Napster Forcing Music Industry to Change Its Money-Making Tune

Napster Inc., the Internet service that helps individuals trade music files, encourages stealing by making it too easy. For that, it is likely to be shut down by the U.S. courts, despite a recent reprieve.

It will probably reemerge as a copyright-friendly service operating with licenses from copyright holders. Napster is already doing what the music industry itself should be doing--making music enjoyable and easy to find.

Meanwhile, the music industry encourages stealing by making people feel justified in doing so. For that, the industry in its present form will also be shut down--not by the courts, but by the laws of economics and the market.

The technology of the Internet has fundamentally changed the economics of the music business. One rule: Being greedy is not illegal, but it doesn’t pay in the long run.

That’s the real lesson the Napster case will teach the music industry.

Yes, it’s wrong to steal, and yes, the music companies have legally binding copyrights. But the reality is that it’s not good business to annoy both your customers and your suppliers--especially if you’re an intermediary whose added value is questionable.

Consider what the music industry has done traditionally. Basically, it hires artists and gives them cash advances in exchange for the copyright to their works. A few artists end up getting quite rich; most don’t.

The artists rely on the music companies for promotion as well as distribution of their works. Some get valuable visibility from their publishers; most don’t.

Courtney Love, one of the most outspoken, created a stir last May when she went public with her complaints:

“What is piracy? Piracy is the act of stealing an artist’s work without any intention of paying for it. I’m not talking about Napster-type software. I’m talking about major-label recording contracts.

“When you look at the legal line on a CD, it says ‘copyright 1976 Atlantic Records’ or ‘copyright 1996 RCA Records.’ When you look at a book, though, it’ll say something like ‘copyright 1999 Susan Faludi.’ . . .

“Authors own their books and license them to publishers. When the contract runs out, writers get their books back. But record companies own our copyrights forever.”

Love’s comments have circulated on the Net as widely and as quickly as a pirated best-selling song. (You can find them at https://www.salon.com/tech/feature/2000/06/14/love.)

Her point is the greediness of the music companies. Mine is their outmoded business model: It doesn’t make sense anymore.

In the old days, record companies provided some value--making sure songs were promoted over scarce airwaves--before the Net offered an unlimited selection of “make your own radio stations.” Record companies mass-produced recordings and made sure to keep retailers in stock, even at the cost of unsold inventories. And of course, they promoted favored artists.

But with the advent of the Net, most of what the music companies do is no longer necessary--or at least not as valuable. Shelf space is no longer scarce; it’s virtually infinite. Musicians can promote themselves, and word of Web is infinitely more efficient than word of mouth.

Finally, as in so many market sectors, the balance of power has shifted: Musicians no longer need to go through a central authority to reach their audiences. They can find their own markets--and their eager listeners will help them by sharing with their friends or filtering for them.

How, then, will artists get paid?

Without such a huge cut going to intermediaries, listeners are likely to pay enough to satisfy all but the greediest of artists--and though there’s no reason artists shouldn’t want to be rich, there’s no reason they should make art only to be rich.

In other words, we might have more artists who truly enjoy what they do (including performing live and being paid for it) and fewer who do it only for money. As Love puts it, she’s willing to work for “tips”--to rely on those willing to pay rather than to force everyone to pay.

“I’m looking for people to help connect me to more fans because I believe fans will leave a tip based on the enjoyment and service I provide. I’m not scared of them getting a preview. It really is going to be a global village where a billion people have access to one artist and a billion people can leave a tip if they want to.”

Will people continue to steal? Some probably will, just as some people stiff waiters. But they will be less likely to when the person they would be stealing from is the artist herself--the artist whose works the listener enjoys--rather than a faceless music company. Artists such as Love are making sure this message gets through, and she has company.

“I want to work with people who believe in music and art and passion,” she says. “And I’m just the tip of the iceberg. I’m leaving the major-label system and there are hundreds of artists who are going to follow me. There’s an unbelievable opportunity for new companies that dare to get it right. A new company that gives artists true equity in their work can take over the world. . . .

“We’re inspired by how people get paid in the new economy. Many visual artists and software and hardware designers have real ownership of their work. It’s a radical democratization. Every artist has access to every fan and every fan has access to every artist. . . . People crowding the distribution pipe and trying to ignore fans and artists have no value.”

Artists will also continue to be paid for personal performances for a service rather than a product. Despite Love’s indignation, the issue here is not whether music companies are evil; it’s whether they have a business worth operating. I don’t believe they do in their current form.

What business is worth operating? In essence, there are two. One is simply to help people find good music--providing the service of making it available, helping people to assess it, making it convenient (as Napster does). It’s the role Amazon.com played recently with Stephen King’s new book--helping to generate publicity, helping to deliver the product and collecting money on behalf of the author. Note that there was no publisher involved.

The second is to act as agent for the artist, giving career advice, providing promotional services, figuring out how much to charge through services such as Napster. In other words, to work for the artist rather than the other way around.

In the long run, Napster may well end up working with musicians as their distributor because it has already proved its value to the market. Now it just needs to figure out how to charge. The music industry is in the opposite position: It needs to prove its value.

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Esther Dyson edits the technology newsletter Release 1.0 and is the author of the bestseller “Release 2.0.” She is also chairwoman of the Internet Corporation for Assigned Names and Numbers. Send comments to edyson@edventure.com.