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Cringely: One Possible Future for a Music Business

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By Dennis Lloyd

Publisher, iLounge
Published: Friday, July 25, 2003
News Categories: Digital Media

“I call my idea Son of Napster, or Snapster for short.

Napster failed because it was determined by the courts to violate intellectual property rights and because it did not have a successful business model, or any business model for that matter. Any successor to Napster must be both legal (if barely) and profitable. [...]

Snapster is all about ownership. Snapster will be a company that buys at retail one copy of every CD on the market. Figure 100,000 CDs at $14 each requires $1.4 million. Snapster will also be a download service with central servers capable of millions of transactions per day. Figure $100,000 for the download system and bandwidth for one year. Throw in $100,000 for marketing and $400,000 for legal fees and the startup capital required for the business is $2 million.”

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Comments

1

They’re making the assumption that it is alright with the RIAA to actually distribute the contents of the CD’s when they only have a single “license” for it. Clearly, they will also have to do other things, like work out deals with the record labels and have a licensing scheme to actually make this system work.

Either that or I’m not really getting the gist of what he’s trying to say.

Posted by Sraphim on July 25, 2003 at 6:00 PM (PDT)

2

Nice try, but no cigar.  A majority of the cd’s ripped and spread online (except advanced copies) were retail at one point.  The bad thing the RIAA is doing is that each and every album downloaded is considered a loss, even if X people would never buy it.

Posted by tetro on July 25, 2003 at 9:18 PM (PDT)

3

No, you guys misunderstood: his idea is that since ONLY people who own shares in the company can download the songs, it amounts to you already owning the CD.  The fee you pay each time (5cents per song) is not to “buy” the song, since you already “own” the CD as a partial owner of the company; the fee is to simply pay costs of running the company.  You’re not, ostensibly, spreading the files beyond anyone but the owners of the company.

Posted by Druid on July 26, 2003 at 3:41 AM (PDT)

4

Yeah, but still, thats really pushing the legal limits to what can actually be cosidered ownership. While all commercial software has a explicit license that entitles you to a certain number of copies of a software title, music also has this license attached to it, but it is implicit, and really, though many people paid for it, only one person actually gets the license to use it.

I am not a lawyer, but this system is really exploiting a legal loophole, and so was the old Napster. The law of sharing music in digital formats like MP3 was limited peer to peer distribution, and Napster hoped to use this as a technicality to continue operation. However, they eventually met their demise.

I think its fair to say that exploiting legal loopholes and technicalities is not the way to go, as eventually the RIAA will devise some tactic to crush the operation, by either legal means or the threat of legal means. KaZaA, for example, would be totally illegal if they operated out of the US, and now, they’re operating out of some island, and their software is being written in the former Soviet Bloc nations by some unnamed developers. The RIAA has had no success in going after the network itself, so they resorted to suing the users of it. In any case, someone loses.

So, IMO, the best way to go is through totally legal means, like the Apple music store or other legal music download sites.

Posted by Sraphim on July 26, 2003 at 5:23 AM (PDT)

5

Since the record companies would be deprived of a sale, this would CLEARLY not be considered “fair-use” as codified into law.

Posted by StupidIdea on July 26, 2003 at 6:27 AM (PDT)

6

Since the record companies would be deprived of a sale, this would CLEARLY not be considered “fair-use” as codified into law.

Posted by StupidIdea on July 26, 2003 at 6:27 AM (PDT)

7

Stupididea, you’re mistaken.  Fair use does not have anything to do with whether or not you’re deprived of a sale.  In fact, one of the purposes of fair use is to aid in the determination of whether or not to make a purchase (as such, it typically dissuades a certain percentage of people from purchases).

In this case though, it _is_ stretching the legal definitions of fair use, although upon consultation with a trio of intellectual property lawyers, it seems to be at least plausibly legal (i.e. it’s impossible to predict which side a judge will come down on).

Posted by Druid on July 26, 2003 at 6:58 AM (PDT)

8

Druid,

There are 4 basic consideration when determining if a use is fair use. #4 is the relevant one to the discussion. The law states:

“the effect of the use upon the potential market for or value of the copyrighted work. “

In other words, if such use could affect a sale, it isn’t fair use.

Posted by StupidIdea on July 27, 2003 at 10:50 AM (PDT)

9

Stupid, all I can do for you is to remind you, as I said already, that ALL fair use by nature affects the potential market value of the copyrighted work, as it by nature adjusts whether or not people will purchase the property.

Posted by Druid on July 27, 2003 at 5:30 PM (PDT)

10

The fair use that allows me to rip a CD I own to mp3 (or AAC) and listen to it in my iPod isn’t affecting the value of the work. I’ve already purchased a copy. It is simply making it more convenient for me. Instead of having to walk around with a bulky portable CD player, i can walk around with my stylish iPod.

In the Snapster case, it clearly is affecting the value.
There is no right to make infinite copies for the individual shareholders. The corporation could have a fair use copy, such as for a backup, but clearly couldn’t distribute multiple copies to people. It is no different that a company buying a single copy of a SW program and then making copies for all their employees.

Posted by StupidIdea on July 28, 2003 at 6:29 AM (PDT)

11

But StupidIdea, what Druid is saying (and I also agree with) is that you ARE depriving RIAA of a sale by ripping your copy to mp3 (aac, etc). It is just the previous interpretiations of a judge that allows you legally rip the song you own, not the law. Up until Cringley’s Snapster business model is challanged in a court of law, we have no way of determining if it is legal. There are a few things for certain:

1) This will be feverishly challanged by RIAA and the labels.
2) It will be very costly for both parties.
3) It can go both ways, and if the ruling is in favor of Snapster, then the labels are immediately irrelevant.

Posted by pbox on July 28, 2003 at 9:12 AM (PDT)

12

This idea is not “pushing the legal limits;” it’s manifestly illegal.

If a group of, say, 5 people chip in three dollars each to buy the latest Justin Timberlake CD (let’s not judge them on their taste) and then make four copies so every contributor gets one, that’s a violation of copyright law. No question about it.

If the creators of Snapster ever get their idea up and running (which I doubt) and keep their files on a central server, RIAA will get a court order shutting it down before the first file transfer.

Posted by Oxhead in Washington, D.C. on July 28, 2003 at 9:21 AM (PDT)

13

Clearly if the following is true:
“It can go both ways, and if the ruling is in favor of Snapster, then the labels are immediately irrelevant.”

then it isn’t fair use. It has a significant effect on the record companies.

Time and format shifting of a work for personal use are legal. You’ve already purchased the work, it is just making more convenient. You could, as I said, carry around a CD player and a bunch of CDs.

This shouldn’t be that difficult. However, if you want to insist that Snapster would be legal, then go ahead and set it up and I will LMAO when you are sued into oblivion.

Posted by StupidIdea on July 28, 2003 at 10:39 AM (PDT)

14

Oxhead, you’re ENTIRELY incorrect.  In fact, one of the fair-use policies which is specifically encouraged by the RIAA is that people can create mix CDs for their friends from the CDs they have purchased.

Posted by Druid on July 28, 2003 at 11:38 AM (PDT)

15

Druid,

If it’s specifically encouraged by the RIAA, I’d like to see that statement. Do you have a URL?

Posted by Oxhead in Washington, D.C. on July 28, 2003 at 11:44 AM (PDT)

16

Now people are just making stuff up!

It is fair use to make a mix tape for your PERSONAL USE. If you give it away, it isn’t fair use. The RIAA may look the other way (wisely), but that doesn’t mean it is legal.

Posted by StupidIdea on July 28, 2003 at 11:55 AM (PDT)

17

“Home Taping is Killing Music”
The record companies actually used to print this on the back of albums!

I found this quote pretty quick:
“The RIAA’s position is unambiguous: making a mixed CD of music you own and then giving that CD to someone who does not own that music violates copyright law.” 

Do some research next time before you open your trap.

Posted by StupidIdea on July 28, 2003 at 2:21 PM (PDT)

18

This whole Snapter idea is clever, but foolish in essence.  It’s clever, but it won’t work because it’s clever… clever by finding some sort of a shaky loophole in the law and then trying to get away with something that most people could see is questionable.  This loophole is gonna get plugged in nothing flat, you can be sure of that.  I haven’t heard anything about the RIAA going after iTunes… I wonder why?  Because it’s straightforward and honest?  If the RIAA is indeed going after iTunes, then that’s news to me.

But people better believe the RIAA is going to squash this before it even gets off the ground.  There are going to be those who will talk about the idea of Snapster for a long while to come, but apart from that, I give this idea not even until the end of this year, tops, before it’s dead.

Posted by Z on July 28, 2003 at 11:44 PM (PDT)

19

This is the most ridiculous thing I’ve ever read.  Owning stock in a company is not the same as owning assets of the company.  I’ll give you an example.  I own 100 shares of GM.  Do you think I can waltz into the factory, grab a new Corvette, and drive off with it because I own it?  If this guy talked to lawyers who thought this was a good idea, they’re dumber than he is. 

Posted by SF on July 29, 2003 at 6:08 AM (PDT)

20

“I own 100 shares of GM. Do you think I can waltz into the factory, grab a new Corvette, and drive off with it because I own it?”

Maybe it’s worth a shot. Good luck.

Posted by Oxhead in Washington, D.C. on July 29, 2003 at 7:13 AM (PDT)

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