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 This Bulletin: Thu, Mar 8 2001 2:14 PM AEDT  

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 SCI TECH : Internet


Napster may be doomed, but music-swapping to thrive: analysts

The latest court ruling on Napster could spell the end for one of the world's fastest-growing websites, analysts say, but music delivery and swapping on the Internet is here to stay.

Tuesday's injunction by a San Francisco federal judge bars Napster from using its computers to transmit copyrighted songs without permission, although all sides in the dispute agree it will be complicated to do this because millions of users may change file names as they swap songs over Napster.

Still, most analysts say the ruling will make it difficult if not impossible for Napster to continue as a massive supermarket for free music sharing.

"To a large extent, this is the beginning of the end for Napster, at least for Napster as a non-subscription service," Nicholas Economides, a New York University professor, said.


Settlement

Analysts at Gartner Group, a California consulting firm, said they do not see any legitimate business model coming from Napster following the injunction.

But analysts say the apparent victory for the music industry may be short-lived if record labels and other copyright holders fail to find a way to use the Internet for music delivery.

The ruling forces the big five global recording labels "to figure out an effective and reasonable digital music distribution model," PJ McNealy, a Gartner analyst, said.

"This buys the big five labels time to get their catalogs online and provides a legal alternative to the current illegal file sharing system."

Napster chief executive Hank Barry said his company would abide by the ruling while seeking to negotiate a settlement.

The recording industry so far has rejected a $1 billion offer from Napster, which is working with German media giant Bertelsmann (owner of BMG music) to set up a subscription service where fees can be used to pay royalties.

Bertelsmann eCommerce Group said that from its perspective, the injunction did not change anything.

Bertelsmann will continue to "support all steps that lead to the introduction of this new business model", a spokesman said.


Restrictions

But professor Economides said Napster would need more than Bertelsmann to become the standard, adding that users are already gravitating to other music-swapping sites.

Professor Economides said the restrictions on Napster will likely drive digital music fans to other systems that are free and use no central server, or he said, music sites could set up shop offshore where they would be less vulnerable to US law enforcement.

"People will go the public domain programs like Gnutella or Freenet," he said.

"They are not commercial entities, they don't have servers, they cannot be sued. The recording industry can sue the individuals, but the individuals are the customers of the recording industry."

The injunction "might actually cause labels and Napster to come to terms," Jeffrey Okkonen of Liquid Audio, an Internet music company, said.

"There's just as equal a possibility that Napster goes under, but I think the Internet will stop appearing to be the Dodge City that it's appeared to be."


Test

Napster has attracted more than 60 million users worldwide in less than two years, but the recording industry and others contend it allows massive piracy of copyrighted works.

The case is seen as a key test of whether copyright and other intellectual property laws can be applied in cyberspace, where music, movies and other forms of entertainment can be transferred with the click of a mouse.

Under the court injunction, once Napster is notified about a copyright violation using its website, it must block the transmission within three business days. Napster was also given five business days to show it is complying with the order.

Napster's web forum was flooded with messages about the decision, with many predicting the death of the service.



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