For a brief moment, as Napster founder Shawn Fanning shook hands and embraced Bertelsmann Chairman Thomas Middelhoff, the drawn-out war between the record industry and its high-tech foes seemed to reach a cease-fire.
Wondrous things were sure to spring from the alliance of a music industry giant and the Internet challenger. A legal, all-you-can-eat way of grabbing near-CD quality tunes off the Net appeared to be on the horizon.
But in the days following the Oct. 31 announcement, a disquieting reality has settled in, and the historic handshake might soon be seen as little more than a photo opportunity.
This deal is not about embracing the future. For Napster, it was a bid for time. For the music industry, it was a cheap way to buy into a hot technology and a very hip brand.
After all, when your enemy's weapons are available at fire-sale prices, you don't have to know how to use them. You just need to own them.
Despite holding the invaluable asset of tens of millions of dedicated users, Napster sold to Bertelsmann for a paltry sum--a loan insiders peg between $20 million and $50 million that gives Bertelsmann an option on an estimated 60% equity stake in the file-sharing company. That's pocket change for a multinational corporation with revenues that topped $14 billion last fiscal year.
Today, at the Los Angeles entertainment trade show WebNoize, Bertelsmann and Napster executives will have their first public face-off with a highly skeptical Internet industry. This crowd sees the record industry alliance with the Internet phenomenon as close to, if not totally, unworkable, given current technology and the vague public promises the two companies made.
Start with the business plan. Napster says it can make money charging users only $4.95 a month, but industry analysts scoff, saying it will never be profitable.
Then there are the obvious conflicts. Napster must develop a way to track music files while maintaining a legal strategy that insists it can't do so.
The companies are asking loyal consumers to pay for something Napster used to give away--and that the public can get elsewhere--for free.
Finally, there is the challenge of convincing Net-savvy music fans to trust the record industry.
"Some of those things, it's not going to be technologically possible to do. . . . Whether [we're] going to be able to succeed or not, we don't know," said Napster Chief Executive Hank Barry during a recent media conference call.
