If Napster Charges, Will Fans Flee?

In a music lover’s dream, the tunes keep coming, free of charge. And indeed, for some 38 million Internet users, the Napster file-swapping site was that dream world, blissfully immune from the meddling of major record labels.

Not anymore. To borrow from John Lennon, the dream is over, as Napster evolves into a subscription-based service. And while paying for once-free music might sound like a fantasy gone sour, consider the nightmare scenario facing Napster and its new business partner, Bertelsmann AG, as they try to set a price consumers can swallow.

When the Bertelsmann-Napster pairing was announced in October, Napster executives floated $4.95 a month as a possible subscription starting point. But before Bertelsmann-Napster can even begin to answer the perplexing musical question, “How much will people pay for music online?” it must face some nasty challenges.

For starters, Napster is still embroiled in a copyright infringement suit with the record industry; a decision on that federal court case is expected any day.

Assuming it survives that suit--and opposition to the Bertelsmann alliance from rival record labels--Napster must then deal with a huge public relations backlash. Many current users who embraced Napster’s renegade spirit dismiss the teaming with Bertelsmann as a sellout.

While it’s too soon to tell, some experts estimate that up to 90% of Napster’s base could vacate once it starts charging a fee. “If that leaves 3 or 4 million paying users, that’s not a bad start for a business,” said Alan Light, editor in chief of Spin magazine. “But on the other hand, if you go into a business knowing you’re going to alienate 90% of your users, that’s a dangerous thing.”

Ask them how much they’d pay for songs on Napster, and the answer many users commonly give--often with disgust--is, “Nothing.”

“I can’t see myself paying for any sort of Napster use, because I feel that they are giving up the struggle that they so cared for,” said John Davies, 19, a Napster devotee from Lower Sackville, Nova Scotia. “I completely understand their will to survive, but to me, it’s a smack in the face of all the loyal Napster users. I truly thought they’d continue the struggle to the end, but they’ve opted for corporate ties, which is something I can’t stand in the first place.”

Davies has a collection of more than 1,000 MP3s (musical files that can be sent from one computer user to another, much like e-mail), many of modern rock groups such as Alice in Chains and Live. Rather than ante up, he maintains he would merely look for free MP3s elsewhere on the Web--a sentiment echoed by other Napster devotees.

“I wouldn’t pay a cent,” said Bradley Coleman, 20, a junior majoring in computer science at Rutgers University in New Brunswick, N.J. “There are plenty of other free MP3 sites, and the combination of MP3 and CD writers is deadly to Bertelsmann and the rest of the music business.”

Coleman, who has more than 750 songs in his MP3 collection, speaks for many in the Napster community who feel compelled to flee the site, but not without a touch of regret.

“Napster is just one of many ways for people to get music,” he said. “It can easily be substituted with a similar service. It’s not about Napster, it’s about what it can do for me--even though I do love Napster.”

Light believes Napster can avert disaster--and find a reasonable price--if it convinces enough users that charging a fee is the only way “Napster is just one of many ways for people to get music. It can easily be substituted with a similar service. It’s not about Napster, its about what it can do for me--even though I do love Napster.”

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BRADLEY COLEMAN

computer science student

it can survive. “The thing that gets lost in the discussion is that with Napster, 38 million users or no, no money changes hands,” he said. “That certainly doesn’t leave them with anything from a business standpoint, and at some point, something has to change for Napster to sustain itself.”

Yet it is impossible to discuss the price issue without speculating what the new Napster will offer for the money. Almost certainly gone will be “bootlegs,” the unauthorized live recordings and studio outtakes that helped make the service such a hit with die-hard music fans.

“The real issue is what kind of access do you buy for your $5?” said Michael Greene, president of the National Academy of Recording Arts & Sciences. “That’s what I’m not sure about. It’s like the old record clubs, where there used to be a lot of free merchandise, but then the fees became closer to what was being offered in stores.”

One core issue, as Greene sees it, is what people perceive the music to be worth. And if Napster’s success was in part a rebellion against over-inflated CD prices, Bertelsmann-Napster might be able to score points with consumers by keeping prices low.

“There has been an artificial plateau put up there between 14 and 16 bucks for a CD, and though it was perceived as high, it was what the public was willing to pay,” said Greene, whose organization sponsors the Grammys. “But now the question is, ‘What will the public to be willing to pay in the future?’ ”

Bertelsmann, which owns the BMG Music catalog, has access to a broad range of artists from Elvis Presley and Duke Ellington to Christina Aguilera and the Dave Matthews Band. And while access to crystal-clear recordings by those artists might be an enticement, it certainly won’t be enough to sustain the new Napster, experts say.

“If it’s only BMG product, people are not going to pay a lot of money for that,” said Owen Sloane, a music business attorney who has represented artists including Elton John and Fleetwood Mac. “It will increase the value, and the amount that can be charged, when you have a better array of product to offer.”

Sloane thinks that Bertelsmann could charge the price of one CD for a monthly subscription, or roughly $15, provided it can give consumers perks they can’t get elsewhere.

“They could set up live chats that would add value without adding costs,” Sloane said. “They could also tie it into selling tickets or even having some sort of a live concert just for members. People feel special because they not only get unlimited access to music, but they get to talk to a certain artist or listen to a concert.”

As for the initial $4.95 figure proposed by Napster, Sloane says artist royalties alone may prevent such a price from even being a possibility.

“I don’t think it will be enough to generate the royalty payments and cover the costs--unless you have a big enough volume,” Sloane said. “It all depends whether they are going to introduce an advertising model. If it’s low price and they introduce some advertising, that’s a completely different issue.”

Of course, the mere mention of ads or any similar concession to corporate commerce nauseates many a current Napster user. But some, acknowledging that habits are hard to break, said they might just pay the e-piper to keep the music flowing.

“I would probably be willing to pay a little less than the shop price for songs and albums,” said Paul Wallbridge, 21, of Guernsey, England. “I wouldn’t use anything else. It’s not the fact that Napster is free that makes me use it, it’s just that it’s so easy. You can just go on the Web, open up a program and download the songs. How much simpler can you get?”