In early 2002, the NPD Group conducted its MusicWatch survey. In it, people were asked to name the online music service they used. A small portion said Napster. That may not seem very surprising, except for this: Six months earlier, the American government had shut down Napster Inc for promoting piracy.
Had Napster's teenage founder, Shawn Fanning, secretly unlocked a backdoor entrance to his free music service? Hardly. Instead, the poll underscored the power of the Napster brand. In its short, tortured one-and-a-half-year life span, the brand had emerged as the Kleenex of downloadable music.
That branding power is exactly what Roxio Inc, the digital media publisher, is betting on. It bought Napster for US$5 million last year, and plans to start a new -- and legal -- service called Napster 2.0 by this Christmas.
So far, the Napster buzz is working in at least one regard: Since the brand was acquired last November, Roxio's stock has climbed 72 percent, to US$7.45.
No matter how eagerly awaited, however, Napster 2.0 will pale by comparison with its renegade predecessor in some ways.
Unencumbered by law or the need to produce revenue, the original Napster bestowed users with the heady joy of downloading -- free -- any song they chose. Napster 2.0 has no such luxury.
Moreover, ever since Apple Computer Inc unleashed the iTunes Music Store to Macintosh users last spring and sold 6.5 million tracks within three months, the digital music market has become crowded and fiercely competitive.
By the end of this year, nearly a dozen services, including MusicNet from AOL Time Warner, Rhapsody from RealNetworks, and offerings from BuyMusic.com, Musicmatch Inc, Yahoo Inc and MSN Music Club, will have either entered the fray or expanded their existing services. Apple plans to make iTunes workable on Windows-based computers by then, too.
So how will the new version of Napster keep pace with such brutal competition once its initial buzz has died down? With great difficulty, industry analysts say.
At the moment, Napster is proposing a service in which users gain access to 500,000 tracks either through a monthly subscription service or by paying for each downloadable track a la carte.
Subscribers would also be able to participate in several community programs, like one that would share copies of newfound songs with fellow Napsterites. But, in sharp contrast to the old days of Napster, this system does not use file-sharing applications.
To make good on those promises, Napster must unravel the tangle of legal and technological issues that plague online music. Because of the original Napster and its file-sharing offshoots, digital-music users insist on having music that can go anywhere with them. The typical user wants to download songs onto a portable music device for a Sunday morning jog, or burn them onto a CD for a friend's birthday party.
The record labels typically refuse to let their music roam so freely. Apple's iTunes wrangled the right to unlimited downloading only because the service is confined to the Mac OS X, a far easier operating system to control. Whether it will have the same rights when it expands to PCs remains to be seen. Peter Lowe, the director of applications and services for Apple, says music on PC-based iTunes will be as accessible as on a Mac. For digital music to appeal to a mainstream market, he said, "it has to be portable, easy to use and uniform."
At the moment, PC-based services like Napster can only dream of the freedom that Apple negotiated. Still, Napster claims to see no problem, and says customers will be able to download, burn or transfer individual tracks easily.
"The rights that we will have obtained from the major labels by the time we've launched will result in a very high-quality consumer experience that will be sufficient and exciting for 99 percent of the users out there," Gorog said. "I am very optimistic."
Yet Napster inherited many of its licensing agreements from Pressplay, the joint venture of Sony and Universal that Roxio bought for US$40 million in May. These deals confine music to a single computer.
That means that every time you want to hear the new Jane's Addiction CD, you are tethered to your desk. Once your subscription ends -- poof -- Jane Addiction vanishes forever. Napster must now renegotiate, a prospect that even Gorog acknowledges is "challenging, given the complexities of music rights."
Napster hopes to attract customers with a staggering selection of more than 500,000 tracks by its start. BuyMusic.com sells about 300,000 tunes, and iTunes' customers can choose from more than 200,000 tracks.
"This will be the first time that users have a choice between individual downloads or a more comprehensive subscription service to hear over half a million songs," Gorog said.
In July, BuyMusic.com started its own music store, and others, like MusicMatch, will soon follow suit. As Peter Lowe of Apple explained: "Customers like the fact that when they buy music on the iTunes Music Store, they own it and can do what they want with it."
Napster says subscriptions will become more popular over time. "Eventually, we'll also attract people to the subscription service," Gorog said. "Let's say someone spends US$10 on 10 downloads. Soon they'll realize that for 10 bucks they can have access to play all of our songs."
By the time Napster hits your desktop, other services will have adapted their own hybrid services. RealNetworks' Rhapsody plans to add a music store to its well-regarded subscription service within the year. AOL Music tested an a la carte service last year and will incorporate such a service into AOL MusicNet within the year.
At best, Napster's new agreements will produce a service similar to BuyMusic.com. Rather than accept the tightest set of restrictions that music labels had to offer, BuyMusic.com chose to sell tracks for a range of prices, with varying degrees of access.
A result is that some songs move with iTunes-like ease, while others have as little mobility as Rapunzel. The prices can be confusing. For 99 cents, you can download Eminem's Lose Yourself to one computer and transfer or burn the song as many times as you please. For Robbie Williams' Feel, US$1.09 lets the song reside on only one computer, three portable devices and three CDs.
In the end, the most distinguishable characteristic of Napster 2.0 remains its brand. Recognizable as that brand may be, no one -- neither Shawn Fanning nor Bertelsmann, Napster's previous owner -- has ever turned a profit on the name.
Roxio must figure out a marketing strategy that exploits the rebel spirit of Napster, while luring customers willing to pay for digital music.
That is no easy prospect, considering that Napster's most loyal customers are equally committed to receiving unlimited free music. As Justin Cable, an analyst at B. Riley & Co, pointed out: "Freeloaders are not Roxio's target customer."
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