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The Napster legacy could be a problem
By Erick Schonfeld

Napster may have been defanged, but other rogue peer-to-peer music services still exist. Even if the music industry were to crush these services too, millions of music fans won't forget the Napster experience, says Erick Schonfeld.

COMMENTARY--Napster proved that music wants to be free. The music industry, on the other hand, wants to be profitable. To that end, Web consumers will soon be offered two new digital services: Pressplay (backed by Sony and Vivendi Universal) and MusicNet (backed by AOL Time Warner, EMI, Bertelsmann's BMG, and RealNetworks). This will be the first true test of whether anyone is willing to pay for streaming music and downloads off the Web. Here's why both services will find it difficult to pass that test. (Full disclosure: AOL Time Warner owns Business 2.0.)

Bertelsmann may have defanged Napster, but rogue peer-to-peer music services still exist. Services like Audiogalaxy, LimeWire, and Gnutella have sprung up to take Napster's place, offering a wide selection of digital recordings. Even if the music industry were to crush these services too, millions of satiated music fans won't soon forget the experience. Paying consumers will demand the same breadth of selection and portability that Napster once offered--and others still do.

But that's not what they'll get. Pressplay will not allow file sharing; MusicNet will, but only if members share with other paying members of the same service. So what happens if a Pressplay member wants to share music with a friend who belongs to MusicNet? Forget about it, at least until the two rivals can come to an agreement.

Of course, file sharing assumes that there's enough good music on these services to attract more and more consumers. That's not the case either. Both companies will suffer from huge gaps in their offerings. Pressplay subscribers won't have access to music from artists on the AOL Time Warner, EMI, and BMG labels; likewise, MusicNet subscribers won't find bands whose music is put out by Sony or Vivendi Universal. And then there's all the great music out there distributed by independent labels that neither service has rights to yet. In other words, consumers will find a better selection simply by walking into a music store.

Andy Schuon, CEO of Pressplay, thinks the market will eventually sort all of this out. "We will become a place where the other music companies will want to have their music because, ultimately, content goes to where the customers are." Of course, those customers could just as easily end up at MusicNet. Either way, both companies would be wise to open up their services to other music industry players before the government does it for them. The Department of Justice is reportedly investigating both joint ventures for possible antitrust violations.

Ironically, though, it could turn out that neither one becomes a destination for music lovers. Both are licensing their content and services to other sites. MusicNet will be available through AOL, RealNetworks, and Napster, while there will be links to Pressplay on MSN Music, MP3.com, and Yahoo Music. Arguably, a third-party music site should be able to license from both services, as well as independents, and assemble a more exhaustive music library.

Even then, consumers will run into another problem. Songs they download that come from Pressplay or MusicNet will not play on anything except the PC that downloaded them. Fans won't be able to burn the files onto a CD or even download them onto an MP3 player. Both companies say they will eventually allow subscribers to shuttle songs to non-PC devices -- once they figure out a way to avoid piracy.

"We are not going to support illegitimate file sharing," Schuon insists. But policing people's listening habits may prove impossible, and it certainly won't win the hearts and wallets of consumers. If I pay for a song, why shouldn't I be able to listen to it on someone else's stereo, in my brother's car, or on my girlfriend's MP3 player? For that matter, why shouldn't I be able to e-mail it to a friend? When I pay for something, I consider it mine and I should be able to exchange it with whomever I like. If Pressplay and MusicNet are supposed to prove that the record labels finally understand the Internet, Schuon's comment is a sad indication of how far the industry has yet to go. It is still obsessing over how not to cannibalize its existing business instead of obsessing over how to make the consumer experience with digital music the best possible.

Truth is, most of the world isn't yet ready for digital music. How many people have great speakers hooked up to their PCs? Even then, listening to music from a PC is only good for when you're sitting in front of it. Plus, downloading music is not a lot of fun without a high-speed connection. MP3 players aren't exactly ubiquitous either. According to IDC analyst Bryan Ma, by the end of this year there will be only about 8 million MP3-playing devices out there in consumers' hands.

And that brings us back to Napster. Folks were willing to deal with sub-CD quality and a tricky interface mostly because the music was free. Now that companies need to grow a loyal base of paying customers, the road back to 70 million users (which Napster once proudly claimed) is going to be long and painful. The new reality is lackluster enough to keep most of us buying CDs online or in stores. And the Net, at least for a while still, will just be a place to learn about bands, maybe listen to some of their tracks, and hunt for low prices. If the music industry wanted to slow down the pace of change when it went after Napster, it succeeded--perhaps too well.




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