Tech Tip:The BMG/Napster Deal



Hollywood, 11/13/00 - Musicians have been worried about Napster almost from the moment the service was spawned.


After all, they reason, aren't record labels protesting that it's a system that encourages theft? Didn't Metallica and Dr. Dre come out against having their music on the service? And weren't they all arguing that CD sales were being displaced by the file-sharing, thus picking their collective pockets without permission?


Well, guess what? There's a major music executive who's finally let the cat out of the bag when it comes to all those arguments.


Early in November, a major press conference was held in New York to announce an investment in Napster by Bertelsmann AG, one of the largest media companies in the world and the home of RCA Records and Arista Records, among many other labels. The $50 million in Bertelsmann financing will fund Napster's research into a file-sharing system that can compensate artists, record companies and music publishers.


At the press conference, a reporter asked a Bertelsmann executive if Napster hurts CD sales.


"All the data I've seen suggests the opposite," said Thomas Middelhof, the chairman of Bertelsmann AG.


The comment marked the first time a major music executive has publicly stated what everyone else seems to know intuitively -- that the more people listen to music, the more they want to own it for themselves. Thus, Napster can be thought of in the same vein as radio, an outlet that record companies spend millions of dollars on in an effort to get consumers to listen to their music.


Given that lost CD sales aren't the real argument, what is? The answer is control. Record companies, musicians and publishers all want to maintain the status quo, which means they are compensated for each use of their music. To accomplish that, Napster will attempt to turn its previously free service into a cash register.


Their task is not an easy one. To date, no file-sharing system exists that can effectively compensate everyone.

There are as many theories on how to do that as there are Napster users. The most popular way envisioned currently is the subscription model, whereby people will pay a fee -- say, $4.95 per month, as was suggested at the Napster/Bertelsmann press conference -- and be able to receive a limited number of downloads in exchange.


But there are several major problems with that scenario.


First, Napster's community may shrink if there's a fee charged, making it less attractive to its users.


Second, such a plan can only work if the swapped songs are tethered to an individual user's computer. Otherwise, just one person would need to pay to download a song, and then could share it with billions of people if they so choose. Being confined to listening to music only on your computer is not a popular choice for most consumers.


Third, any system of file-swapping would have to include every major record company in order to be successful. And, to date, no other major music distributor has indicated that they'd be willing to cooperate with any solution devised by Napster.


So what's a musician to do in this increasingly crazy digital music world? Simple. Forget your worries, and remember what Herr Middelhof has said. Napster does not hurt CD sales; in fact, quite the opposite seems to be true.


That means that you should encourage as many people as possible to distribute and listen to your music. If it's any good, you'll start building a fan base that will come and hear your live show, possibly buy a t-shirt, and certainly may be willing to pick up a high-quality CD, complete with artwork and liner notes.


And then, as your act builds a larger audience as your music becomes noticed by bigger and more prestigious radio outlets, then you, too, may be able to get some of the Bertelsmann money -- in this case, when you sign a recording contract.