The Fourth Napster Item

Feb 7 04:53 UTC 2001

Thomas Middelhoff, the CEO of the media conglomerate Bertelmann, picked a 
very public platform to deliver the news about Napster.  At the 
World Economic Forum in Davos, Switzerland, Middelhoff announced that 
Napster would begin charging its users by July.  Middelhoff further 
announced that a digital rights management system would become part
of the Napster experience.

The Napster corporation seemed somewhat confused by this announcement,
and at first I chalked it up a clueless executive sounding off 
on the world stage.  I didn't see how digital rights management was
going to be incorporated into the Napster file sharing model; maybe 
there was some idea that they would put some sort of wrapper around the 
MP3 file as it was delivered to your computer?

Then it struck me: first, Bertelsmann thinks that the $50 million
it loaned Napster last fall gives it control.  Second, Bertelsmann 
wants Napster's brand name and its 30-50 million users, but 
file sharing does not figure into Bertelsmann's plans.  
Bertelsmann's Napster will give users songs from central 
servers, not from everybody's hard disks.  

Essentially, Bertelsmann wants to take their failed BMG music 
download system, spiff it up a bit, and call it Napster.
I'm skeptical that this will go very far with the existing 
Napster user base.

I found confirmation of Bertelsmann's view in a recent issue 
of "Entertainment Weekly," in an article on the availability of 
racist hate songs through Napster.  In that article, Bertelsmann 
senior VP Frank Sarfeld talks about "in the future, when 
Bertelsmann and Napster, in a new musiness model, will limit 
distribution to 'licensed music from major record labels.'"

((No indie labels on Napster?  Hmm, I wonder if there's grounds for 
antitrust action here.))

Bertelsmann hasn't gotten any of the other major labels to sign up 
for a Bertelsmann-controlled Napster.

response 2 of 134:

Feb 7 04:58 UTC 2001

I forgot to mention:  we're still waiting on the Appeals Court ruling 
on July's preliminary injunction to shut Napster down immediately.
The trial court judge saw this as a slam dunk; the appeals court hearing
was what, October?  What's taking them so long?  

response 4 of 134:

Feb 7 15:30 UTC 2001

There was an interesting "perspective" provided on NPR yesterday, where 
a journalist described his attendance at a meeting of investors who had 
lost big in the dotcom investment craze, and were looking for somebody 
to blame. (Their greed? That couldn't be it... it must be somebody 
else's fault.)

The reporter indicated that they put the blame on those he described as 
"the Pizza Kids" - young adults who spent many a late night drinking 
coke, eating pizza, and creating code. They had all been suckered in. 
The journalist had a different perspective - the investors, in their 
quest for instant riches, had corrupted the "Pizza Kid" culture - it was
 no longer a valid use of time to build on somebody else's idea, or for 
that matter to develop any code that couldn't be patented. While "Pizza 
Kids" bought into the money culture and the dream of being dotcom 
millionaires, the investors drove the creative force out of the 
Internet.

It's an interesting perspective. The place where the journalist, IMHO, 
is most clearly correct is in his refusal to place the blame on the 
"Pizza Kids". He didn't use the word "avarice," but that's what drove 
the big losses - even when the handwriting was clearly on the wall, 
early 2000, investors continued to pour their money into various 
Internet projects, hoping that they would reap exponential returns. A 
fool and his money.

The patent issue is an interesting one. But for the grant of patents to 
online business ideas, a lot of the money that flooded into Internet 
projects would not have come. To get money, a company would have had to 
do more than race to patent the latest modest innovation, stifling the 
development of parallel projects - it would have actually had to 
innovate in a manner which inspired users.

There is irony in the fact that Yahoo, Microsoft and AOL are the three 
biggest generators of page views - by a huge margin. None of them 
established that prominence on the basis of software patents or patented
 business ideas. Meanwhile, the patent holders seem to be folding in 
rapid succession.

Meanwhile, the exectuives now behind Napster, eager to get back part of 
their foolish investment, will do little more than inspire a "Pizza 
Kid", who stands to gain nothing save possibly for notoriety, to create 
the successor freeware version of Napster.

response 6 of 134:

Feb 7 20:17 UTC 2001

Interesting interview with a Bertelsmann exec:
http://www.zdnet.com/zdnn/stories/news/0,4586,2683015,00.html
(or get it from mp3.com/news)
 
The exec is still talking about file sharing and says Napster has
"a very good legal argument." 
About "security," the exec says:
"... our number one goal is that the user experience that a Napster 
user has today is not tampered with."   And, with respect to the 
digital rights management technologies which exist today, "Very few
of them have proven to be sufficient when it comes to the element
of ease of use.  They're all highly, highly secure, but secure to the
way that users can't handle.  And we don't think this is the right
approach."