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Silicon Alley News: Judge Weighing Napster's Fate

Jul 26, 2000, 22:31 (0 Talkback[s])
(Other stories by Samuel Rosales)

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By Samuel Rosales, Silicon Alley News

A court in San Francisco's federal district court is weighing the fate of Napster Inc., the online music warehouse whose file swapping technology has spawned copyright-infringement lawsuits by the music industry and recording artists.

If Judge Marilyn Patel signs a temporary injunction against Napster, an estimated 87 percent of its service would be shut down, leaving approximately 15 million surfers worldwide without their online music provider.

The injunction was requested on June 12 by a coalition led by the Recording Industry Association of America (RIAA), which argues that Napster encourages piracy and harms CD sales.

Napster's legal defense is the Audio Home Recording Act (1992). The company claims this act gives users the right to download songs from other Napster users, even if that music is protected by copyright, a move the RIAA labels as "another veiled attempt to reinvent itself and its legal position."

But Napster's CEO Hank Barry said on Monday that his company is moving toward a business model that recognizes intellectual property. Speaking to attendees of Jupiter Communication's Plug-In conference in New York, Barry said the key issue is compensating artists for their music.

Companies such Liquid Audio are among those watching the events with a keen eye. The company's CEO, Gerry Kearby, said Napster is using its new technology that monitors music file origination. The Liquid Audio product essentially tracks file downloads from computer to computer.

Napster currently has no revenue model, only an enormous music library stored on a massive network, an impressive chunk of listeners, and a mammoth set of legal problems.

Doug Milles, vice president of marketing for Alley-based EverAd, told atNewYork.com that whatever the legal outcome of Napster, the company needs to look at business models, most notably the three basics: subscription, direct sale and advertising revenues. EverAd runs PlayJ, an ad-supported site that licenses content from recording companies and offers free music downloads (the files contain wrapped in dvertisements).

If the injunction is allowed and Napster's 15 million listeners are booted off the popular site, companies such as PlayJ could benefit, agreed Milles. Folks may be willing to watch a banner ad, for example, in return for the free music that is such a part of Internet culture.

Even if the company avoids the injunction, Milles added, the company "will probably scramble to go to streaming based ads, and hope to work with a legally licensed model, and legally licensed content."

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