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The 2-percent solution

A subscription-based philosophy will kill Napster.

In mid-February, Napster offered $1 billion to the recording industry to settle the copyright-infringement suit that had threatened to shut down the free Internet song-swapping service. Under terms of the proposal, $150 million would be paid annually for five years to Sony, Warner, Bertelsmann Music Group, EMI, and Universal. An additional $50 million would be divided between independent labels in each of those five years.

The ultimate goal of the proposal was to provide a distribution avenue, via Napster, for the labels’ online music files–and to provide a way for Napster to stay afloat. But the charmed life Napster has led so far seems to be coming to an ugly end. Its trial balloon is descending with a thud.

Napster’s attempts to strike a licensing deal with the major record labels was reminiscent of a condemned man negotiating with his firing squad. The proposal came on the heels of a crippling ruling by a three-judge panel of the United States Court of Appeals, which largely affirmed a lower-court decision finding that Napster aids the infringement of copyrights held by the major record labels.

The record industry is plainly holding all the cards here, and it’s all too happy to watch Napster squirm. The major labels scoffed as one at Napster’s proposal, calling it woefully inadequate fiscally and taking the company to task for floating the idea in the media instead of going to the labels directly.

Napster believes it could eventually generate hundreds of millions of dollars a year to pay the record companies, presuming they went along with the offer, via monthly user subscriptions ranging in cost from $2.95 to $9.95. Some simple math and some common sense say otherwise.

From a nuts-and-bolts perspective, I’ve been a major advocate of Napster all along. Its application is efficient and lightweight, and its interface is simple. In that sense, its legacy will live on. Also, if there were a way to preserve the service’s current selection (I just logged on, and there are more than 1.3 million files available), I would gladly pony up a few bucks a month to stay connected.

But Napster itself concedes that if it started charging for its service, it would lose up to 98 percent of its users. That brings the typical lofty file count down to about 27,000. Would you pay $9.95 for 2 percent of something you used to get for free?

What makes Napster’s scheme border on the ridiculous is that no major label would let Napster have any legal control over the online distribution of its music–especially given Napster’s existing alliance with Bertelsmann Music Group. Having the wares of every label up for grabs on the same server would surely strike the big five labels as downright Communistic.

Plus, you know that once they were in the door, each label would want to wrest control over how their files could be used. Anti-copying bugs and other such features would surely be part of files downloaded from the new and improved Napster.

Napster CEO Hank Barry has already conceded that the company doesn’t have the technology in place to implement the transition to a for-pay format, and he’s hinted that the appellate court decision might kill Napster even if its bouquet to the record industry is accepted. What’s more, with that court decision in place, every musician with a mind to do so will be able to file an injunction forbidding Napster from hosting his music, a possibility that would drain the service’s file pool even more quickly than a user fee would.

But it’s Napster’s peer-to-peer file-sharing nature that could provide the final nail in the coffin. As Napster’s system exists, it’s virtually impossible for the company to thoroughly police the content that gets traded via its servers. If a user wants to post a file by Metallica and say it’s by Herman’s Hermits–then spread the word that he’s done so via a Metallica forum–that doesn’t make it any less a Metallica file. Napster has become the ultimate victim of the online anarchy it helped to engender. Look for it to be boarded up sometime this year.

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