What the Record Companies Lost in the Napster Decision

What the Record Companies Lost in the Napster Decision

What the Record Companies Lost in the Napster Decision

Moneybox
Commentary about business and finance.
Feb. 13 2001 9:00 PM

What the Record Companies Lost in the Napster Decision

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Reacting to the 9th U.S. Circuit Court of Appeals' ruling yesterday that Napster must stop letting its users download copyrighted songs from each other, the president of the Recording Industry Association of America declared, "This is a clear victory." And so it would seem.

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Certainly the ruling is bad news for Napster itself. The firm has always been in the wrong in thinking it could build a business by giving away other people's content and never really evolved past a sort of bland rebel rhetoric—indeed, Shawn Fanning was wheeled out at yesterday's post-ruling press conference to mouth the usual blather about hoping to "share" Napster's technology with "the community," when of course the people who tell him what to say want your money just as badly as the record companies do. Anyway, it's never been clear, even at the height of the music download hype, how Napster would generate a dime.

That said, what exactly is it that the record industry has won? By rolling in the legal mud with Napster, the industry has been able to focus attention on the idea of theoretical revenue lost, which has been an extremely useful distraction from figuring out how it might use technology to increase revenue brought in. For quite a while—years, at this point—the industry has made a series of unspecific promises that it would come up with a system for distributing music digitally that would satisfy artists and labels and still provide some sort of value to consumers. Where is that system? Where's the blueprint showing what it might be?

The timetable for Napster to figure out how to prevent its users from snagging illicit music has been left somewhat vague for the moment, which pretty much ensures a massive musical pig-out of Napster users downloading as much material as they possibly can while various delay tactics and appeals are played out in the days and maybe weeks or months ahead. Perhaps we'll even hear some fanciful figures thrown around, putting a dollar value on this frenzy. But record sales have actually risen during the Napster era, and the most downloaded artists are the same ones at the top of the sales charts. There's no evidence that closing off this particular valve will convert all those "lost" sales into significant spending on new CDs.

So while it's true that the record companies won a court battle yesterday, what's much more interesting is what they have lost: By declaring victory over Napster, the industry loses its darling nemesis, its greatest bogeyman. Now it's up to the labels to cough up, or at least endorse, a real digital music plan of their own. Either that, I suppose, or wait around for another enemy to emerge. Which do you think they'll do?