A Marriage Made in…?

The Napster controversy took an interesting turn when Bertelsmann (the parent company of BMG, Barnes & Noble, and CD NOW) entered into a deal with the online MP3 swapping company, and thus broke from the copyright infringement lawsuit brought by the Recording Industry Association of America (RIAA, which also includes Universal, EMI, Warner, and Sony). Now the controversy is between Napster and its members, who fear an end to the free music sharing (and some would say theft) service. I have little pity for Napster members, for the sole reason that they got something for nothing for too long. The real question is, “Who benefits from this deal, the artists or the record company?” In an attempt to answer this question, I went straight to the sources—the press release and “Q and A” posted by Napster on their Web site. The information, placed here voluntarily, speaks volumes.

What Napster and Bertelsmann Want You to Believe

The press release announces the settlement and subsequent “alliance” between Napster and Bertelsmann. The motivation, according to Napster, is to “find a system that rewards artists for their work when members of our community share their music over the Internet.” In the long term, this will mean transforming into a “membership-based service.” The “Q and A” attempts to reassure existing Napster users that the character of the service won’t change, and that a “free service” will remain after the fee-based membership is implemented. It also reaffirms Napster’s independence.

What They’re Really Saying

Though they claim to be striking this deal on behalf of artists, BMG is a record label, and their investment is about their financial return. It is Napster’s agreement with BMI (Broadcast Music Inc.) and negotiations with ASCAP (American Society of Composers, Authors, and Publishers) that will ultimately protect artists, as most artists write their own work (as they have for decades) and make the bulk of their profits from royalties. In the few genres where independent songwriters still make a living (principally country and some Top 40 pop), all the profits come from royalties. In both documents, Napster glosses over the distinction between record labels (the RIAA) and performing rights organizations (ASCAP and BMI), and ignores their radically different goals.

As for the free service, I expect it to remain only as a demographic tool for BMG. Tracking the exchanges within the Napster community will provide BMG valuable information, not only about their own artists but competitors in the same genres. BMG could also turn around and sell this information to other interests. The RIAA’s member labels already tried this with their own sponsored service Myplay.com, which never came close to the success of either Napster or MP3.com. (See my column in issue 6.06 for my take on Myplay.com).

Who Loses?

First, the members of the Napster community. Again, I feel no pity toward them. They associated with thieves and attempted to justify what amounts to petty theft. Now the thieves are in league with even bigger thieves, namely record execs. The old saying, “there is no honor among thieves,” summarizes a tough lesson for the Napster community.

Second, the artists, who will gain almost nothing from this deal even though they are the ones who bring the record companies all their profits. As long as the RIAA can retain their monopoly on distribution, artists will see next to nothing.

Third, Napster. BMG is just one of the five members of the RIAA. Who knows what the price of a settlement will be for the other four, if they decide to settle at all? Napster could face the same situation as MP3.com did earlier this year when, after MP3.com settled with the other four members, Seagrams (parent company of Universal Music Group) took them to court anyway. In fact, I wouldn’t be surprised if this exact same thing happened to Napster. Where will it end up then? Will Napster be able to meet its end of the bargain with BMG and any future partners while paying out a judgment, or will the terms of repayment be Napster itself?

Fourth, ultimately, the RIAA itself. No monopoly lasts forever. As more artists realize that the Internet provides a far more lucrative method of distribution than record labels, they will break off on their own and the record industry will have to pay more money to keep as many artists as they can. Finally, we’ll have some competition between labels and “freelance” artists and everyone will benefit.

Meanwhile, in Another Courtroom

Universal Music Group received an award of $53.4 million in their copyright infringement suit. Concurrently, they announced a non-exclusive North American license for the use of their recordings on MP3.com’s MyMP3 and BeamIt services. According to Universal, “It was never our intent to put MP3.com out of business,” but merely to assure that “copyright owners and artists need to be properly compensated for use of their work.”

But Universal is not a performing rights organization either. Neither the judgment nor their subsequent deal with MP3.com will increase artists’ royalties. Both, however, will increase record company profits at the expense of both artists and consumers.

None of the press releases issued over the last several months have disclosed details of the individual settlements. Having frequented MP3.com both before and after the court case, though, I can hazard an educated guess. Since July, when EMI became the first label to settle, the MP3.com site has undergone a noticeable change. Now, when you want to play or download a track from an independent artist (we are still the backbone of MP3.com) you must enter your e-mail address, country, and postal code. Upon entering this information, a cookie is stored on your hard disk to identify you during subsequent visits. Who gets this valuable demographic information? The RIAA.

Finally, Macster Becomes Napster

For those of you who frequent Napster (and are still reading after I called you thieves) there is some good news. Macster, the most stable and feature-rich Napster clone, has been adopted as the official Napster client for Macintosh. I tried it out (purely for journalistic reasons, I swear) and found a few improvements that bring it up to par with the established Windows application. So if you’re going to frequent Napster, now seems to be the best time with free access and a fully-functional Mac client.

I ask one more thing, though, as an artist. Sample songs, not whole CDs, and buy the ones you like. At most, my “Downloads” folder was about 200 MB in size (equivalent to three CDs in length) and I sampled the tracks as part of the process of planning CD purchases. I never offered any for upload, and I dumped them after I evaluated them. Maybe I’m the one making excuses now, but I know that I haven’t cost any musicians a dime in royalties. The RIAA could never honestly claim that.