Napster's Spawn

For all the success the record industry had bludgeoning Napster into compliance, it may have created more problems than it solved. That's because even as Napster has faded into Internet history, a phalanx of successors has marched on the scene. Already they're garnering the same popularity Napster once enjoyed, using technologies that made Napster so attractive while avoiding features that made it so legally vulnerable.

"There's a very good analogy that it's an evolutionary process," says Eric Scheirer, an analyst who follows on-line music for Forrester Research in Cambridge, Massachusetts. "Napster had a particular kind of weakness in its architecture. By killing off the nets like those which are vulnerable to lawsuits, it allows the other networks that aren't as vulnerable a chance to succeed and grow. It's almost an explicitly Darwinian process."

All these programs use peer-to-peer networks, essentially ad hoc collections of Internet users who interact through small programs that let them search for and trade files stored on each other's computer hard drives. These days, those files tend to be songs -- of every conceivable genre and in staggering amounts.

Napster could be sued so easily because its central "server" computers kept track of all the files traded on its network. Because Napster knew what songs were being traded, the courts ruled, it had an obligation to block the pirated ones and a legal liability to the record industry for the billions of songs it already had helped users pirate. Napster's peer-to-peer successors don't have that centralized listing of songs, and their creators say that if their systems are being used for piracy, they have no way of knowing or stopping it -- and thus aren't legally vulnerable.

"The Gnutella network is not policeable," says Jonathan Levinson, chairman of Petapeer Holdings, the Las Vegas company behind Gnutella, an increasingly popular program that lets people swap files on the Gnutella network. "It's like running Bill Gates' Internet Explorer. You can do whatever you want with it."

Gnutella and most other Napster successors can trade more than just music, whether it's home movies of the kids or reports from work. Because they can be used for more than just ripping off the record industry, they have what lawyers call substantial non-infringing uses. Again, their creators say, that makes them less vulnerable legally.

And with Napster neutered, these networks are booming. A recent report from digital entertainment news site Webnoize says about three billion songs were traded through the new networks in August, exceeding Napster's February peak of 2.79 billion.

"We are part of one of the biggest networks in history," says Gnutella's Levinson. "The world has voted already with Napster. People want to stay at home and get their content. Sooner or later, the rights holders will get the idea. This is the future, and this is inevitable."

More than a billion of those songs traded in August were on the FastTrack network, which Forrester says is growing at a staggering 60 percent per month, with as many as 600,000 simultaneous users. FastTrack's creator, the Dutch company Consumer Empowerment BV, released the KaZaA program so users can access its network, and licensed the technology to Music City Networks, whose Morpheus program also taps into FastTrack. Another network, Audio Galaxy, is nearly as busy as FastTrack, while the older Gnutella network is close behind.

Many of these programs are easier to use than Napster, too, with such capabilities as auto-resume, which restarts a download if the person on the other end temporarily logs off, and the ability to download parts of a song from several sites at once, to speed the laborious process.

"That opportunity [for the record companies] to kick our ass will keep getting smaller and smaller as the clients' [front-end programs] keep improving," says Levinson.

The record companies aren't exactly rolling over on all this, though. The Recording Industry Association of America (RIAA), the lobbying arm of the Big Five labels, is suing Aimster, which can piggyback on AOL Instant Messenger as well as Consumer Empowerment and Music City.

"At the end of the day, they look like Napster, they smell like Napster, and from a user's perspective, they taste like Napster," says Matt Oppenheim, the RIAA's senior vice president for business and legal affairs. "Are they architected differently? Sure. Does that mean they don't know what's going on? C'mon. Everyone knows."

Oppenheim says that just because the companies built their programs so that they can't easily detect and stop piracy, they and their users don't get a free ride.

"Sure they get more sophisticated," Oppenheim says. "Does that mean it's theft to any lesser extent? No. Theft is theft. The issue is not whether they're responsible for what they're doing. The issue is whether we're going to be able to figure out what they're doing and pursue them."

Webnoize director of research Lee Black says the new companies face "a sort of double-edged sword" by building their technology the way they have. "Because of the architecture they've set up, they're proving themselves guilty of trying to circumvent the law," Black says. "I think it comes down to the legal interpretation of knowledge and control. There is knowledge that [piracy] can be done. But whether they have control of it is another thing. [The programs do] have legitimate uses, and they can't control how people use it. You need a judge to do a ruling."

That will take awhile. The suits against Aimster are still in procedural mode and months from anything substantive. The Los Angeles federal court case against Music City and Consumer Empowerment is even further from a decision.

Is the record business worried about these networks? Certainly it should be. The RIAA's own figures show that CD sales dropped in 2000, only the second decline in a decade. And sales in the first half of 2001 dropped again, particularly among the under-thirties who have long been music's biggest buyers. The presumption, of course, is that those tech-savvy fans are busily downloading all the music they want from Napster and its successors on high-speed networks at colleges and workplaces.

But that's not all of the story, of course. A rotten economy has hurt the entertainment business across the board, and as the baby boomers gray, they buy less music. And analysts point out that selling CDs is now a mature, 20-year-old business. Most people have already bought the CD versions of their old LPs.

The Big Five are rolling out their own on-line music services, though given their limitations, analysts give them little chance of early success. MusicNet users can download songs but can't transfer the files to other devices like handheld MP3 players and even other computers, while pressplay, a streaming service, won't even give subscribers a file to keep. Neither will have music from all five of the big record companies. And neither will be free.

"I wrote when the Napster decision came down that the labels had a very narrow window of opportunity, that consumers could have been retargeted by a legitimate service if it was launched in a timely fashion, even as a placeholder," says Forrester's Scheirer. "But what we have seen is that the window has largely elapsed."

Even record business executives acknowledge they're feeling their way haphazardly through the challenges of the on-line business. And some candidly acknowledge there's only so much the industry can do to stop the free competition, especially when their for-pay alternatives are so weak.

"Napster is dead, but consumers will always be able to get music on- line for free," says Dave Goldberg, the blunt-spoken CEO of Launch, the Santa Monica music site recently bought by Yahoo! "Overwhelmingly, they listen to music and things they can't get elsewhere. Subscription services will only succeed when they do what customers want, not what record companies want."


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