Victory or defeat?

Did the record industry's court triumph insure a future full of profits -- or seal its doom? Experts weigh in.


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Salon TechnologyBusiness staff
February 13, 2001 1:05AM (UTC)

Although the Napster music-trading service is still breathing for now, most observers declare that the latest court decision spells imminent doom for the company. Now the question becomes, What next? Will Napster users flee to other file-trading networks? Or has the recording industry established its dominance over the new online world of music distribution once and for all? We asked our favorite suspects in the worlds of law, music and software for their opinions. Here's what they had to say.

Eben Moglen, professor of law, Columbia Law School

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The record industry is about to discover that this was a terribly bad idea. The consequence of shutting down Napster -- whenever the injunction happens -- is that they will be on the cover of every major newsmagazine and 60 million people will again find out that you can share music online. They will also find out that Napster's servers have been replaced by the OpenNap -- a program that allows any computer anywhere to be a Napster server and help people share music.

In peer-to-peer file sharing, when the customer moves, the inventory moves with him. The entire Napster-using public is going to figure out that they don't need Napster to share files. The consequence is that the music industry will then discover that the lawsuit was the stupidest part of five years of stupidity.

It will discover that this lawsuit fully popularized, publicized, promoted and spurred the development of the very alternative distribution system that it was trying to eliminate. This is how the industry will have turned out to have participated in bringing about its own highly satisfactory and complete death.

Industry members will have created a situation that they can only control by going to war with their own customers. They've attempted to murder Napster, and they've actually shot themselves in the head. Self-murder or suicide, they're dead either way -- it's an untenable business strategy in the long run to be at war with your own customers. But shutting down Napster will give them no one to sue but the listeners. This is one of those rare, but nonetheless important, situations in which victory in a lawsuit is defeat in the world.

Whitney Broussard, attorney at Selverne, Mandelbaum & Mintz

It's an interesting decision. Ultimately what it says is that Napster has to disable access to files that it has specific notice of. That makes sense; it's about right. It's pretty much what the Digital Millennium Copyright Act says when it talks about safe harbors for online service providers. That seems to be what Napster has been doing with all the Metallica users -- if it is presented with a list of allegedly infringing files, as far as I know it's been blocking users.

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What's more troubling are some of the statements about fair use. The decision makes rather broad statements about the consumer's lack of a right to make copies. It says that consumer use is commercial use because it's exploitative; that doesn't seem right to me. They also seem to imply that a user who is engaged in sampling -- downloading something to see if he wants to buy it and then deleting it thereafter -- isn't [engaging in] fair use, which I think a lot of scholars would disagree with. And they seem to be making the general assertion that consumers making copies of music for their own private noncommercial use is an infringement; they aren't talking about the fair-use aspects of that.

What happens next? I think it depends on what the U.S. Court of Appeals says, if it wants to take it on. If the Court of Appeals decides to take it "en banc" (i.e., instead of just three judges, they use the entire court of judges -- it's not common but it is for very serious cases), then we go back to where we were a few days ago, where probably the injunction will get stayed on some level and it will be Round 3 and they'll be going down all these arguments again.

If the Court of Appeals doesn't agree to take the case, I suppose they could appeal to the Supreme Court, which might or might not take it. But no matter what the court does it will be an unstable solution. It's difficult for courts to decide something like this; it probably needs to go to Congress.

Gene Hoffman, CEO of eMusic

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The only place where the Court of Appeals disagreed with the U.S. District Court was the scope of the injunction itself. It denied all the defenses Napster put forth; the only thing it did say is instead of putting 100 percent of the burden on Napster, the plaintiffs need to share the burden by helping Napster identify the files.

What the Appeals Court is saying is that it's clear that Napster can make sure that surf results don't return for obvious infringing files, and all that the plaintiffs have to do is point out the infringing files and Napster has to make it happen. That's what we're planning to do. It's everything but an absolute slam-dunk. It changes the value of my company; it really invigorates and opens up an opportunity to serve all the customers that will be cut loose by Napster.

Jim McCoy, founder of Mojo Nation, a peer-to-peer file-sharing service

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This was inevitable. Napster was lucky in that the injunction wasn't completely upheld.

What's interesting is what the court said about how Napster relates to the First Amendment; it shot holes in the slashdot cypherpunk argument that Napster constitutes speech.

The judges also changed how the DMCA will be applied. The District Court injunction held that Napster had to preemptively prevent illegal stuff from getting on the system. But now, with the present decision, it's a shared burden. Napster has to remove files if it knows that they're infringing, but the copyright holder has to notify Napster first. So Napster can't hide its head in the sand, but on the other hand, when someone connects up and uploads files, Napster doesn't have to make sure they're legal. So the court allowed for a safe harbor; it argued that it does apply but not quite as broadly as Napster wanted it. We think that's significant. It has confirmed the basic wisdom that if someone puts up a file, on a cache system, a Web page or Napster, the service doesn't have to nuke it until it knows about it.

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For us, it's a little less of a direct application. The Napster play is not our story. But at the very least, the decision clears the field and removes the cloud of suspicion. People in and around P2P had been waiting for the other shoe to drop. And if this decision had been overly broad, we would have all been in trouble. That was getting a little scary. But [the decision] didn't attack the technology. So I'm glad they said that there's nothing radical about what the technology does; Napster just has to follow the same DMCA rules like everyone else.

Mark Cuban, founder of Broadcast.com

Just another example of the recording industry doing its best to shoot itself in the head. It finally has a single destination Web site where 40 million plus digitally ready music fans go to celebrate their PERSONAL interests in music. Napster has become the ultimate music community. Rather than taking the easy road by offering those 40 million plus people the option of buying virus free, guaranteed quality and multi-format choices of hassle free downloaded music at realistic prices, they take probably what will go down in history as the stupidest business move every made, and shut the doors on the largest congregation of music buyers in the history of the world.

What the music industry will be left with is their ongoing fantasy of trying to drive music consumers to industry owned Web sites in enough volume to generate any material amounts of digitally delivered music revenue. The music industry has already spent and lost more money trying to create viable Web sites for digital commerce then they could ever possibly lose to downloaded music for personal use via Napster. With Napster gone, the cumulative total that the labels will spend trying to recreate their own personal crapsters will exceed a billion dollars easily and get absolutely no results.

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They paved paradise and put up a parking lot.

Mike Godwin, lawyer and chief correspondent for IP WorldWide

It's easy to get lost in the details here. What we're going to have at the trial court now is a negotiation over the scope of the injunction. Both sides are going to say what each thinks; we know that the original scope of the injunction that put all the burden on Napster was too broad. I don't think it's a slam-dunk that the record companies can just provide lists of their catalogs and say that anything on it is infringement. But maybe they can.

What is true is they will go back to court and talk about the scope of the injunction, and that gives Napster another chance to rehabilitate its image in Judge Patel's court. Since that injunction was issued Napster has partnered with one of the plaintiffs. The kind of presumption that Patel brought to the case, and all her factual findings, were that Napster is just out to infringe. Now as we come back, Patel knows new things -- that Napster is partnering with a big-time copyright holder, BMG, and so the presumption that Patel brought to all the evidence is something she has to call into question now. I think she is not going to create an injunction that effectively shuts down Napster altogether.

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Patel just sort of assumed that Napster was illegitimate, but now that this negotiation is taking place, she has parties on both sides that qualify as legitimate businesses, and if Napster's legitimate business is squashed by this injunction it can also claim undue hardship.

Raymond Kurzweil, author of "The Age of Intelligent Machines"

The recording industry has been behind the power curve on developing a viable business model in an era of ever more powerful file sharing and streaming. The model of charging almost $20 for a packaged album hasn't changed since I was a kid in the 1950s and earlier. Ultimately, these issues will affect all intellectual property, including software. I don't think shutting the Napster barn door will get the horses back in the barn.

Jimmy Greer, a manager at Revolver, which represents the band Everclear

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I don't know how big of a ruling it's going to be; Napster's still going to be around, some way or another. If it's not Napster, you'll find someone else to do it. But hopefully, yeah, they're going to be able to do something about it.

[Napster is] a big problem. It's basically stealing. But I don't think shutting down Napster is going to solve it. Unless they come up with some kind of crazy encryption. But the people who can hack that kind of thing are always one step ahead.

The whole Napster community could be used as a great promotional tool. The thing that hurts is when you put out a record that you've spent months and months on and then, two weeks before the release date, it's available on Napster. That really hurts sales. Especially for acts like Everclear, where the demographic is young people, 18-25. But it depends on the genre; you aren't going to see James Taylor's record sales affected because of Napster. But at the end of the day, people are still going to want to go to the store and buy the CD, to get the liner notes, art, etc.

The Internet is never going to be a viable outlet for sales, or significantly hurt sales.

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Glenn Reynolds, lead singer of techno group Mobius Dick and law professor at the University of Tennessee

Well, based on my oh-so-thorough reading of the opinion over the last 15 minutes, it looks as if most of Napster's legal arguments have bitten the dust, meaning that it'll have to win on the facts. (I am, to put it mildly, astonished that the court made such short work of the Audio Home Recording Act issue. To argue in this day and age that music on a hard drive isn't music is just silly.)

Napster's best hope, it seems to me, is to see a lot of stuff on its network that is clearly noninfringing. The court clearly left open the possibility that the technology might evolve toward noninfringing uses and that notions of Napster's culpability shouldn't be based on a snapshot of what was going on at a very early stage. The more that Napster's content moves toward independent artists and major groups that grant permission for Napsterization of their tunes, the stronger its position at trial.

Speaking personally, I've bought more CDs since getting music off the Web (not via Napster, which I don't use for security reasons), but they've mostly been from independent artists whom I never would have heard from previously. I still think that this is the record companies' biggest fear: not that people will trade copies of Britney Spears, but that they'll bypass the record companies entirely.

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Ian Clarke, project coordinator for the Freenet project

I'm not a lawyer, but it looks like the decision affirmed most of what the Recording Industry Association of America was claiming -- that it is against the law, that Napster should be shut down, that it is just a matter of time now. I think that the decision was certainly consistent with the law, but I don't agree with copyright law.

I don't think the decision comes as a surprise to anyone; the fact that Napster the network relies on Napster the company inevitably is a weakness in the system. It offers a clear way that you can attack a system like this, and it has been attacked.

Freenet is specifically designed so that there is no one person or any one thing to be shut down. It doesn't rely on anyone or any person. Even I couldn't shut it down if I wanted to. The RIAA might come after me, but it wouldn't do any good; it would be ridiculous. Even if they put a gun to my head I couldn't shut Freenet down. It wouldn't make any more sense to come after me for Freenet than it would to go after the creators of the Internet.

Gene Kan, CEO of Gonesilent.com, lead developer on Gnutella

The decision seems to be paving the way to make it easier to make complaints similar to that of Dr. Dre and Metallica to be handled, to be acted upon. The whole basis is faster takedown, right?

That's one approach. I'm not sure what the implementation of the takedown policy will be, whether it will be based on names of files or on users who are infringing or in the same way the Metallica and Dre complaints were handled. It's hard to measure the impact of that. If the tool is to be so blunt as to allow the recording industry to effectively remove all users from the Napster system, then I guess that shuts down Napster.

And the more annoying Napster is to use, the more popular alternative systems will become. The Napster music swapping and everything like that are only one segment of P2P technologies. It won't affect this new technology broadly but it might affect the music-swapping segment.

It seems to me that Napster really is the biggest friend of the recording industry in the sense that Napster has a ridiculous majority of the number of music-swapping users on its system, and they didn't leave in droves when it was proposed that Napster would be a subscription model; so it seems it's a gold mine that should be tapped. I guess almost 50 million users think that Napster is the next way to get music, and since that's the case it seems really shortsighted to try to put a stop to it.

Terry McBride, manager of Barenaked Ladies and Sarah McLachlan

I'm actually pleased. My issue with Napster wasn't with the actual software itself or the philosophy behind it. It was the fact that an IPO was being built off the back of copyrighted master recordings that artists did not give permission to be used.

If you want to use an artist's copyrighted work, you should give him or her some kind of fee for it. Napster could take the approach that MP3.com did, if it's so concerned about getting new music out there. But artists who don't want their stuff up on Napster should be afforded that right.

I'm pleased and happy and hopeful that now people can do this inside the rules, which is how it should have been dealt with from Day 1.

A lot of my artists really don't like Napster because it takes away their living. Napster's been out there saying CD sales are up again. Record sales have been up for the last 10 to 15 years, with this year being the slowest. In an industry where one out of a 100 pieces of music we release is actually successful, we need to maximize that one, because the other 99 are released on artistic, not commercial, merit.

Kelly Truelove, CEO of Clip2, which analyzes the Gnutella and P2P services

I think that we'll see an increase in Gnutella usage; we've seen increases in Gnutella usage when Napster was in the news in the past. I'm looking at numbers comparing right now with a day ago, and we're seeing a 17 percent increase compared to yesterday. But the news just came out, and we haven't had much time to see the impact yet. We did not see a substantial surge over the weekend. But Gnutella has been going through a continuous growth phase for some time that continued right through the weekend. Every day for Gnutella is a record day. Over the last 30-day period, the average daily growth has been 7 percent. As of today, we average between 75,000 and 125,000 unique users per day. Napster was seeing something like 8.5 million users per day. Gnutella is quite a ways from that.

But Gnutella does not scale very well, although some of the newer software out there does work better than the old ones. Things have improved relative to where they were last July and August, but some of the fundamental issues remain.

[If a million Napster users switch to Gnutella] users shouldn't expect to be able to access the content on all those 1 million drives, essentially -- they'll only be able to share with some subset of the users who come over. That's kind of the way Gnutella scales -- sublinear scaling. The big alternative is OpenNap, a really huge service and one that's not discussed as much in the media as Gnutella. OpenNap scales more like Napster, by adding more and more servers. And in general it's easier to use and a better experience than Gnutella.

Jack Valenti, president and CEO, Motion Picture Association of America

The biggest beneficiary from today's decision will be the consumer because it will encourage content owners to put their creative works online knowing that the courts have confirmed what everybody knows: You cannot take for free what belongs to someone else. The fruits of this ruling will be seen in the film industry within six months as studios start to put movies online and offer consumers an exciting new high-quality and legal opportunity to choose what they want to watch.


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