Now Where, Napster?

Consumers tune out the music industry's dated business model

The attorney who won a reprieve for the file-sharing software Napster was recently identified on an airplane. When the passenger who picked him out of the first class seats introduced him to the coach crowd, cheers filled the cabin.

Could it be that reality, in this case, is its own best analogy — that the masses (coach class) are taking matters into their own hands at the expense of the big spenders (first class)?

Napster demonstrated, within six months of launching, the outdated nature of the record industry’s business models.

In those six months, Napster revealed that there’s a huge audience out there for individual songs; the record industry lives, and dies, by the album. Napster, which was targeted by the record industry because it attempted to set up a business that ostensibly provided free access to music, is just the beginning — the Kitty Hawk of the 21st century.

The record industry, however, is approaching the digital invasion like the railroad industry even though they need to respond more like Boeing.

The record industry, however, is treating the space-age digital invasion as if we were still in the horse-and-buggy era.

Frances W. Preston, president & CEO of music-publishing overseer BMI, is among those supporting the drive to shutter Napster. “These copies are made without the permission of the owners of the sound recordings and their underlying musical compositions,” she said at the time of the court injunction. “By facilitating this wholesale and widespread copying, Napster should be held responsible for these clearly foreseeable infringements.”

Music industry professionals are generally not forthcoming about the perceived threat of Napster.

“As record labels we have to be the site where consumers get quality downloads,” one senior label exec said, noting that underground sites proliferate with faulty or inferior quality recordings.

That plays into another exec’s wild plan: Bomb the Internet with MP3 files marked with names of hot bands but filled with gibberish. By making the system too frustrating to use, the exec figures, fans will turn to official sites.

A few artists — Limp Bizkit being the one with the highest profile –spoke on Napster’s behalf, seeing it as a way to get more music out to potential fans.

The Limp logic has played out in polls that have found less than 8% of Napster users buy fewer CDs now that they download from the Internet while close a third have increased the number of discs they purchase.

And there are the little guys out there, such as singer-songwriter Peter Salett, who see Napster as a tool that benefits their Web presence.

Salett has recorded two indie albums but gained considerable exposure when two of his songs wound up in the Edward Norton-Ben Stiller movie “Keeping the Faith.”

“I saw my Napster folder go from zero to 12 to 40 to 98 to 100, which is the maximum” said the New York-based Salett. He figures that Web pages and Internet players have not only opened doors for musicians but allowed them to track where they are building an audience. In his case, it is generally wherever the movie has opened, reaching as far away as the Czech Republic and Brazil.

“If there was a way to charge a small fee — 50¢ or a quarter — that the artist would split with the supplier, no kid would think twice about downloading and there’d be a bit of revenue,” Salett said.

Revenue opportunities have been driving Internet businesses for indie performers since the late 1990s. Ice T, the rapper who has led several rock bands, has estimated his per-disc gross as $8 since he moved to the online record company Atomic Pop. While at Warners, he reportedly received 83¢ per disc.

If digital delivery is indeed the future, the record industry will likely want a bigger piece of the pie. They want control from the start, even though they have been remiss in calculating how big a market there is for digital downloads. This year should be the breakthrough year for the majors as they put music online — for purchase:

  • Universal Music Group recently unveiled its digital format Bluematter, which will include additional features such as biographies, photographs and lyrics. It uses RealPlayer.

  • Sony Music Entertainment was the first to put any of its catalog online and in May announced a joint venture with Universal for a subscription-based digital music service.

  • EMI Group is offering 100 albums for sale over the ‘Net.

  • BMG started offering digital downloads this summer and the Warner Music Group expected to make its move in the fourth quarter.

The official platforms, however, have been slow to start and are often clunky and time-consuming. Napster, on the other hand, showed how easy it can be done. Nothing the majors are doing is a direct reaction to Napster’s increased popularity.

“If the industry is to benefit from the new opportunities afforded by the Internet, they will need to take a hard look within at their own business strategies,” Eric de Fontenay, a consultant who has developed solutions for telecommunications and digital markets, said shortly after the RIAA won its temporary injunction against Napster.

For better or worse, Napster is having the effect that radio formats have had on music in the last decade: Record music is a singles business, not an album business., realizing that singles are driving the online business, is attempting to offer strategic clearinghouse in which artists are linked with targeted marketing campaigns for clothes and other products. Maybe even airline ads.

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