Clay Shirky's Writings About the Internet
Economics and Culture, Media and Community, Open Source
The Music Industry Will Miss Napster

July 28, 2000

On Wednesday, federal Judge Marilyn Hall Patel ordered Napster, a
company that provides software allowing users to swap MP3 music files
over the Internet, to stop facilitating the trading of copyrighted
material by midnight today. Now the argument surrounding digital
downloading of music enters a new phase.

In business terms, this is a crushing blow for Napster.  Although
Napster gets to keep its "community" intact, in that it can still
offer its chat function, Napster users will have no reason to use the
Napster chat software for any purpose other than trading information
on alternative sources of free MP3s like Napagator and Gnutella. If
Napster is kept offline for any length of time, it will likely lose so
much market share to these competitors and others that it will not be
able to recover even if the ruling is later overturned.

MP3 Files

For the Recording Industry Association of America, which sued Napster,
Judge Patel's order is a powerful demonstration that it can cause
enormous difficulties for companies that try to shut the major record
labels out of the Internet distribution game. But the recording
industry association should not be sanguine simply because the total
number of MP3 files being moved around the Internet will plummet, at
least temporarily.

There are still well over 10 million users out there who have become
used to downloading music over the Internet. Napster or no Napster,
someone is going to service this enormous and still growing
appetite. The recording industry cannot expect that one court ruling,
or even many court rulings, will turn back the tide of technology.

Closing Napster as an outlet will have no effect on the underlying
ability of average users to create and listen to MP3 files. It is not
Napster that is digitizing music, it is the users themselves, using
cheap personal computers and free software. And it is the users'
willingness to trade copyrighted material, not Napster's willingness
to facilitate those trades, that the record industry should be worried

For the record companies, the issue is plain and simple -- what
Napster is doing is illegal, and Judge Patel has ruled in their
favor. Legality isn't the whole story, however. The critical thing for
the music executives to realize is that while they have not lost the
right to enforce copyright laws, their ability to do so is waning.

The analogy here is to the 55 miles-per-hour speed limit, which turned
out to be unenforceable because accelerator pedals are standard
operating equipment on a car. Likewise, government cannot control the
fact that computers are capable of making an unlimited number of
perfect copies of a file.

The current legal ruling has not taken a single Rio music player off
the shelves, nor destroyed a single piece of WinAmp music software,
nor deleted a single MP3 file. More to the point, it has not, and will
not, prevent anyone from "ripping" a CD, turning every track into a
separate MP3 file, in less time than it actually takes to listen to
the CD in the first place.

Napster did achieve an ease of use coupled with a distributed source
of files that no one else has been able to touch, so the short-term
advantage here is to the recording industry. The industry now has a
more favorable bargaining position with Napster, and it has a couple
of months to regroup and propose some Napster-like system before
Napster's users disperse to new services. This new system must give
fans a way to download music without the expense and restrictions of
the current CD format, which requires you to buy either a dozen songs
or none.

If the industry doesn't meet this demand, and quickly, it may find
that it's traded the evil it knew for one it doesn't know. The lesson
that new Internet music companies will take from the Napster case is
that they should either be hosted offshore (where U.S. laws don't
apply) or they should avoid storing information about music files in a
central location.  Either option would be far worse for the record
industry than Napster.

Napster at least provides one central spot for the music industry to
monitor the activity of consumers. Driving Napster completely out of
business could lead to total market fragmentation, which the industry
could never control.

Digital Is Different

It's very hard to explain to businesses that have for years been able
to charge high margins for distributing intellectual property in a
physical format that the digital world is different, but that doesn't
make it any less true. If the record labels really want to keep their
customers from going completely AWOL, they will use this ruling to
negotiate a deal with Napster on their own terms.

In all likelihood, though, the record executives will believe what so
many others used to believe: The Internet may have disrupted other
business models, but we are uniquely capable of holding back the
tide. As Rocky the Flying Squirrel put it so eloquently, "That trick
never works."

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Economics and Culture, Media and Community, Open Source