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Analysis: Henhouse buys Fox
The creation of Napster was a true convergence, the meeting of cyberspace, pop culture, open media, intellectual property and emerging Net law. Napster's agreement to be eaten alive by one of the largest info-tainmnent conglomerates on the planet is a different sort of milestone, but a big one.
The Napster-Bertelsmann deal was hailed all over Wall Street last week as one of the most significant business moves in years. Execs are watching to see if there is a way for gargantuan multinationals trafficking in intellectual property to thrive and prosper in the hacker-shaped, chaotic culture of cyberspace.
"Free ride might be over" was one USA Today headline. So much for all you thieves and pirates out there.
If it goes through, says Business Week in its forthcoming issue, then Thomas Middlelhoff, Bertelsmann CEO "conceivably will rescue the concept of profitable intellectual property in the Information Age."
Middlehoff's response to this nightmare of easily-transferred digital goods, says Business Week: "Recruit the thief to protect the jewels."
This seems a bit premature. Whatever happens to Napster, Big Media' ongoing Net nightmare is far from over. The brawl between the distributed architecture of the Net and corporatism is just getting rolling. It's clear that intellectual property needs some saving, but not necessarily in the Bertelsmann mode. The notion that music-sharing was only a free ride, a temporal window in the mediasphere for greedy and amoral kids, is too simplistic, as is the idea that nobody ever has to pay for anything non-material again. Those who are sick of the raging wars over Net content are breathing almost audible sighs of relief at the prospect of this deal bringing about something positive.
In the short term, what's most likely to happen is that Napster will become a sort of AOL for music: sanitized, commercialized, subscription-organized, the "free" zone shrinking by the week.According to Business Week and other interviews, Middlehoff "idolizes AOL CEO Stephen M. Case as a prophet of the Internet." And Case isn't big on the idea that information wants to be free.
If subscription models evolve as the sane compromise to the free culture wars, fine. People have the right to choose their own economic models for acquiring culture.This model makes a certain amount of sense, especially for the hordes of middle-class Net users piling online, some of whom are twitchy about all the furor about theft and copyright. But it seems a temporary solution. In a world where all of the textual and visual information on the planet is being archived, the very idea of what intellectual property is is going to have to be resolved, and not just by Bertelsmann and its lobbyists.
This deal might make CEOs happy, but it's bad news on several fronts, including the much-invoked artists and their rights, the diversity and choice of music, consumers and their wallets, or the architecture of the Net itself. A lot of very good things have come from open media models of information and culture-sharing, and they are likely to be threatened or lost if the Bertelsmann Corporations of the world establish an almost total monopoly on information, entertainment and culture, a monopoly literally shattered by the rise of the Net. Many techies believe that can't happen. For every Napster that gets bought, they claim, a hundred will spring up. Maybe so. Personally, I think that's a gross under-estimation of corporatism's contemporary muscle, and it's influence on government, lawmakers, and law enforcement. There will certainly be file-sharing sites, but they will become a fringe, alternative media, existing in small and sparsely-trafficked corners of the Web.
The Napster/Bertelsmann pact is an almost textbook study in how modern corporatism -- late capitalism -- works to dominate, influence and acquire culture. Even though there free music sites -- Gnutella, and Freenet -- and people will continue to use them, AOL and other commercial sites have proven that millions of people will gravitate towards subscription models online if they are cheap enough and hook users up with enormous volumes of information and services.
As AOL merges with Time Warner, the control-and-sanitize model will become more ubiquitous, especially if companies like Bertelsmann pile on. In that context, the Napster-Bertelsmann hookup takes on a different hue -- as a blueprint of the strategy more and more multinationals will use in their ongoing effort to make up for lost time and commercialize the Net. Bertelsmann and the other companies have made it clear they will continue to go after any mini-Napsters that pop up. If they can't get them all, they can sure get the big ones. The shame here is that multi-nationals like Bertelsmann and AOL/Time-Warner are the only entities with the resources to fund and market those kinds of sites and services, develop the technology and the volume of information that could make commercial file-sharing sites work.
The details of the deal invoke the "Sopranos" more than the Net. Middlehoff is proposing to reshape Napster by lending the site $50 million -- pocket money -- and reserving the right to take an equity stake at a later date. Napster is supposed to use the money to develop technology and services designed to get users paying for music. If Napster behaves, says Business Week, Bertelsmann will settle its copyright infringement suit and ask other music and entertainment companies to do the same. If it doesn't, then there won't be a Napster. This is cooperation corporate style, sort of the way John Gotti might have done it, only there's no need for guns.
Middlehoff told a number of reporters last week that Bertelsmann wants to cooperate with rivals and turn Napster into a new kind of platform for downloading the entire range of media products, including books, films, and magazines from any company that wants to participate. Bertelsmann really has nothing to lose by going into business with Napster. The company acknowledged that it's aggressive campaign to brand music downloaders as pirates and to intimidate them into paying exorbitant rates for music has failed miserably.
For music lovers, though, the sense of betrayal was palpable. Messages poured into SaveNapster.com, reported USA Today last week. "I believe Napster's sole idea of the future was to be a part of the money-hungry record industry," messaged Jeff Margel of Northumberland, Pa.
It's impossible to know what Napster's motives really were, but the site had long been seeking help in its expensive fight against the music companies, right up to the moment they started cheerfully exchanging T-shirts with Bertelsmann officials in New York, portraying themselves as heroes and victims in the information wars.
Music industry analysts said it appeared that Bertelsmann's idea is for Napster to evolve into a two-tier, with both paid and free elements. Hank Barry, chief executive of Napster, has suggested that a monthly fee of $4.95 might be appropriate. AOL's $l9.95 price has also been mentioned. Napster would maintain a free, promotional component, but officials get vague when they are asked how a free service would differ from the membership one.
Other analysts, including some quoted by the New York Times, said that one plan under discussion includes adding unspecified "new technologies" that would impose a time limit on downloaded recordings. Non-members might be able to download digitized recordings which expire after a certain period, while members who pay their monthly fees would be able to download files permanently. Members might get other perks, like exclusive recordings from certain artists or the opportunity to pay for a higher-quality download that would work better on their personal CD's or MP3 players.
Until just a few days ago, Bertelsmann (whose major labels include Arist, Ariola, Arte Nova, RCA, New Talents, Windham Hill) was teamed up with the other big music and entertainment companies -- Sony, Disney, Universal, Sony, AOL/Time-Warner -- spewing legal warning notices, intimidating colleges and other institutions that permitted Napster and other free music sites to operate on their servers, branding music lovers and downloaders as pirates, filing lawsuits, hiring lobbyists to pass laws like the DMCA, and funding a barrage of spindoctors and publicists who successfully got the media to sound numerous alarms that a generation of obliviously amoral kids were steading ideas and wantonly ruining the very idea and sanctity of intellectual property.
Sony, Warner, Universal Music and EMI all said they would continue to pursue their lawsuit against Napster. Spokespeople for several of these companies, reported the London Financial Times said they felt they had to continue their struggle against free music in the courts, since there was nothing to prevent "Napster two, three or four" from springing up."
The other companies may be missing at least some of the point of Bertelsmann's deal: Napster/Bertelsmann could afford to play around for years with different models for music distribution, offering more music for little money in new ways. They could even begin re-building a culture of music acquisition.
But it won't be easy. A Pricewaterhouse Coopers survey released to USA Today Friday found that 75 per cent of U.S. music downloaders said they would stop downloading free music if they had to pay. The notion of free music suffered another setback this week. Listen.com, a music directory whose investors include the five major record labels and Madonna, bought the assets to Napster competitor Scour for $5.5 million. Music lovers are already checking out alternatives among the sites on some of the messaging systems, and on open sites like Songspy.com, which reported a huge influx of users in the wake of the Napter/Bertelsmann announcement.
Songspy, which has been online for a only month and claims 30,000 members, has pledged to stick to its policy of free music. "We don't want to betray our users like Napster did," promised Gavin Hall, Songspy's co-founder. Wonder if Hall will feel that way when Sony's lawyers come around in a few months, flex some muscle and suggest a "relationship."
Reading between the lines, Bertelsmann seems to be edging closer to trying to figure out how to commercialize the open media models that sprang from the open source and free software movements. As Lawrence Lessig pointed out in Code, the key to controlling and regulating cyberspace isn't law, but control of code. Regulation of cyberspace is possible, writes Lessig, but that regulation is imposed primarily through code. "What distinguishes different parts of cyberspace are the differences in the regulations effected through code. In some places, life is quite free, in other places more tightly controlled, and the differences in degrees of freedom are simply differences in the architectures of control -- that is, differences in code." Thus the money Bertelsmann is giving Napster is supposed to go to creating code that will make it possible to charge consumers for music.
In moving to acquire a file-sharing online pioneer like Napster, Bertelsmann may also be grasping what the other music and entertainment companies are still resisting -- the company that knows the most about and controls the most code will ultimately control the biggest chunks of cyberspace. Bertelsmann is taking a savvy approach: let the other big companies hire lawyers and try and stop the free music movement legally. If they can, Bertelsmann will still benefit. If they can't, Bertelsmann will be ahead of the curve and well-positioned.
Bef
I'm surprised nobody else has pointed out that the Napster software is neither Open Source nor Free Software. The Napster client is no-cost, but not Free in the sense we are used to talking about it. I have a hard time believing that the "new" Napster membership service will be any different from the existing service--closed system.
Bertelsmann was the publishing company that supported the ideals of the third reich in the late 20's and early 30's, and who rode the nazi party's wave to domination. The company was a bavarian family run business, and espoused self-censorship of their materials as being good, responsible citizens. During the nazi period, Bertelsmann were given all of their competitors properties, all those that were seized for being "subversive" of the state. Most of those competitors made their fortunes during the relatively free era of the Weimar Republic, by publishing books and magazines which touched on many subjects the nazis didn't like.
After the fall of the Third Reich, Bertelsmann laid low and collected war reparations from the Marshall Plan, and generally tried to distance themselves from the horror of the war. They used the claim of being just a simple book seller, who by sheer coincidence ended up owning 100% of all publishing and distribution in Germany at the end of the war. They also took over most publishing in the occupied countries, using the power of the SS judges to "lawfully" transfer ownership. After the war, attempts were made in most countries to break the Bertelsmann connection, but with not any great effect, and those business connections continue to this day.
During the 50's and 60's, Bertelsmann became the largest employer of ex-SS officers. Whenever an SS officer was released from prison after serving time for war crimes, Bertelsmann would send a car to pick them up, and they would automatically have a job with the company.
Because of the large concentration of war criminals in the company, it has long been the focus of allied intelligence services. I've heard rumours that the company employs state of the art counter-surveillance at all their main buildings, and their internal communications are some of the most secure in the world.
I've never worked directly on Bertelsmann's networks, but I've a few colleagues who picked up all their encryption and security experience there. The funny thing is they used Crypto A/G gear for all their inter-office communication because they all believed GCHQ/Echelon was watching them.
More recently, another proposed BMG merger fell through, which generated surprisingly little press. It was the topic of discussion over beers a few weekends ago, and one of my drinking buddies from the Commission made the very cryptic comment "Those old nazis still have many enemies with long memories, and they are all in a position to keep Berty down". There was a young and naive crowd, the ones who don't believe in any conspiracy unless it is first seen on the documentary series "the X Files", who didn't catch on at all to that remark. But there were several older and more clued-in people who nodded imperceptibly and exchanged knowing glances.
the AC
Hemos is like...sci-fi fans;he thinks technology is cool, but he hasn't bothered to understand the science it's based on
If they try to implement a system that charges per-listen they are going to be as bitterly disappointed as the Divx people (Circuit City's DVD-ish format, not the codec)! Particularly since they are going to be competing with non-controlled open P2P networks.
Currently, you don't download any music from Napster. That's their whole defense in the lawsuits. They simply act as an information broker, putting people who want to download music in touch with people who are willing to serve it up.
With Bertelsmann in the act, the model has to change. Why should I put the latest Barfing Weasels CD on my server if somebody else gets paid for *my* bandwidth and disk space? Additionally, putting music on a server is legally questionable. If money gets involved for downloading, it becomes even more questionable. (Hmm. Perhaps part of the deal would be "amnesty" for people who put up songs for downloading through an "approved" broker? I expect a rash of lawsuits against people who allow downloads via "nonapproved" (ie, Gnutella) sites....)
If Napster starts charging, the only way it will work is if they have their own servers with music on them. This is a good deal for Bertelsmann (and whoever else gets in on it); it's essentially free money. It's a good deal for users, who get guaranteed quality and availability. (Hope they've got a *big* pipe!) However, it changes the business model so totally that it might as well be a different company (as well as needing a lot of new hardware!)
It can be a roaring success if they treat it right, particularly if the price is reasonable. US$5/month sounds about right. Unfortunately, the big multinationals seem to treat a new business area like a small child treats a kitten -- they love the idea, but then they squeeze it to death.
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Welcome to the Turing Tarpit, where everything is possible but nothing interesting is easy.
The only reason they agreed to this is that they know users won't use Napster if they have to pay, not because they think the micro-payment business model is viable. This model will kill Napster and there is no risk for them, Napster takes all the risk, pretty sweet deal. Any backward-thinking record exec would see this and get behind this agreement full tilt.
for the privledge of downloading all the music I want. I mean when you think about it, that is pretty cheap all things considered. If I wasn't downloading all those songs, I might be buying a Cd every month only for the three to five songs on it I actually want. For $5 a month, that would be a pretty big savings. And since I usually only listen to music on my computer (no cd in car), I don't have to worry about mp3 players or anything like that. Now if they go with the $20/month price, things might change...
Eric Gearman
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Atomic batteries to power! Turbines to speed!
1. Offer a "micropayment" service and fail
2. Offer a flat rate service and succeed (think ASCAP as the model)
Maybe, just maybe, they'll choose number 2, and we'll still have our music. If they don't, there will always be someone else trading pirated MP3s (think Gnutella).
sulli
RTFJ.
I agree with the AC. They are making you pay 5$ a month, and not putting ANY hardware costs on their part. They dont have to pay for bandwidth, (limited to napster.com) drivespace, support, or any of the other standard costs that come with an internet based service.
I WILL NOT pay for a service that doesnt gaurentee a product. I could download an mp3 of "theme to ducktales" and get a recording of a women orgasming (this happened. was very funny)
im not complaining about this file..
Im more concerned with the lack of resposibility on the RIAA if they charge for napsters service.
Wanna make money? fine. spam cd sales on napster, but unless you are going to set up an ftp or something w/ files i KNOW are correct, im not going to pay you a fucking dime.
no
and will have all the music I'm ever going to enjoy in mp3 format. seriosly, I look around the cubes and all the guys 5-10 years older than me are still listening to Rush! I'm thinking that after a certain point, new music is irrelevent. I will stick with my sonic youth, tom waits and stereolab, my bloody valentine, pumpkins, etc, for a long long time. I have a bunch of single entry albums from a lot of artists too, like garbage 'garbage', nirvana nevermind, portishead 'dummy', on and on.
enough variety for sure. maybe I need never buy another album already.
Okay, fine.
Let's say that they go thru with this deal, and only the payers get to "keep" their music. What's to stop me, once I have paid for the service, from turning around and giving away copies of music I just dl'ed from them for free? Or for that matter, getting together with a group of other people, pooling our money and buying a subscription.
Code? I'll make my own player after I exercise my right to backward engineer it.
Encrypt it? I'll break it myself, make my key for decryption public, or find somebody who already has done one of the first two. Despite what DMCA says, I believe that circumvention of "copy controls" is just as legal as tinkering with own car. (Despite the many, many propritary parts and tools I now need to do that)
It doesn't matter what they try. People will find ways to make it work for them.
Consider, for instance, a sampler of Bertelsmann's magazine portfolio in the U.S.
American Homestyle
Family Circle
McCall's
Parents
YM
Sincerely,
Vergil
Insects and Grafitti Photos
Shouldn't that be 100%? It no longer is free (as in beer) music if you have to pay for it, and if you continue to download this music without paying a fee, it technically isn't considered to be free music.