Industry sleepless over Napster

Unless you’ve been living under a rock for the past few months, you’ve probably heard about something called Napster — which, depending on whom you listen to, is either an abomination used by criminals or a tool that has freed music from the clutches of evil record companies. The fact that such a tiny piece of software can generate these kinds of wildly divergent opinions suggests something significant is going on.

Napster is a small “freeware” program that can be downloaded from the Internet in about 15 minutes. Perhaps because its inventor is a 19-year-old college student named Shawn Fanning (whose curly hair led to the nickname “Napster”), the software doesn’t have all that many bells and whistles, but it is fairly easy to use, and does what it does very efficiently.

What Napster does is allow anyone on the face of the planet to connect to thousands of other users and trade digital music, or MP3 files. That’s all it does — but that’s enough to make it Enemy No. 1 for the recording industry. The entire might of the U.S. music business has come down on Napster like one of those two-ton weights in a Road Runner cartoon.

The Recording Industry Association of America is currently suing the company, arguing that its service breaches copyright laws, and several prominent artists — including the band Metallica — say it facilitates piracy. Metallica got a lot of press recently when it produced a list of 350,000 names of Napster users it claimed were trading songs illegally.

The company promptly banned those users, even though it admitted it would be relatively easy for users to sign onto Napster with a pseudonym — which may help to explain Napster’s claim that it has more than nine million users, a figure that is growing at a rate of 10 per cent a day.

One of the interesting things about Napster is that — despite all the furore surrounding it, and the recent dramatic selloff in technology stocks — the company seems to have had no trouble getting funding from venture capitalists. Not only did the well-known firm of Hummer Winblad invest $15-million (U.S.) in the currently non-public company, but also one of the firm’s senior partners, Hank Berry, recently became Napster’s interim CEO.

The fact that such a firm would be interested in a tiny startup is even further evidence that something big is going on — and it’s more than just Napster, which is part of the reason critics like Metallica and the recording industry are missing the boat. For one thing, there are already half a dozen programs available that do the same thing, and more.

A little program called Wrapster, for example, allows Napster users to disguise any kind of digital file as an MP3 file and trade it through Napster’s servers. Gnutella allows users to trade software and other files by connecting to a rotating series of servers, as does a service called, while something called Hotline allows any user to turn their own computer into a server and trade digital files of all kinds.

Napster is just one front in an all-out war that the music industry is waging with the Internet, a war in which the tide seems to be favouring the consumer. The arrival of the MP3 compression standard allowed users to download and trade songs for the first time, and the industry has been trying to come to grips with this new threat for almost two years. Record companies have tried to develop their own MP3-type standard that would prevent file-trading, but so far the effort has produced nothing but press releases.

The kind of legal challenges that have been launched against Napster and a Web site called only serve to show how blinkered the industry is. Even if they are both crushed financially, the phenomenon that created them is not going to go away. Just as music fans have made bootleg audio tapes for decades, they will continue to trade MP3s because they can — and the sooner music companies embrace that, the better off they’ll be.

This doesn’t mean all music suddenly has to be free. All those Napster users spend hours searching for, trading and downloading files because to some extent they love music — and it’s worth a bet that some of them would probably pay for those songs, as long as they didn’t have to pay too much. The U.S. Federal Trade Commission, for example, recently ruled that consumers paid close to $500-million more than they should have for CDs in the past three years. That’s not the best way to appeal to your customers.

But what if, instead of paying $25 for a CD that has two songs you like, you could pay 99 cents each for the ones you want? Sites like already offer this kind of service, but they can’t offer any of the really popular songs consumers want — and the few record companies planning to offer music for download are stuck on the idea of using standards that will prevent copying.

This effort is almost surely doomed. Similar attempts to control digital content — such as the DIVX variation on the DVD movie standard — have been spectacularly unsuccessful, and there’s no reason to think digital audio will be any different. Instead of hiring legions of copyright lawyers, the industry should spend its money coming up with some way of getting on board the MP3 train rather than trying to block it.

After all, those people trading MP3 files are the industry’s core market. Instead of suing them, record companies should be trying to figure out how to give them what they want.