The battle over Napster—it should surprise no one—is neither about the sacred principle of intellectual property rights nor about the need for fair compensation to artists. It’s about who gets to keep the profits of a lucrative worldwide multi-billion-dollar business.
Those who create something – a book, a song, a movie – should and already do have the legal right to own and sell it. They should - as they do now - have the right to control distribution of that work, including the right to sell distribution rights to someone else.
In truth, however, real control over creative property [NYTimes] has long rested with those who own the physical means of reproduction and distribution, those who control the pipeline to an audience – the TV networks and movie studios, the publishers, and the record companies. They decide who gets in the pipeline, and they earn most of the profits [Boston Globe]. Napster threatens them because, virtually overnight, it has become a gigantic, consumer-controlled alternative reproduction and distribution system.
Whether artists will gain or lose money from this in the long run is increasingly an open question [Nando Times]. But that those who now monopolize reproduction and distribution will lose from it even in the short run is no question at all.
Consider the Costs of Making a Music Recording
It costs about $2 to manufacture a compact disc. That includes pressing the disc, printing a cover, and packaging in a plastic “jewel case.” In a recording contract with an artist who has a following, the artist typically gets $2-$3 per disc [Chicago Tribune] as a royalty. Out of the artist’s take usually come all or most of the music production costs: a producer, the studio, the side performers if any, and the mixing – in other words, all the costs of creating and producing a distribution-ready master.
By the time a disc gets to the consumer, it typically is priced at $16-$19, which translates into at least a 300-500 percent markup over the combined cost of recording and manufacturing. Music recording is a $12 billion global business, and so, even allowing for the cost of publicity, promotion, inventory, and accounting, profits to the middleman are huge.
Digital reproduction, the keepers of the traditional music pipeline would have us believe, threatens the very core of the music industry. If music fans can get their music for free, who will pay for it? Artists should get paid for their work, the companies insist.
No argument from artists there. When the digital downloading of music files first got hot about a year and a half ago, a number of musicians [Dallas Morning News] (notably heavy-metal band Metallica [Salon]) filed copyright infringement lawsuits [Salon] against Napster and MP3.com, at the time the most prominent music download site.
But eventually it became evident that digital distribution actually helped more artists [Globe & Mail] than it hurt. On the internet there is no pipeline controlled by someone else. Musicians could put their own music up on the net or make their own CD copies and sell them. Fans could more easily sample musicians’ work and decide whether or not to buy. The internet has become an efficient marketing tool [CBC] for musicians trying to get their music out to an audience.
So who is the real loser? [Salon] It’s the middlemen, who could see that their power, which consists largely of the ability to control distribution of product, was quickly vanishing.
The recording industry managed to threaten MP3.com [ABCNews.com] into line, ending the site’s free downloading [Orange County Register] of copyrighted material. But Napster was something entirely different. Whereas MP3.com is an actual site, an actual place, Napster is a program. It neither offers its own music (copyrighted or otherwise) itself or makes copies of anything. It’s a program that enables users to share with one another.
Simple to use, the program has been hugely popular with music fans, and an astonishing “one out of three teens [Washington Post] ages 12 to 17 download songs through Napster.” Indeed, Napster’s CEO reported last October that the service has 38 million users - 13 million more [The Age] than online media giant America Online. In September Napster recorded as many as 100 million simultaneous users during peak-use hours, compared to AOL’s 1.6 million. That month 1.4 billion songs [The Age] were downloaded over the internet. Today Napster is said to have grown to 55 million users.
Legally, the recording companies didn’t have to prove they had been damaged by all this downloading—that would have been difficult [Wired] since sales of recordings actually went up [The Age] last year by about 4 percent—only that their copyrights had been violated. Much as the companies would love to make their case on moral grounds – people should pay for other people’s work – it’s not a point they can make [Wired] with much authority [ZDNet]. For years they have been making exorbitant profits [Variety] on the backs of the artists they now want to say they’re protecting.
Why Shutting Down Napster Doesn’t Matter
On February 12, a US judge made a ruling that could shut Napster down. The file trader, desperately trying to stay alive, offered to pay [Salon] the recording industry $1 billion in royalties, but for obvious reasons the industry rejected the offer [Wired]. The money, as staggering an amount as it is, doesn’t come close to compensating the companies for their loss of control and the middleman cut.
Up till now the recording industry was so intent on protecting its traditional turf that it failed to innovate [ZDNet] and make it easy [Wired] for fans to download music legally. Even if you want to pay for music online it hasn’t been practically possible [Boston Globe]. Now it turns out that the recording companies have been rushing [BBC] to get their own file-trading service [Inside.com] to market.
That’s probably the clearest indication that slamming the door on Napster doesn’t signal the end [Feed] of music-file trading. Even if Napster goes away, there are already other swapping programs [Wired] ready to take its place [Wired]. Consumer resistance [Wired] to the music industry’s high prices has grown. The technology, once out of the bag, isn’t going to go away [NY Times], and software writers have a proud tradition of keeping a step or two ahead of would-be regulators.
Part of the public’s fascination with Napster is that it was invented by a 19-year-old [Time] with few resources. Innovation is the American dream [Inside.com]. Within the space of a year, “during peak hours, a startup with a few dozen employees, beta software and no income stream accounted for two-thirds as many Internet connections as a 15-year-old Net behemoth [AOL] with 15,000 employees and a pre-merger market capitalization of $108.5 billion."
As the internet gets faster and broadband becomes more commonly available, music-on-demand from wherever you happen to be will become a reality [Reason]. The cost of music to consumers should come down. And artists ought to be able to keep more of what their music earns. [The Age]
What is likely to go away [NY Times], no matter how many legal battles they press [Wired] and win, are the old-style recording companies [Inside.com] and their big fat slice of the pie. Recording companies do provide a service of promoting artists, and, when the power of traditional distribution is taken from the hands of the few [Wired], there will still be a need for artist promotion - maybe even more of a need. Those record labels that are good at adapting will survive, even flourish
Ironically, the huge new traffic in music-file downloading seems to have goosed sales [Newsbytes] of compact discs. But, as the technology and quality of downloadable music improves, it’s going to be increasingly difficult to charge $16-$18 for a traditional CD that the consumer may or may not like when they get it home.
Additional Reading: Our Napster/Digital music archives
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