News From The Woods - February, 2001


By Bob Ketchum

Originally Published February 16, 2001


We are now witnessing the impact that MP3 files on the Internet is having on the music industry. I have been saying for months that a day of reckoning would be seen as sort of a backlash to the furor created when college student Shawn Fanning released the Napster model to an unsuspecting public a few years ago.

With its near CD quality, MP3 has been totally embraced by today's net minded college crowd. The small file size makes it easy to download megafiles using T1 lines installed in college campus' and dorms. Before Napster reared its ugly head, everyone had to log on to one of the various music sites on the web offering free downloads for listeners. Before too long, sites like, and became giant websites rich with content. Their "hit" meters registered unprecedented internet traffic streaming to find free new music.

Then along came Napster, and you didn't even have to go to a website to find new music. For that matter, you could find just about any kind of music you wanted all over the world residing on the hard drives of all the users online at any given time. I covered this phenomenon in a recent article so I wont cover old ground here. Suffice to say that I saw that something was going to have to give sooner or later.

Well, the first thing that I have noticed is that the original MP3 music sites are suffering from decreasing traffic. And that interprets to loss of revenue to the site. A month ago I received email from informing me, in effect, that they were being "forced" to close the website due to decreased traffic, more competition, and changing times. However, I think they should have added "mismanagement of funds" as I recall reading about expanding their horizons drastically (when the investment money was rolling in). They were simultaneously trying many different ways of promoting their website while at the same time constantly tweaking the cosmetic look of the site itself. Also, the company purchased a large theater in LA and began net casting performances from some of their featured bands. In my opinion I think they mistakenly believed that the gravy train would keep on rolling along, unmindful of the impending train wreck fast approaching. The end result was that, which was at one time THE prominent MP3 music site, ran out of money. Since all the music was free they couldn't capitalize on income gained from charging for downloads. And no one wanted to be the first site to attempt to charge for downloads. Not when every single site on the web was offering free music downloads. It would be like attempting suicide. Of course, all this (lack of) action did was strengthen the users mindset that ALL music should be free from now on. It was EXPECTED.

The next red flag popped up about a week ago when I received another email message. This time it was from IUMA (Internet Underground Music Archive) is the original and granddaddy of all music sites. Born from the concept of offering new music from unheard of bands, this site grew into a huge database of unsigned bands. It was a good place for record company execs to cruise and scout for up and coming new bands. Unfortunately the database got so huge and unwieldy that I'm sure it became more of a hassle to use and traffic dropped there as well. So now IUMA is crying the blues. To wit:

Dear IUMA Artists,
As many of you know from our last email, IUMA's funding has been cut and we've been forced to suspend operations. This means that, for the time being, CD sales have been put on hold indefinitely. We've received numerous email asking about what's going to happen to the CD's you have on consignment with us and how you can get them back. Please bear with us - we hope we'll be able to reactivate those "Buy-it" buttons in the near future. We're asking that you please let us hold on to the CDs for a couple of months. If we decide to permanently disable fulfillment, we'll send you an email instructing you how to get your CDs back. If you need more assistance, please visit the IUMA bulletin boards.

Jeff Patterson
Founder, IUMA

Ouch! That's gotta' hurt!

Okay, if that's not enough, I will also inform you that three of the sites I have my own CD posted on have since folded and I have removed them from my links pages. Even Giant seems to be teetering back and forth lately. And what of Napster in all this? Read on:

Napster Faces Shutdown Posted 12. February 2001 The Napster community faces being shut down for the second time in the last year. A federal appeals court modified a request for a temporary injunction against the file-trading application Napster on Monday. As part of its ruling, the court held that District Court Judge Marilyn Patel would need to modify her original injunction to encompass only the file-trading portion of the application. The court ruled that "Napster, by its conduct, knowingly encourages and assists the infringement of plaintiffs' copyrights." The recording industry was understandably thrilled with the decision. Hillary Rosen said "This is a clear victory. The court of appeals found that the injunction is not only warranted, but required. And it ruled in our favor on every legal issue presented." Napster quickly replied with a comment of thier own. "Napster is not shut down, but under this decision it could be. We are very disappointed in this ruling by the three judge panel and will seek appellate review. The Court today ruled on the basis of what it recognized was an incomplete record before it. We look forward to getting more facts into the record. We will pursue every avenue in the courts and the Congress to keep Napster operating." Napster's attorneys have successfully obtained an emergency appeal from the court based on the Sony Betamax Case. For now Napster's future hangs in the balance as they fight today's decision of the court.

Or, put another way - - -

SPECIAL NAPSTER UPDATE! Congratulations to the 3-judge appellate panel, who issued a Soloman-esque decision that split the baby of Napster in half. The court ruled that Napster is liable only insofar as they were aware of "specific cases of infringement" and whether or not they did anything to stop it. The injunction must be modified and reissued by Judge Marilyn Patel. The jury's still out on whether this will require Napster to shut down; as of 10:20am Pacific time, Fox News was reporting Napster would remain open, CNBC was reporting Napster would likely shut down, and CNN's legal experts declared it too close to call (remind anyone of a recent election?). The complete court ruling can be found here , but expect delays -- everyone else on the Internet is trying to read it too.

In anticipation of the death of freely traded music, Napster received heavier than normal activity over the weekend. According to a report at Wired, more than 10,000 users were logged in at any given point on Sunday; quite an increase over the typical 6,000 or so of Napsters 57 million registered users. The report says that each server was trading over 2 million songs; CNN reported earlier today that as many as 250 million songs traded hands in the past 48 hours alone.

So, the bottom line is - people are finally becoming aware of the size of this issue. It's not just how music will be distributed in the future, but will music even be worth listening to if it's all given away? What songwriter would even spend the time to compose a worthwhile piece of music if they knew they would get NOTHING in return for writing it in the first place? And yet, in the face of all this controversy, there are STILL people who don't get it. They still contend that music should be free to the masses.

In any event, time marches on and changes WILL have to be implimented before this new music revolution on the internet can take place. I predict we will see more of those music sites come and go on the net before the dust finally settles. And I'm sure that as soon as Napster lives or dies there is another Napster idea waiting in the wings. But in the meantime I will still refrain from posting MP3 files on our website. You can come and listen to RealAudio samples but NO MP3's. After all - I still want you to BUY THE CD!!!!!

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