Napster deja vu?
In a matter of months, this online phenomenon went from zero users to millions. It was hugely popular with media-loving teens and young adults, whose participation drew in even more people. And for many, it became a daily obsession.
In 1999, the phenomenon was called
Napster, a service that allowed users to swap songs through the Internet. Two years later, a pair of competing file-sharing networks -- Morpheus and Kazaa -- enjoyed a similarly meteoric rise. In 2005, a new version arrived -- this time in the form of the social-networking site MySpace (and, in a more modest way, Facebook), which allowed people to post profiles to the Web and communicate with friends through them. This year’s model is the video-sharing site YouTube.
As of October, MySpace had almost 50 million users, according to Nielsen//NetRatings, making it the runaway king of social networks. YouTube, meanwhile, had 30 million users, making it the most popular user-generated video site.
The two companies differ in fundamental ways from their file-sharing predecessors, but their popularity flows in part from the same source: a supply of free media contributed by users. On YouTube, it is video clips; on MySpace, it is clips (often provided through links to YouTube) and music. In fact, the two sites each show more videos than any website except Yahoo, according to a recent study by comScore Media Metrix, which tracks online activity.
And now, with both sites drawing flak from copyright holders, the question is whether they’ll follow their predecessors’ rapid path downward too.
The descent of the file-sharing companies was fueled mainly by their inability to satisfy the demand for free downloads that they had stoked. When the courts ordered the original Napster to prevent users from downloading copyrighted songs, for instance, it lost more than 60% of its audience in five months, according to comScore Media Metrix. It never recovered.
MySpace and YouTube are in a different position legally and economically. They’re websites, not software programs designed to copy digital files (so the companies can argue that they are protected from liability by special rules for Internet providers And their owners -- News Corp. and Google, respectively -- have very deep pockets and can afford to fight any challenges.
Still, the communities they have created rely to a great extent on users’ ability to express themselves through media, and frequently the copyrights to that media are owned by a major music company, TV network or studio. While arguing that they aren’t liable for their users’ infringements, the companies have also tried to placate copyright owners by striking deals to share revenue with them (e.g., YouTube’s deals with Warner Music Group and Universal Music Group) or sell their content (e.g., MySpace’s deal with Snocap to help sell songs from unsigned artists). But the major labels and studios have not been mollified and have continued to press the companies to block copyrighted works from being posted on their sites unless specifically authorized. YouTube is developing technology to do just that.
Depending on how restrictive copyright owners decide to be, MySpace and YouTube could face a Hobson’s choice. If they accede to the demands of Hollywood and the record labels and allow only a fraction of their works to be posted, users may be driven away because they can’t express themselves the way they want to. And as their audiences thin, so will the glue that binds many users. It’s the “network effect” in reverse: As users leave, the sites’ breadth diminishes, prompting more people to go elsewhere.
Alternatively, MySpace and YouTube could refuse and continue letting users post whatever songs or clips they please, removing material only if the copyright holder complains. Some copyright specialists argue that MySpace and YouTube are shielded by the 1998 Digital Millennium Copyright Act, which exempts Internet service providers from liability as long as they remove infringing material when asked. But other experts disagree, saying the exemption doesn’t apply to MySpace and YouTube. Universal Music Group, among others, doesn’t believe it does; it sued MySpace and News Corp. for copyright infringement Nov. 17.
It’s ironic to see News Corp., whose 20th Century Fox movie studio helped bring the lawsuits against Kazaa, Morpheus and numerous individual file-sharers, on the defensive here. At the same time, it’s refreshing to see an important copyright-law case litigated by parties with comparable resources on both sides, rather than having the entertainment industry pound away at much smaller figures.
The best result would be for Universal and its entertainment brethren to work out a way with MySpace and YouTube to turn people’s enthusiasm for posting songs and clips into a robust revenue stream -- assuming that the sites can gin up enough money to make everybody happy. In another parallel with the original Napster, MySpace and YouTube haven’t found a way yet to generate much revenue from advertisers or users. And the longer that remains true, the greater the chance that the companies will meet the same fate.