[Infowarrior] - Why Is Hollywood Making A Sequel To The Napster Wars?

[Richard Forno]

Why Is Hollywood Making A Sequel To The Napster Wars?

Shutting down Napster was a huge blunder for the record companies, leading
to the collapse of the entire industry. Now, movies and TV studios are
looking to repeat the failure by going after YouTube, says columnist Cory
Doctorow.

By Cory Doctorow,  InformationWeek
Aug. 10, 2007
URL: 
http://www.informationweek.com/story/showArticle.jhtml?articleID=201400131

Hollywood loves sequels -- they're a safe bet if the franchise is already
successful. But you'd have to be nuts to shoot a sequel to a disastrous
flop.

The Napster debacle was the entertainment industry's biggest-ever flop. That
disaster took place six years ago, when the record industry succeeded in
shutting down the pioneering file-sharing service. Record companies show no
signs of recovery.

The disastrous thing about Napster wasn't that it it existed, but rather
that the record industry managed to kill it.

Napster had an industry-friendly business-model: raise venture capital,
start charging for access to the service, and then pay billions of dollars
to the record companies in exchange for licenses to their works. Yes,
Napster kicked this plan off without getting permission from the record
companies, but that's not so unusual. The record companies followed the same
business plan a hundred years ago, when they started recording sheet music
without permission, raising capital and garnering profits, and then working
out a deal to pay the composers for the works they'd built their fortunes
on.

Napster's plan was plausible. They had the fastest-adopted technology in the
history of the world, garnering 52,000,000 users in 18 months -- more than
had voted for either candidate in the preceding U.S. presidential election!
-- and discovering, via surveys, that a sizable portion would happily pay
between $10 and $15 a month for the service. What's more, Napster's
architecture included a gatekeeper that could be used to lock out nonpaying
users.

The record industry refused to deal. Instead, it sued, bringing Napster to
its knees. Bertelsmann bought Napster out of the ensuing bankruptcy. Later,
Universal followed the same patttern when it killed MP3.com in the courts,
then brought home the corpse on the cheap, running it as an internal
project.

After that, the record companies had a field day: practically every
venture-funded P2P company went down, and the record companies made millions
of dollars.

But the record companies weren't ready to replace these services with
equally compelling alternatives. Instead, they fielded inferior replacements
like PressPlay, with limited catalog, high prices, and anti-copying
technology (digital rights management, or DRM) that alienated users by the
millions by treating them like crooks instead of customers. These half-baked
ventures did untold damage to the record companies and their parent firms.

Just look at Sony: It should have been at the top of the heap. It produces
some of the world's finest, best-designed electronics. It owns one of the
largest record labels in the world. The synergy should have been incredible.

Instead, Sony's portable players -- the MusicClip and others -- were so
crippled by anti-copying technology that they couldn't even play MP3s, and
the music selection at Sony services like PressPlay was anemic, expensive,
and equally hobbled. Sony isn't even a name in the portable audio market
anymore -- today's Walkman is an iPod.

Of course, Sony still has a record label -- for now. But sales are falling,
and the company is reeling from the 2005 "rootkit" debacle, where it
deliberately infected eight million music CDs with a hacker tool called a
rootkit, compromising more than 500,000 U.S. computer networks, including
military and government networks, all in a (failed) bid to stop copying of
its CDs.

The public wasn't willing to wait for Sony and the rest to wake up and offer
a service that was as compelling, exciting, and versatile as Napster.
Instead, they flocked to a new generation of services like Kazaa and the
various Gnutella networks. Kazaa's business model was to set up offshore, on
the tiny Polynesian island of Vanuatu. Kazaa bundled spyware with its
software, making its profits off fees from spyware crooks. Kazaa didn't want
to pay billions for record industry licenses -- it used the international
legal and finance system to hopelessly snarl the RIAA's members through half
a decade of wild profitability. The company was eventually brought to
ground, but the founders walked away and started Skype and then Joost.

Meantime, dozens of other services had sprung up to fill Kazaa's niche --
AllofMP3, the notorious Russian site, was eventually killed through
intervention of the U.S. Trade Representative and the WTO, and was reborn
practically the next day under a new name.

It's been eight years since Sean Fanning created Napster in his college dorm
room. Eight years later, there isn't a single authorized music service that
can compete with the original Napster. Record sales are down every year, and
digital music sales aren't filling in the crater. The record industry has
contracted to four companies, and it may soon be three if EMI can get
regulatory permission to put itself on the block.

The sue-'em-all-and-let-God-sort-'em-out plan was a flop in the box office,
a flop in home video, and a flop overseas. So why is Hollywood shooting a
remake?

Napster: The Sequel

YouTube, 2007, bears some passing similarity to Napster, 2001. Founded by a
couple guys in a garage, rocketed to popular success, heavily capitalized by
a deep-pocketed giant. Its business model? Turn popularity into dollars and
offer a share to the rightsholders whose works they're using. This is a
historically sound plan: cable operators got rich by retransmitting
broadcasts without permission, and once they were commercial successes, they
sat down to negotiate to pay for those copyrights (just as the record
companies negotiated with composers after they'd gotten rich selling records
bearing those compositions).

YouTube '07 has another similarity to Napster '01: it is being sued by
entertainment companies.

Only this time, it's not (just) the record industry. Broadcasters, movie
studios, anyone who makes video or audio is getting in on the act. I
recently met an NBC employee who told me that he thought that a severe,
punishing legal judgment would send a message to the tech industry not to
field this kind of service anymore.

Let's hope he's wrong. Google -- YouTube's owner -- is a grown-up company,
unusual in a tech industry populated by corporate adolescents. Google has
lots of money and a sober interest in keeping it. It wants to sit down with
A/V rightsholders and do a deal. Six years after the Napster verdict, that
kind of willingness is in short supply.

Most of the tech organizations with an interest in commercializing Internet
audio and video have no interest in sitting down with the studios:

    *

      Some are nebulous open source projects like mythtv, a free hyper-TiVo
that skips commercials, downloads and shares videos, and is wide open to
anyone who wants to modify and improve it
    *

      Some are politically motivated anarchists like ThePirateBay, a Swedish
BitTorrent tracker site that has mirrors in three countries with
noninteroperable legal systems, where they respond to legal notices by
writing sarcastic and profane letters and putting them online
    *

      Or out-and-out crooks like the bootleggers who use P2P to seed their
DVD counterfeiting operations.

It's not just YouTube. TiVo, which pioneered the personal video recorder, is
feeling the squeeze, being systematically locked out of the digital cable
and satellite market. Their efforts to add a managed TiVoToGo service were
attacked by the rightsholders who fought at the FCC to block them.
Cable/satellite operators and the studios would much prefer the public to
transition to "bundled" PVRs that come with your TV service.

These boxes are owned by the cable/satellite companies, who have absolute
control over them. Time Warner has been known to remotely delete stored
episodes of shows just before the DVD ships, and many operators have started
using "flags" that tell recorders not to allow fast-forwarding, or to
prevent recording altogether.

The reason that YouTube and TiVo are more popular than ThePirateBay and
mythtv is that they're the easiest way for the public to get what it wants
-- the video we want, the way we want it. We use these services because
they're like the original Napster: easy, well-designed, functional.

But if the entertainment industry squeezes these players out, ThePirateBay
and mythtv are right there, waiting to welcome us in with open arms.
ThePirateBay already has announced that it is launching a YouTube competitor
with no-plugin, in-browser viewing. Plenty of entrepreneurs are looking at
easing the pain and cost of setting up your own mythtv box. The only reason
that the barriers to widespread adoption of BitTorrent and mythtv exist is
that it hasn't been worth anyone's while to capitalize projects to bring
those barriers down. But once the legit competitors of these services are
killed, look out.

The thing is, the public doesn't want managed services with limited rights.
We don't want to be stuck using approved devices in approved ways. We never
have -- we are the spiritual descendants of the customers for "illegal"
record albums and "illegal" cable TV. The demand signal won't go away.

There's no good excuse for going into production on a sequel to The Napster
Wars. We saw that movie. We know how it turns out. Every Christmas, we get
articles about how this was the worst Christmas ever for CDs. You know what?
CD sales are never going to improve. CDs have been rendered obsolete by
Internet distribution -- and the record industry has locked itself out of
the only profitable, popular music distribution systems yet invented.

Companies like Google/YouTube and TiVo are rarities: tech companies that
want to do deals. They need to be cherished by entertainment companies, not
sued.

(Thanks to Bruce Nash and The-Numbers.com for research assistance with this
article)

Cory Doctorow is co-author of the Boing Boing blog, as well as a journalist,
Internet activist, and science fiction writer. Read his previous
InformationWeek columns.