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What the Record Companies Lost in the Napster Decision

By Rob WalkerPosted Tuesday, Feb. 13, 2001, at 9:00 PM ET

Illustration by Robert Neubecker Reacting to the 9^th 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?

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Rob Walker writes the Ad Report Card for Slate.

COMMENTS

Reader Comments From The Fray:

[Notes from the Fray Editor: Who was it who said "most of the posts were called 'I like Napster' or 'don't shut it down' or might as well have been…it proved almost impossible to find any defense of Napster which was well-argued, informative, or based on anything except self-interest, greed, a general feeling of entitlement, or hatred of Metallica"? Oh, it was the crack Fray Team. We wrote that last July--click here to read Rob Walker, the Fray posters and the Fray Editor on the Napster court case then. Nothing has changed.]

Napster was on shaky legal ground from the start. The laws governing copyright and proprietary material have been on the books for many many decades. It was only a matter of time before the big production companies put an end to free downloads of digital music on Napster. To you and me the freesites represented cheap entertainment but to the record industry it was a leak in potential revenue. Just like the other big entertainment companies they know that people will pay almost anything to be entertained, as long as someone else is not just giving it away. Being able to control the media is essential to being able to charge $8 for a movie ticket, or $15-$25 for a CD, or $45+ for a sports event. So Napster had to go. There is no limit to how far a multi-billion dollar industry will go to protect itself and it's bottom line. The record industry is probably surprised that they did it so cheaply.

--So Sue Me

(To reply, click here.)

Put a banner ad on Napster...

I would bet you a good hunk of change that the marketing people at Coke or Pepsi would pay big bucks to be on the desktops of millions of twenty-somethings downloading music if it was legally sanctioned. Right now, the radio plays what for the listener is free music. They pay the record companies for the right to do so. They get their money from advertisers. Why couldn't Napster do the same thing?

--Jay Kreusch

(To reply, click here.)

Much of the reason for Napster's success was that the music was free. But isn't it also important that MP3s, or indeed any sort of digital format, is clearly the way people want to receive and play their music?

If the record companies had put their energy into finding a viable way to charge a nominal fee for downloading artist's work, people would buy that instead of wasting time looking for music of dubious quality on Napster.

--Dana

(To reply, click here.)

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