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NEW(S) MEDIA Oh, those silly record companies are at it again "Anyone want to bet that more music actually travels across the 'Net as e-mail attachments than via Napster?".

Just when you thought all the funny money in new media was gone, Napster offers the record industry $1 billion to back off.

For those of you who haven't been keeping score at home, here's a quick recap: The record companies have been in full snit for about a year over the ability of users to turn CDs into computer files called MP3s, which is short for MPEG Layer 3. The current focus of the record companies' ire is Napster, of Redwood City, Calif.

Napster has developed a peer-to-peer file-sharing network -- that is, Napster servers keep directories of users' music files, which users browse and then directly trade between themselves. The record companies are suing to shut the service down as a haven for piracy. They won an injunction last summer, which was stayed while Napster appealed.

Earlier this month, a three-judge panel of the San Francisco-based Ninth U.S Circuit Court of Appeals ruled in a way that means the music industry will almost certainly win its suit. The judges sent the injunction back to the trial court for a bit of a tune-up and implementation.

The judges ruled that the injunction could prevent the trading of any copyrighted material on Napster, which the Napster folks say is impossible and would therefore force them to shut down. Napster officials vowed to appeal the ruling to the full Ninth Circuit Court of Appeals.

Last week, Napster officials raised the stakes -- quite literally. Napster Chief Executive Hank Barry and company founder Shawn Fanning offered the record companies suing Napster $1 billion to back off. The two said $150 million would be paid each year for five years to the major record labels -- Sony, Warner, BMG, EMI and Universal -- with an additional $50 million going annually to independent labels.

Spokesfolks for the record companies immediately pooh-poohed the idea, and suggested it would be more helpful if Napster immediately complied with the terms of the injunction -- in other words, if Napster just gave up the ghost. (As we mentioned in a column in this fine publication a year ago, record companies are so smart about how their business actually works that they not only fought the release of tape recorders all the way to the Supreme Court, they even opposed radio on the grounds that people wouldn't buy music if they could listen to it for free. That's right: People want to market your product for free, so you sue them. That's snappy thinking.)

Several questions about the Napster situation arise immediately:

* Don't these music guys kill you? They're just going to keep at this until it blows up in their faces, aren't they?

* Where are these Napster guys going to get $1 billion? Last time we checked, Napster was a company that facilitated peer-to-peer file trading. That is, users trade files directly with each other after finding files listed on Napster. Since the users deal directly with each other, Napster has -- and this is the technical term -- No Revenue Stream Of Any Sort, Beyond Sticking A Few Obligatory Banners On Pages.

Sorry. Back to the first point.

The record companies have a few things working against them. First, there is a fair amount of hostility between artists and record companies. Second, Napster runs a centralized music directory, and therefore presents the lawyers a big fat target of opportunity, as we used to say in the Army.

Here's today's top question: Anyone want to bet that more music actually travels across the 'Net as e-mail attachments than via Napster? And e-mail is just one way files are moving. There are now file handlers in instant messaging programs, chat programs and a variety of others, including old standbys such as Usenet.

The music companies, meanwhile, seem intent on keeping on keeping on, despite the failure of every encryption and watermarking scheme to date, and the enormous benefit they have reaped from such losses as the battle with radio.

The latest move to fall under the heading of "this will sure make everyone happy" is a plan to hardwire content controls into PC hard drives and disk controllers. That's right: Your equipment will start checking up on you to see what you're listening to today.

Congress is already talking about revising the laws in the wake of the Napster suit. Can you imagine the backlash when people find their new systems won't play their old -- and legal -- disks because of copy protection?

Whatever happened to the customer comes first?

Switching subjects: Last week I was named vice president of technology for Belo Interactive here in Dallas. I'll be doing pretty much what I've been doing at BI -- running the technology services group -- but, hopefully, a bit better.

-- Christopher J. Feola

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Date:Feb 26, 2001
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