Will Music Giants Bite at Napster's Bait?

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Having failed to change the world for free — legally, anyway — Napster is upping its offer.

The online free-music commune (from each according to his collection, to each according to his tastes) on Tuesday announced that come summer, it would start charging its users a subscription fee between $5.95 and $9.95 for downloads — and kick in a five-year, $1 billion payoff to the five major music companies.

Under the plan, the Big Five would split $150 million annually, divvied up according to what percentage of their works are downloaded by Napster users. An additional $50 million a year would be split among independent music companies and artists.

"We are putting a concrete offer on the table," Hank Barry, Napster's chief executive, said, adding that talks along these lines with the record companies have been proceeding apace since last summer. Indeed, in November, Napster cut a deal with Bertelsmann to finance just such a transformation to a pay-for-play model.

But now, a week after a U.S. appeals court affirmed in principle a circuit judge's order that Napster dismantle its "vicarious copyright infringement" business model — accompanied by a mad rush of users to its site — Napster figures to strike a deal while the iron is hot. And before its aghast users find someplace else to go.

So it's laying the offer out in the open, and hoping for the winds to start blowing. "If Napster is shut down," said Barry, "it's because, even though our users are willing to pay, the record companies don't want to take their money."

One problem is that for record companies, the iron may have to get a whole lot hotter before they start to scream for mercy. They're still winning on the law, and while they must know about the alternatives — and the coming industry sea change — they're still not in any hurry to face the future while they've got the lawyers.

Not at these prices. As Richard D. Parsons, co-chief operating officer of AOL Time Warner (owner of Warner Brothers Music and this writer), Napster's proposal "doesn't solve the immediate problem" for an industry still pulling in $35 billion to $40 billion in annual sales, even swimming against the technological tide. The $1 billion proposal, Parsons told the New York Times, "does not strike me as being in the ballpark."

Which doesn't mean this convergence won't happen. Once the judge successfully reissues her injunction (the appeals court sent it back for retooling), it should be only a matter of time before Napster goes online with a subscription model, even if only armed with BMG's considerable stable of artists.

Napster and its glimpse at the file-sharing future have changed the music business, if only by showing it what changes are coming. But having seemingly failed to beat the Big Five, Napster now has to wonder what future lies in joining them. Mp3.com bought legitimacy from the Big Five and tried to become its own mini-label, never to be heard from again. Now, as Napster tries to put its bad-boy days behind it, the line on the other side of the law is forming: Gnutella, Aimster, Napigator, BearShare and any number of others. Like they say about roaches, for every one you see, there's a hundred in the walls.

Each is more or less what Napster was to Mp3.com; each fills the same basic demand — free, virtual music — yet each adds some additional legal twist that makes it even harder for the Big Five's copyright lawyers to lay their hands on them. Pending the judge's rejiggering of her injunction order, the suits appear to have caught up to Napster; how will they catch up to Gnutella? And what happens when somebody transplants their server farm to Antigua?

The history of Big Entertainment suggests it is quite comfortable waging war from behind the curve. In 1982, Jack Valenti, then as now the president of the Motion Picture Association of America, went before Congress to decry the good old VCR. "The growing and dangerous intrusion of this new technology," Valenti said, "is to the American film producer and the American public as the Boston Strangler is to the woman alone." (In the end, the VCR worked out pretty well for everyone concerned, with the possible exception of exhibitors.)

This time, as then, some sort of capitulation is inevitable. But while Napster is right about public opinion being on its side — there are a lot of folks out there who say they'd be quite willing to pay for the unparalleled selection and convenience Napster offers, even if they're lying — Big Music is not an elected official. And as long as their lawyers keep winning, they're still on the high side of the negotiating table.

Next offer.