Napster no match for 'establishment,' yet

This week's ruling may force the Internet firm to find a way to pay for music-trading.

Clobbered by the courts, the power team of Napster - the popular, free online music service - filed into a press conference once again this week.

Youthful founder and college dropout Shawn Fanning stood further back from the podium, and more stiffly, than the firm's dark-suited CEO and lawyer. The picture seemed a perfect representation of how the Internet Age has sought, however uncomfortably, a cohabitation with the Old World establishment.

That may be working within Napster, where Mr. Fanning's bright idea has drawn investors from the venture capital and entertainment industries. But outside the firm, the conventional business world remains largely hostile to Napster's upset-the-teacart model.

A ruling this week by the US Ninth Circuit Court of Appeals found that the Napster service aids copyright infringement. While online, a user who wants to swap music with another simply types in the artist or song desired and receives a directory of matches, any of which can be downloaded for free.

The service has become a pop-culture icon, trailblazing a technology path that alarmed the entertainment establishment by making a hash of its commercial underpinnings. Why buy a CD when you can get music for free?

Even if Napster as we know it disappears, the form of digital distribution it pioneered will likely be a lasting legacy - one to which the music industry itself is increasingly drawn.

Napster now boasts more than 50 million members and claims it doesn't violate copyright laws since it does not house or trade any music itself. It simply provides a directory of what members have available and the software to connect willing parties.

The court this week found otherwise, saying Napster knowingly encourages and assists its users to infringe, and could be liable for that activity when it does not stop the infringement.

For supporters and critics alike, the case goes beyond the issue of free music. Fans say Napster represents the promise of the Internet, a technology that can shift power from big business to consumers. For opponents, Napster is revolutionary all right, but in the wrong direction, undermining copyright protection.

Is compromise possible?

The question is whether there is a middle ground.

A number of legal analysts have suggested that the best resolution would be for the entertainment industry and Napster to find a workable compromise.

There is an ongoing attempt to do just that. Bertelsmann AG, a German media giant whose record-label subsidiary was originally one of the parties to the suit against Napster, switched gears last year and bought a $50 million stake in Napster.

With that investment came a pledge from Bertelsmann and Napster to come up with some sort of new pay service, whereby Napster would collect fees from users to help reimburse artists.

Since then, two other independent music labels have also begun working with Napster.

But Napster CEO Hank Barry and founder Fanning continue to insist that the free side of the service will survive. That pledge grates on the ears of the music industry, but Mr. Barry still hopes other major labels will join and capitalize on the firm's revolutionary software.

"We seek an industry-supported solution," Barry reiterated this week.

But Monday's court ruling, which knocked down virtually every legal defense Napster had mounted, seems likely to strengthen the music industry's optimism that it could prevail in court and, thus, have leverage in any possible out-of-court settlement. The court sent the case back to a US district judge, but it called only for modifications in an earlier order that aimed to shut Napster down.

"Napster is definitely on the ropes," says Shane Ham, a technology analyst for the Washington-based Progressive Policy Institute. "In order for Napster to satisfy the music labels, it would have to change so much it wouldn't be Napster any longer."

This week's ruling will be appealed by Napster, and the legal process could be protracted.

A lasting legacy

Whatever happens to Napster, the technology it helped pioneer is expected to last. With peer-to-peer computing, individual computer users form networks that enable them to share resources. Under the older model, central servers were the main sources of information.

"When it comes to computing, Napster was a small breakthrough that changed everything," says Tim O'Reilly, president of a computer publishing firm in Sebastopol, Calif.

Mr. O'Reilly says peer-to-peer computing, loosely defined, is the philosophy driving everything from the growing popularity of instant messaging to distributed computation, where networks of individual computers work on large problems that used to be the purview of supercomputers.

The music industry has been trying to come up with its own online distribution services, but has been a late starter compared with Napster. Most analysts believe Napster's rapid popularity has both alarmed and enticed the entertainment industry to move into the digital market. "[Digital distribution] is an easier and cheaper way to distribute music," says University of California-Berkeley law professor Mark Lemley. "That's got to be of both social and commercial value."

(c) Copyright 2001. The Christian Science Publishing Society

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