Lesson From the Dead: Keep on Truckin’, Napster

What’s next for Napster? With the U.S. song-swapping service in legal limbo and Korean Napster-knock-off Soribada (“Sea of Sound”) hit with a similar suit by the record industry last week, the Web seems a very unfriendly place these days for free MP3 downloads.

But appearances can deceive. There may be a way to revive Napster, make it legal and possibly--wonder of e-wonders--even profitable. The place to begin is to recognize that, for all the hype, Napster wasn’t novel.

The folks who were first to “set music free” were the Grateful Dead, back when Napster founder Shawn Fanning was still learning to walk. The Dead didn’t just turn a deaf ear to bootleg recorders, they aided and abetted them.

At live shows, the Dead would invite fans with recording devices to plug into the engineer’s sound board, allowing them to burn CD-quality recordings free.

The Dead didn’t do it because they had any animus toward capitalism. Far from it: Few rock rebels understood concert-based capitalism better than Jerry Garcia and his merry band.

For a group that had just one Top 10 hit and whose first 10 albums never climbed higher than No. 24 on the charts, the Dead went on to become one of the highest-grossing bands in the world. And Napster, take note: The Dead did it by giving away its music.

To be sure, there are some not-so-small technicalities: Napster was giving away something it didn’t own. If that’s not, strictly speaking, grand larceny, then it’s pretty close to setting up an electronic-fencing operation. The Dead was giving away the fruits of its own musical labors. There’s no law against that.

But there’s a bigger difference: The Grateful Dead made money, and Napster still hasn’t figured out how, as dot-commers like to say, to “monetize the relationship.”

While Napster’s economic model is beholden to a dubious advertising-subscription pricing strategy, the Dead had a true innovation system focused on the sale of concert tickets and merchandise--not music. Music was the hook, the free toaster for the first 100 people who open a bank account.

This explains why you could sell practically anything at Dead shows, from peanut butter sandwiches to hair braids--with one exception: Grateful Dead merchandise, unless of course licensed and sold by the Dead. In the last years that Garcia was alive, the Dead routinely racked up $50 million a year in ticket sales and $70 million in merchandise. It’s a business model that works beyond the grave: Even now, Garcia rings up $5 million a year in merchandise and re-recording sales.

Is there a lesson here for Napster, or even peer-to-peer swappers like Aimster (already subject of a Napster-like lawsuit) and Gnutella? Perhaps. Rather than asking their users to pay for downloads, Napster should consider finding a third party that is willing to pay for them in order to build brand awareness.

Even Lars Ulrich, onetime drummer for Metallica and now a witness on Internet piracy in Congress, shouldn’t have a problem with that.

Napster should tell the recording industry it’s going to be paid for its product, then sell itself to the biggest and richest broadband provider it can find, and send them the bill. The reason: Napster’s value is as an application, not a business model.

Napster was the early candidate for broadband’s first “killer app”--the must-have service that gave people a reason to subscribe for high-speed Internet access. To be sure, we can’t imagine the range of services that will be conceived once broadband becomes as ubiquitous as the telephone.

But those applications aren’t likely to be invented until broadband access reaches critical mass. It’s not yet, and Napster’s travails are one reason why.

Ask yourself: Is it any wonder that the rate of new subscribers for high-speed hookups flattened out at roughly the same time Napster was forced to unplug?

Free music downloads are the “free toaster” in the broadband revolution. Napster needs to get its mind around that, and let the bidding begin between the well-heeled broadband suitors.

Is Napster ready to sell itself so others can give it away?

Napster executives insist that the service is not for sale. But surely they must know, as any Deadhead does, that “Sometimes, the cards ain’t worth a dime if you don’t lay ‘em down.”