the major labels formed a united front through the RIAA to stop Napster, in reality they are competitors, combative adversaries who frequently fight in the courts among themselves. EMI Music, Sony Music Group, Universal Music Group and Warner Music Group were all blind-sided by the Bertelsmann acquisition. They watched as their competitor captured 57 million eyeballs, already being put to good use through a button shuttling users to Bertelsmann's CDNow site. Napster is not really under the control of the industry, it's under the sole control of a single member of the industry.

Because of that, the remaining members of Big Music want to shut down the service only to deny Bertelsmann what is now a significant competitive advantage. They also want the act of online trading to be declared illegal because they know there are Napster alternatives waiting in the wings.

Shutting down Napster or even converting it to a pay service won't immediately effect the renegade Napster servers out there that are linked by the Napigator software. Users will still be able to trade on those freely, but if the court deems online trading illegal, the music labels have the firepower to locate and shut down those other servers. The ones in the US and Europe that is.

There are quite a few third world countries that are not members of any world intellectual property body, but still have Internet access. China only recently has become an active party to the policing of copyright material (something they still need to work at). Servers located in such countries would be difficult to stop and they would still enjoy the Internet's stretch across the world. That is the most glaring element for Big Music to challenge as Napster servers can reside anywhere on this globe.

Indeed, nothing stops a resident of a foreign country from literally building an identical copy of Napster knowing they couldn't be touched. How do you shut down a Web site based in the explosive Ivory Coast, Invade? What about Cuba?

The chances of such a renegade service being shut down is slim, especially if the reigning junta is cut in on the profits. It only stands to reason that if the real Napster is shut down or converted to a subscription service, millions will flock to alternatives.

Ivory Coast Napster could capture most if not all of US Napster's audience and then earn income through advertising on the service. Napster's biggest competitive advantage is that is relatively inexpensive to run, so profit could come quickly. The effect on the host country could be significant too. Even revenues that may seem modest in the US could have a positive effect on the Gross National Product of countries like Cuba or sub-Saharan Africa (there are World corporations whose revenues are greater than the ENTIRE GNP of these countries). Big Music won't find many friends here.

Don't expect Bertelsmann to let it get that far though. They have the deep pockets and the incentive to take this all the way to the Supreme Court. They are also in negotiations to acquire EMI, which would allow them to surpass Universal as the biggest record company and drop the big five major labels to the big four. This would only strengthen the ability to negotiate in Napster's favor within the industry, whatever it morphs into in the coming months.

But let us step back a little bit from the details and possibilities. Right now the only thing that Napster users care about is will their service still be there for them to use after this week. At this point it can go either way and the suspense is gripping.



Copyright MP3 Newswire 2001

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