Napster's deal with German entertainment giant Bertelsmann may signal an end to the recording industry's battle with new technologies, opening the way for broader and easier music distribution over the Internet, analysts say.
The accord on a subscription-based site could also make Napster's technology the standard by which music is distributed on the Web, enriching the company and its investors.
"The alliance of the two companies shows that the record industry is finally getting the fact that they can't fight technologies that consumers want," said Stacey Herron, a music analyst with New York's Jupiter Media Metrix.
"And it's going to be very, very good for Napster's bottom line."
Napster and Bertelsman announced an alliance Tuesday for a subscription-based Web site, expected to offer users music downloads for a monthly fee, possibly 4.95 dollars a month.
If Napster, which is currently free to users, moves to a subscription service, it could provide a huge cash infusion from many of the 38 million Napster users, some of which could be used to pay royalties.
Napster was sued for various copyright infringement claims by artists such as Metallica and Dr. Dre and the big five of the recording industry -- Bertelsmann, Sony, EMI, Universal and Warner Music. Bertelsmann, which owns the BMG music label, will withdraw from the suit, and is urging the other record companies to do likewise.
Analysts say Tuesday's announcement means the record industry is finally coming to terms with a Napster-like system of distributing music. Record companies have depended either on selling CDs in stores or through online outlets, or by sending song files to Internet users from company owned computers.
The Napster model, which is known as either "peer-to-peer" or networked filed sharing, was met with "shrieks of fear and pleas for reparation," stated a Jupiter report published in July. Record companies, said International Data Corp. analyst Malcolm Maclachlan, where fearful that Napster and other similar technologies would cannibalize revenues as customers bypassed retailers by swapping their songs among themselves.
But surveys showed that Napster users actually bought more music from record companies. Napster, it seemed, acted as a promotional tool for the record companies, much like radio has over the years. "The record companies didn't understand the technology," said Maclachlan. "So they decided to fear and attack it."
That conclusion has been called into question by findings published Tuesday by Virginia-based PC Data. The research firm survey showed that customers of Bertelsmann's CDNow Web site, which sells CDs online, would use the online CD retailers to gather information, then go to Napster to get free music.
Nevertheless, "Bertelsmann understands that you can't fight technology that consumers want to use," said Jupiter's Herron. "It's better to figure out how to make it pay than to try and kill it."
Napster, headquartered in Redwood City, California, distributes software that allows anyone with an Internet connection to pass digitally encoded songs back and forth with any other Napster-using Internet user. Napster software also creates a constantly updating searchable index of song files available on other computers. Since its debut in 1999, the company claims it has signed up 38 million users.
Analysts said a Napster accord with the recording industry could make the young software company a key distributor for online music, which Jupiter predicts will amount to some 5.4 billion dollars by 2005. The trick, these same analysts say, is to come up with a way to keep music from being passed endlessly across the Internet.
In their joint announcement, Napster and Bertelsmann said they would create a "membership" service. Herron said customers of the new alliance would pay a regular fee to access Bertelsmann's catalog of music, which includes music ranging from U2 to Elton John.
"If Napster can come up with a system that keeps the songs from being passed around, it will be the Microsoft of music distribution," said Herron. – AFP.
© 2000 Al Bawaba (www.albawaba.com)
