Posted on: Tuesday, October 30, 2001
New Napster on hold until next year
By Ron Harris
Associated Press Writer
LOS ANGELES — Concerned that its rivals may get a bigger audience, the head of Napster hopes to press play for the embattled song-swapping service sometime next year.
Konrad Hilbers told technology industry compatriots at the Webnoize 2001 conference Monday that Napster still needs to license more major record label music before the business is ready to go online, "probably in the first quarter of next year."
It continues an extended off-line stay for Napster, once the poster child of insurgent online start-ups. But the recording industry's copyright infringement lawsuit brought the Redwood City company to its knees, and Napster has been dark since July.
Sources close to Bertelsmann and Napster confirm that the German media giant believes the song-swap service can be reborn a winner, and has funded Napster with additional cash totaling about $25 million.
Other companies that never crossed the largest record labels continue to jockey for position in the burgeoning online music space, hoping to ink lucrative deals to distribute music via high-speed streaming over broadband networks.
Listen.com is making another play at the changing music landscape. Once merely a directory of legally downloadable music, the service is about to be reborn and will launch a new streaming music platform called Rhapsody.
Rhapsody, set to launch in about two weeks, is an application where users can store and access streaming song playlists for a subscription fee set by independent distributors.
Listen.com's chairman and founder, Rob Reid, says it will take time for a legitimate online music space to draw users from the current free-for-all that began with Napster and continues with the seemingly unstoppable Gnutella networks.
"Over a period of time, probably three to seven years, we and other competitors in our space can offer something better than free," Reid said.
Reid thinks consumers will see the added value in accessing personalized music collections online and streaming them over broadband connections.
But the same problem exists for Rhapsody, as with many others — no big name content. So far, Listen.com only has signed licensing deals with 37 independent labels to provide music content to the Rhapsody service.
The Big Five record labels keeps their coveted content close to the vest and each has vowed to come out with subscription online music services before year's end. Sony and Universal have partnered to form pressplay while MusicNet is the joint venture of Warner, BMG and EMI.
EMI has also signed a deal to license its catalog to pressplay, making it the only label ready to commit content to both services.
That could mean Napster would be relegated to the status of a latecomer to the digital music party if it restarts next year.
Napster is a small partner in the MusicNet venture, but that agreement between the two companies contains clauses unfavorable to Napster seeking similar deals elsewhere. MusicNet retains the right to cancel its agreement with Napster should Napster seek additional deals for major label content.
Analyst Phil Leigh, of Raymond James and Associates, said even if the company remains on hold until early 2002 it could possibly time its re-emergence successfully.
"I would say if (MusicNet and pressplay) have a small degree of success, I don't think it's too late for Napster."
Leigh said Music Net and pressplay could serve to warm up consumers to the idea of subscribing for online music, to the benefit of Napster's relaunch.
"It doesn't hurt Napster if they come in later when the offering becomes more attractive," Leigh said.
Napster CEO Hilbers seems anxious to get Napster back in the game and has urged Congress to step in and pass compulsory licensing laws if the big labels won't share their prized content.
"Let's get this going before the buzz wears off," Hilbers said.
