Once upon a time there was a struggling young California band. Its music was too loud and its image too unpolished for MTV. Its social and political messages were a little too disturbing for radio. But it built a passionate following among underground-rock fans by touring relentlessly, staying true to its message and encouraging fans to record its live shows and distribute bootlegged tapes as widely as possible.
Metallica, once copyright poor, is now copyright rich. It has grown from one of those bands only the hip and angry followed to become a major player in the music industry. Its 1992 Metallica (the "black album") marked its emergence from marginal to central in the rock world.
But Metallica seems to have forgotten that it got rich through free music shared by loyal fans. Now the band is harassing and exposing its followers who still believe in the value of sharing and community. Metallica has filed a copyright-infringement suit against Napster, one of the many software services young people use to distribute digitized music files, a service that has attracted 2.5 million users since last fall. Metallica also threatened to pursue racketeering claims against three universities--the University of Indiana, the University of Southern California and Yale--forcing them to forbid their students and faculty access to Napster. Rap star Dr. Dre soon followed Metallica with similar actions against Napster and his fans who use the service.
Later this month, Napster will go into Federal District Court in San Francisco to defend itself against a barrage of plaintiffs, including all the major record labels and legendary composer Jerry Leiber. The plaintiffs claim that Napster is liable for copyright infringement because it enables thousands of people to share and copy compressed music files--known as MP3s--for no cost. The companies hope to plug up this leak in the music distribution system. They would like to distribute music electronically, of course, but in a format under their own control, under terms they dictate, for a price they can enforce.
There are several enterprises involved in digital music distribution--and some have been working out deals with the record labels. After a federal judge ruled in April that MP3.com's services did constitute copyright infringement, the web company started negotiating a settlement with record labels that could yield up to $100 million in cash plus a cut of future revenues. But most of the attention concerning MP3s has focused on Napster, the company that distributes the software that allows fans to find one another and swap specific songs quickly and easily. Napster has a great origin story: It was invented by a teenage college student in Boston who grew frustrated with the sporadic availability of MP3s on the World Wide Web. In the past year, the company has attracted millions of dollars in venture capital, millions of users and more than its share of lawsuits.
While Napster has frightened the music industry and attracted the attention of every major news organization, focusing solely on it distorts the real story, which involves issues much larger than the fortunes of Napster itself. Even if a court shuts Napster down--and the company is at this moment fighting off a request for an injunction aiming to do just that--the MP3 movement will thrive. And even if Napster survives, it's not so clear that people will stop buying CDs just because they can get free MP3s one song at a time. But regardless of the outcome of this case, the music industry will never be the same again.
The MP3 movement is a rational revolt of passionate fans. Compact discs cost too much. Mainstream radio is vanilla and corrupt. MTV has almost given up on showing music videos. Cutting-edge fans want the newest, coolest music as fast as possible. So they share music and tips about it where they find each other--over the Internet. When I was a kid, we traded free music where we found each other--clubs, coffeehouses, basements, high school cafeterias. Music fans today have found a better way. Their new music communities are more vibrant, more likely to get recorded well and distributed quickly, potentially empowered to control their commercial destinies, and more likely to make a difference than forgotten bands of my youth like the Damned or the True Believers.
The free-music strategy is, for lack of a better term, the Grateful Dead business model: Give away music to build a loyal following, establish a brand name and then charge handsomely for the total entertainment package. Whole creative movements have established themselves through this process of community building. In the late seventies, downtown New York punk fans found one another and discussed emerging artists through the handmade fanzines given away at the few clubs willing to host punk shows. At the same time, uptown in the Bronx, the hip-hop movement was spreading through a network of fans who would copy and lend tapes of artists like Grandmaster Flash and Kurtis Blow. Free music has always been essential to the discursive communities that fuel the creative process. These days, some small music labels such as emusic.com and Chuck D's Rapstation.com are experimenting with "value-added" and "gatekeeper" business models, with modest taxation on consumers and artists (and thus modest profit potential). They depend on open systems, like the Internet itself, to foster creativity and "buzz" about their products and services.
MP3 offers a wonderful opportunity for emerging artists, the very people copyright law is constitutionally charged to encourage and aid. Because the established music industry narrows the pipelines of production and distribution, manufacturing scarcity, established artists like Metallica and Dr. Dre profit best from the old system.
Major music labels perform four basic tasks: production, distribution, price-fixing and gatekeeping. If bands use their home computers to record, mix and edit their music, put up their own websites or contract with Emusic.com, and charge $1 per song for MP3 downloads, they can evade the high costs of relying on major record companies. Production and distribution don't seem so hard anymore. And the major record companies have just been exposed as oligopolistic price-fixers, while they've been at it: In May, five top labels settled with the Federal Trade Commission over antitrust charges. It turns out they have been collaborating to keep CD prices $5 higher than they could be, defrauding fans (including Metallica's) of $480 million over the past four years.
The gatekeeping function of record companies may be the most important (and bears some similarity to what's happening in the book-publishing world at the moment). How does a band get noticed amid the noise and flash of our media-saturated world? MCA anoints a band by scouting it, signing it and developing it. These labels can get a song played on radio or MTV (but not always). Tiny Pravda Records out of Chicago probably can't. A truly independent artist with her own label, like Ani DiFranco, has to rely on fan communities. As MP3s proliferate and the web replaces radio as the place to taste new music, DiFranco will be the pioneer whom new artists will emulate. Ani DiFranco's fans have set up more than a dozen web pages with photos, biographical information, tour information, e-mail list subscriptions and MP3 files available. DiFranco's record label, Righteous Babe, does not have its own site yet. Her fans do her marketing and gatekeeping for her.
A signal trait of this new technology, then, is that it offers the ability to evade the professional gatekeepers, flattening the production and distribution pyramid. MP3 is only rock and roll. It's the production and distribution equivalent of the three-chord garage band, made possible by cheap electric guitars and amplifiers. And like rock and roll, anyone can do it, and probably will. This scares the hell out of those who profit from cultural control.
As Chuck D of Public Enemy says, Napster and other such networks are not pirating machines. Napster is radio. Fans will continue to download cheap or free music, and will probably continue to buy CDs if record companies cut their prices and offer value like documentation, design, arrangement and convenience at a reasonable price. The Beach Boys' Pet Sounds is Pet Sounds because it is a complete masterly document, not a collection of digital signals. Despite Dr. Dre's complaints about Napster, his new album is a major hit. Free MP3s have not kept it from crossing the Sam Goody counters.
I spend about $60 per month on CDs over and above any "free" music I download. I download to taste, not to replace. That's common behavior among digital music fans. I have a CD burner, which I use to make mix discs for lectures and parties. But I have yet to assemble an entire replacement album from MP3s. That would be a supreme waste of time. I usually spend no more than $10 per CD because I buy used and from an online music club. Once every six months or so, I pay retail, usually for something brand-new. And my students have not stopped buying CDs either. They are, however, choosier about what they buy.
Of course, not every user of MP3s or distribution networks is a good-hearted fan, or even a driven revolutionary out to overturn the commercial-music industry. There just might be a whole lot of excessive copying going on. But no one seems to know how many CD sales abusive Napster users are costing record companies. Sometimes the Recording Industry Association of America tries to provide evidence of sales losses attributable to MP3, but their research is unpersuasive. Is every downloaded song a potential CD sale? Every dozen songs? What if I hate the song I listened to? The fact is, there is no way to measure accurately the financial impact of MP3 use. And some evidence suggests its effect on CD sales is just as likely to be positive as negative.
A recent study filed in court by the plaintiffs in the case against Napster seemed to indicate that Napster had hurt CD sales among college students, the most visible users of the service because they have access to high-speed Ethernet connections in their dormitories and computer labs. The report, released by the digital-rights management company Reciprocal, examined sales from 2,099 record stores located within one mile of 3,454 US campuses. Those stores experienced a 7 percent drop in sales between a 1998 peak and early 2000. Interestingly, the study considered more than two years of sales data, even though Napster has been out only since last August. What difference could pre-Napster sales make in this debate? If sales dropped before online swapping began, then there must have been some other cause for such a decline: price hikes, online sales, pickier buying habits or just plain aversion to Ricky Martin, perhaps.
Plus, the standard industry sales tracking service, Soundscan, does not count sales at small, independent record stores that do not subscribe to it. Most important, college students are big users of online CD merchants like EveryCD.com. Online sales did not show up in this survey. Perhaps students are buying less from the stores down the street, which do not offer discounts and charge sales tax, and buying more from tax-free web CD services. As it turns out, better studies suggest that college students are actually a minority of Napster users. Most Napster users are over 30.
Approaching the issue from a different direction, there is reason to believe that the proliferation of MP3s helps the CD business: Other Soundscan-based studies show that CD sales were up 7 percent in the first quarter of 2000 compared with the first quarter of 1999. In the midst of its price-fixing fiasco, the music industry would rather not confront the possible positive marketing effects of MP3s.
When Napster's lawyers filed briefs July 3 in federal court arguing against a request for an injunction against the service, they included a new study by Peter Fader, a professor at the Wharton School of Business at the University of Pennsylvania. Fader's surveys of Napster users show that they most often use the service to try out new tunes to decide which CDs to buy. He argues that Napster is a great boon to the CD industry, and sales figures seem to support that assertion.
On the other hand, Chuck D of Public Enemy, the most visible pro-MP3 recording figure, predicts slow but steady death for the CD and for major labels. He envisions a world of small, independent websites offering free digital music. Emerging and marginal artists would not suffer so much under this system. Communities, not major synergistic media companies, would control the marketing efforts.
Either way, MP3s and file-sharing technology are here to stay. Regardless of the direct effect on CD sales, MP3 distribution makes music fans more informed consumers. In the long run, the music industry could be more responsive to margins of the market, such as ethnic communities, subcultures and political movements. The public can express its preferences rationally only if it enjoys good information and a fair pricing structure. MP3s let consumers taste before they buy and act in concert with like-minded fans. They let music companies react instantly to changes in the marketplace. With better feedback, apparent "trends" like grunge or techno would not surprise companies in the future.
MP3 evangelists might sound like they are under the idealistic spell of Marx or Bakunin. But in fact, the charm of digital-music distribution lies in the thought of capitalist theorists such as Friedrich von Hayek and W. Edwards Deming. The current mainstream music industry is a "planned economy," the sort Hayek railed against. It limits information flow and resists price pressures. And Deming advocated constant change, flexibility, new ideas, flat organizational structures, quick reactions to customer preferences and maximum creativity.
The MP3 phenomenon is a battle for control of the music and information pipelines, not the music itself. But ultimately, Napster is a grand distraction. Venture capitalists, who seem to know no bounds of stupidity, threw millions at Napster last year after a teenager wrote and introduced the software. Then, after gigabytes of bad publicity and a couple of serious lawsuits, more venture capitalists gave an additional $15 million to the revenue-proof company in May. Despite all this cash, Napster was dead on arrival. As Slate's "Moneybox" columnist, Rob Walker, has pointed out with the clarity of the child declaring that the emperor has no clothes, Napster is a stupid business model: It has no way of generating income. It charges nothing for people to use it. It charges nothing for artists to post songs on it. It has no way of metering use. Plus, it's already technologically irrelevant.
Since December, several superior Napster-like services have emerged on the Net. Unlike Napster, these are noncommercial and community-based. They depend on volunteer programmers to fix and improve the open-source systems. And unlike Napster, privacy is pretty much assured--for now. No one has any idea who else is using these services. One of these open-source systems is called Gnutella. Several versions exist, at least one for every common computer platform. Unlike Napster, one needs no password to use it, and it has no registration process. So no one can kick you off if Metallica comes calling. Also unlike Napster, Gnutella lets users share all kinds of files--text, video, photos, software and music. And best of all, there is no one to sue. No one "runs" or "owns" Gnutella. Alas, venture capitalists won't lose a dime on it either.
Gnutella represents a new kind of Internet. But it's really what the old Internet was supposed to be back when Wired magazine and Nicholas Negroponte evangelized about its transformative potential--before Budweiser.com put those frogs on the web. It's free, open, decentralized, uncommercializable, ungovernable and uncensorable.
The rise of MP3 and free, open networks like Gnutella should have been expected. The culture industry invited them. Media companies have hijacked the copyright system and drained it of any sense of public interest. Copyright is an essential state-granted monopoly that works well when balanced. Thanks to the Clinton Administration and its efforts on behalf of media companies to maximize copyright protection, copyright has lost that balance.
What the content industry has claimed is a "crisis" of digital reproducibility is actually the opportunity they have been dreaming of. All the whining about piracy and "unauthorized use" and the high-profile lawsuits are sly tactics. The music industry is just stalling through litigation until it can establish a standard, secure digital-encryption format, which is an essential step toward a global "pay-per-view" culture. This technocratic regime will be a severe threat to democracy and creativity around the world.
The important struggle here is not bands versus fans, or even Time Warner versus pirates. It involves the efforts of the content industries to create a "leakproof" sales and delivery system so they can offer all their products as streams of data triple-sealed by copyright, contract and digital locks. Then they can control access, use and ultimately the flow of ideas and expressions. The content industry has been clear about its intentions to charge for every bit of data, stamp out the used-CD market and crush libraries by extinguishing fair use. In late June America Online agreed to a deal with a digital-rights management system called InterTrust. InterTrust will provide the encryption and decryption technology to AOL's software so that AOL users will endure metered and regulated use of digital music, film, text and everything else. Other digital music services are struggling to settle cases with the record industry and are considering ways to install electronic controls on their music.
The reason the culture industry can take advantage of the "Digital Moment" to trump the democratic process and write its own laws is that digital formats collapse the distinction between using material and copying material. If you are reading this article on the Nation website, you have made a copy of it on your computer. If you are reading the magazine proper, you have not. Because regulating reading or listening raises deep First Amendment concerns, courts have been unwilling to do so until now. However, copyright law regulates copying. So, digital distribution allows a higher level of regulation than we ever imagined. Soon--unless Napster and MP3 formats prevail--we will have to apply for a license to listen or read, and the rule of law will no longer apply. America Online will in essence be the cop, jury and judge in matters of copyright.
What James Madison knew, and American jurists have known for centuries, is that a leaky copyright system works best. When properly balanced, copyright allows users--that's citizens to you and me--to enjoy the benefits of cultural proliferation at relatively low cost through a limited state-granted monopoly. Libraries help that process by letting the wealthy or the community subsidize information for all, most usefully for the poor. And a thin, leaky copyright system allows people to comment on copyrighted works, make copies for teaching and research, and record their favorite programs for later viewing. Eventually, a copyright runs out, and the work enters the public domain for all of us to enjoy at an even lower cost.
But when constructed recklessly, copyright can be an instrument of censorship. Here's the big picture: Copyright used to embody a clear and cautious balance among artists, producers and users. Now the game is rigged, thanks to the political power of AOL, Time Warner et al. Citizens, music fans, artists, teachers, librarians and programmers are in a virtual lockdown from these trends. Metallica is not. Perhaps as a result of all the attention Napster has received, people will notice these long-term threats to our culture and democracy and stop demonizing kids who love music.