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"Napster is a card catalog. It’s a directory with a community built around it. It doesn’t make copies of anything."

DOWN AT THE DIGITAL CROSSROADS

An In-Depth Interview With Napster CEO Hank Barry
By Simon GlickmanPart One | Part Two | Part Three

I just have to tell you, I love the editorial attitude of HITS.

You do? Well, I knew there had to be somebody.

The Daily Double—I think it's just awesome. I love the fact that you make up new press releases and add words. It reminds me, sort of, of Variety back when it was fresh.

Given that at least a substantial chunk of the music industry will be reading this interview, and there's some possibility that you might make some argumentative in-roads there, if you could come to a commonality of understanding with respect to the idea of Napster being a "super radio," would it be appropriate for the company then to pay for a compulsory license, like radio?

"Compulsory" is an interesting word—it indicates some kind of government-mandated license, and I'm opposed to that. I think that the private marketplace is the place to work these things out, and I said that in front of the Senate last week and I was delighted that [Sony Music's] Fred Ehrlich agreed with me.

It seems the senators agree with you, too.

Yeah, a compulsory license is a last-resort remedy, and everybody looks at it that way, I think.

What I was thinking was some kind of licensing modeled on what radio stations pay.

We certainly have some precedents to look at. We can look at public performance licensing, we can look at mechanical licensing in the publishing world, we can look at the kind of Web licenses that have been established with the RIAA in connection with Internet licensing. So there are lots of what I would call collective or mass-licensing structures that are out there. I think any one of those could serve as a basis for a structure.

Again, though, the problem that you run into is that if you don't accept the premise that Napster is a complementary service, it leads you to suggest a pricing model for Napster that is much more like a retail-sale model than it is like a radio model. So the types of revenues that are generated from public-performance licensing are not as great, from the standpoint of the record and publishing companies, as the revenues that you get from a sale. That's really where the issue lies. I think people who run the record conglomerates genuinely believe that this is a substitute for a sale, and we just don't agree.

Well, this gets to the heart of a kind of definitional disconnect that we've grazed but haven't really articulated: What is a download? Is it a performance? Is it analogous to a containerized musical product?

That's a really good question. My view is that there are a number of different models you can look at, and it's not clear to me that any one of them is directly analogous.

That's exactly why new technologies appear threatening—because they knock away the certainties that the old system was built on.

Right. Whenever new technology appears on the scene, the established order is upset and it takes a while to see how to use it in a beneficial way or to see how beneficial it is.

Part of your argument is based on an analogy to home taping, but part of it is based on the idea of radio and promotion. And it's because downloading bridges these two previously disparate worlds that it becomes difficult to qualify.

That's right, and yet the further complication here is that Napster really doesn't do any of this. Napster is a card catalog. It's a directory with a community built around it. It doesn't make copies of anything. Our 20 million users have MP3 and WMA versions of recorded songs on their computers, so how Napster fits into that scheme is not clear. It's a startup. Nobody is making any money right now. Including us. We have zero revenues.

Can we talk about how it might make money?

Well, what we're doing is, we're taking an activity that is legal, this file-sharing activity, and we're making it convenient for people. You know, you can share files right now, you can e-mail a file to somebody, there's a site called Audiofind.com, which you can get at through AOL, which is a way to find music. Or, you can use .ftp file transfers. There's lots of different ways to do it right now, and what Napster does, by using the community and the directory, is provide more convenience.

So the models out there are just what you would expect. You could do an advertising model, some kind of subscription fee or a combination of the two. I think any good business-school student could come up with 10 models for Napster to make money. But the key question is, how do you do that in a way that's going to be accepted by the community? We've had lots of people come to us, wanting to have access to the community and willing to pay a lot of money for that. And we haven't taken any of those deals, because what they've asked for is something that we think would interfere with the experience that the user has. We really don't want it to change all that much.

Do people want to build ads into downloads?

Ads, links, little pop-up windows that automatically change your long distance provider—you know, whatever! These are things that make it less convenient, and we're trying to avoid those. It's a very simple service right now, and I think that is something that people really like.

You are working on expanding it. I know the new-artist program has been germinating.

It's going great. We have 17, 000 artists, they get this special placement on the site and we're promoting exposure for them and that's been really great. The good news is—and I read an e-mail on this subject at the Senate—we've got a lot of people who are sharing files on Napster and then people are going over and buying their files on MP3.com. So I think we can work with MP3.com like we can with the record companies. I think we can work with Riffage; I think we can work with everybody who's out there in this community. I'm going to leave somebody out here …you know, garageband.com… Fill in the blanks.

Any final thoughts as the moment of truth nears?

I just want to try to be clear: Napster complements the record business. I think Churchill once said, "The problem with communication is the assumption that it has occurred." Sometimes it's hard to communicate, but I'm trying.

Go Back To Part One

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