Music Industry Still Gunning for Napster

The Recording Industry Association of America and the National Music
Publishers Association fired the next shot in the legal war against
Napster Inc. late Monday night by
filing a request for a preliminary injunction against the MP3 file-swapping
firm.


The groups members, composed of recording industry luminaries, academians
and artists, claimed widespread copyright infringement and industry harm as
reasons supporting the requested injunction. This time, the disgruntled
parties are using the results from a detailed study to back up their claims.


The Field Research Corp. conducted a study of 2,555 college students who
were Internet users. In a report submitted by E. Deborah Jay, the
study shows a direct correlation between Napster use and decreased CD sales.


“(Nearly half) of Napster users … described the nature of its impact on
their music purchases in a way which either explicitly
indicated or suggested that Napster displaces CD sales,” said the Field
Study. “The more songs Napster users have downloaded, the more apt they are
to say explicitly or suggest that Napster has reduced their music
purchases.”


According to statistical analyses filed with the U.S. District Court in the
Northern District of California, essentially every single Napster user
sampled was engaged in some copyright infringement while using the Napster
service and the majority of songs actually copied and downloaded on Napster,
over 87 percent are infringing.


The plaintiffs argued that a preliminary injunction should be issued because
the music industry will likely succeed on their claims of contributory and
copyright infringement, which they first took Napster to court over Dec. 7
of last year. Plaintiffs in the lawsuit
include A&M Records Inc., Geffen Records Inc. and Sony Music Entertainment,
Inc.


“This is not just about online versus offline,” said Hilary Rosen, president
and chief executive officer of the RIAA. “Most in the online business
community recognize that what Napster is doing threatens legitimate
e-commerce models — and is legally and morally wrong.”

No stranger to legal battles with the RIAA, MP3.com Inc. CEO and
Chairman Michael Robertson also submitted a declaration in support of the
motion stating that file sharing services like Napster do nothing to promote
emerging artists and that MP3.com has not authorized Napster to distribute
the music of MP3.com artists.


“In my view, Napster is not designed to promote or share the music of
unknown or lesser known artists. The only way to find a song
on Napster is to enter the name of the song and/or artist that the user
wants to find,” said Robertson.


Others filing declarations include: Michael Fine, CEO, SoundScan Inc., Dr.
David J. Teece, professor at Berkeley University; Ingram Olkin, professor of statistics and education at Stanford University and Charles Robbins, owner, Oliver’s Records, Syracuse, N.Y.


Last month, Fine’s SoundScan published a study trying to link the decrease of university record store sales to Napster’s popularity.


Responding to the claims in a statement Tuesday afternoon, Napster CEO Hank Barry said his company was trying to settle with the plaintiffs, but that a fundamental difference in opinion was holding them back.


“The RIAA’s position in all of this is, as they say, dij` vu all over again,” Barry said. “Every time an innovation has made it easier for people to enjoy music more conveniently and less expensively, the music industry has complained and tried to slow the adoption of the technology. And every time, the music industry has nonetheless benefited.”


Essentially calling the SoundScan study a hazardous shot in the dark, Barry picked it apart:


“First, the RIAA tries to drum up proof of lost sales due to Napster, but its effort

s fall flat. The RIAA ignores the 8 percent overall increase in sales in 1Q 2000, when Napster was a factor. Instead, they dredge up the discredited Soundscan Report that studied sales ‘near colleges’ in 1Q 1997 through 1Q 2000. The report shows that a minor decline in college store purchases happened from 1998 to 1999 — before Napster even existed. There is nothing to suggest that Napster in late 1999 early 2000 had any impact the course of sales. And, the study did not take into account the impact on the surveyed stores of big box or online retail competitors. The survey also did not refer to independent record store sales generally, which are down even more than those in ‘college’ areas.”


Barry and Napster have some analysts, including Jupiter Communications analyst Aram Sinnreich, in its corner. Sinnreich believes the online community of Napster and others of its ilk will ultimately boost record sales.


“I would be very disappointed if the courts made any kind of lasting decision about Napster based on this research,” said Sinnreich of the Field Study. “I think there is a very obvious inherent flaw in it, which is that it doesn’t take channel shifts into online sales into account.


“And if you assume that college students are going to be first movers and are probably going to shift onto online retail faster than the populace at large, then it’s feasible that the amount of music they purchased overall has increased.”


Since the RIAA first sued at the end of last year, more and more attention
has been paid to the firm, which was created by a 19-year-old in a college
dorm room over a year ago. Metallica and Dr. Dre have come forward to single
out over 500,000 users and order Napster to ban them from the service.


That move created a backlash on the artists and Napster by enraged fans cut
off from the service, but has also resulted in a boost in Napster’s traffic
in recent weeks. According to Nielsen Netratings, Napster audience size grew
32 percent at home, from one million
to 1.4 million, and 30 percent at work, from 417,000 to 541,000, supporting
the theory that any press, regradless of what spin it creates, is good press.


Napster’s turmoil also hasn’t deterred investors as the firm scored $15
million in funding from Hummer Winblad last month. Barry, a partner at
the venture capital firm, joined Napster as interim CEO as well.


A complete list of public documents filed with the Court including the brief
and supporting declarations can be found online under the link “Napster Lawsuit
Documents.”

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