NAPSTER/RECORD INDUSTRY
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Tuesday July 25 5:31 PM ET
Napster, Record Industry Finds Compromise Not Easy
By Derek Caney
NEW YORK (Reuters) - The genie is out of the bottle.
That cliche has been recited with fugue-like repetition this week at Jupiter Communications' Plug.In music conference in New York. The genie, of course, is Napster Inc.'s song-swapping software and the fact that the technology is ``out of the bottle'' is something the record industry must accept and accommodate, industry executives acknowledged.
The San Mateo, Calif. company is being accused of rampant copyright infringement by the world's five largest record labels, which are seeking a preliminary injunction in a U.S. District Court in San Francisco to stop the service. A hearing is set for Wednesday.
But even if the record industry is successful in shutting down Napster, whether temporarily or permanently, technology rarely moves backward. Already other types of file-sharing software are circulating on the Internet.
The record companies will need to find a way to incorporate Napster's file-sharing services into their digital business models, industry executives say, while Napster and other companies of its ilk will have to find a way to compensate artists for their intellectual property.
In other words, can't we all just get along?
The answer, according the Plug.in attendees, is maybe -- but not without bruising each other a bit in the process.
``Napster has started a revolution,'' said Charles Jennings, chief executive of Supertracks, which offers Internet distribution services to record labels. ``In a way, it's like Boris Yeltsin defiantly standing on the tank ... in 1991. It's inspiring at the time. But how are you going to make it all work? That's much harder.''
At the center of the issue is Napster software, which allows users logged onto the Internet to see music files other have stored in their computers. Using the software, users can search and download songs from other people's computers. The vast majority of these songs have not been licensed by artists, record labels or publishers.
In a panel discussion at the Jupiter conference, Napster's vice president of marketing, Elizabeth Brooks, reiterated the company's position to work with the labels but offered few clues as to how it intended to do so.
``I'm all for compensating the artist'' for their copyrights, she said at one point. Pressed for details, she said, ``We're working on it.''
Jupiter analyst Aram Sinnreich suggests that Napster begin to integrate ``digital rights management'' software into its service. Such programs allow the copyright holder of a media file to apply customized security provisions to the file -- allowing it to copied, say, twice or 200 times, or how often the holder sees fit.
``That's something that we're looking at, but we want to be careful to preserve the intuitive organic nature of the site,'' Brooks said.
On Monday, Liquid Audio Inc. (NasdaqNM:LQID - news), which provides technology to sell music securely online, said Napster planned to license technology that traces the origin and ownership of recordings.
Ted Cohen, vice president of new media for EMI Group Plc (EMI.L), was asked if he could live with Napster. ``As long as artists are being fairly remunerated,'' he said.
To be sure, not everyone in the business agrees with that view. Jonathan Zavin, an attorney with Richards & O'Neil who has represented record labels in copyright disputes, said Napster as it currently exists as inherently incompatible with the record industry.
``Napster cannot partner with the labels in its current form,'' he said. ``Napster would need to change its model, and of course, if Napster were to put limits on its users or start charging fees, then it wouldn't really be Napster anymore.''
Napster plans to argue that its service constitutes ``fair use'' in intellectual property and is protected under the Audio Home Recording Act -- the argument that allows people to make copies of music, documents and artwork for non-commercial use.
EMI's Cohen drew attention to the ``terms of use'' policy boilerplate displayed on Napster's own Web site. The disclaimer reads: ``This Web site...may not be reproduced, duplicated, copied... for any commercial purpose that is not expressly permitted by Napster.''
The terms are a longer version of what appears on virtually every compact disc: ``Unauthorized duplication is a violation of applicable laws.''
``So if I copy your software and I 'share' it with a friend of mine, would that be OK with you,'' Cohen snapped at Napster's Brooks.
After a pause, Brooks said, ``No.''
``So how is this any different,'' Cohen shot back.
Brooks then backpedaled and said, ``Well, if you only made one copy, I'd have to think about it.''
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