Trend: Illegal File Sharing Sites Go Legit

The interesting trend, here, though, is that a lot of companies and services that were previously known for being 'illegal' hubs for file sharing are now trying to go legit. Napster, the grandfather for Kazaa and most of its brethren, is now a respectable paid service, and the Pirate Bay may offer a legal version of its service soon.

As Eric Pfanner pointed out in the New York Times, we are now getting to the point where using legal services like Spotify or Lala are actually so much more convenient than illegally downloading music. Given this trend, it makes sense for centralized services like Kazaa to slowly drift to a legal model. At the same time, decentralized file sharing options like BitTorrent, which don't depend on a single company to work, will still continue to be popular. Chances are, though, that users will probably share less music through torrents over the next year or so, as more cheap and free options allow users to legally access music more conveniently.

Without doubt, consumers in 1999 needed better access to music. They needed the opportunity to preview full tracks, to pick and choose songs from an album, and to have instant gratification through online downloads. And ten years later, consumers still have all those lovely perks. Napster ate it (thanks, Metallica!), but Kazaa sprang from its ashes. Then there was Limewire and its cadre. Due props to Apple for monetizing the system as it stood when the iTunes store came on the scene, but users are now ridiculously entitled about what kinds of readily available (a.k.a. easily stolen) files they are willing to pay for and their justifications for stealing media. Yet musicians, as much as they've tried to adapt, are still getting screwed by the Internet and their fans.

On the Napster blog CEO, Chris Gorog, wrote yesterday, "The original Napster hadn't thought through how to protect artists' rights... Napster was about putting the control into consumers' hands so they could find virtually any song they could think of."

That kind of thinking makes me twitch. I love users. I am a user. And yes, I've illegally downloaded my fair share of tunes over the years (sorry, Journey, but the road trip karaoke sessions would've been meaningless without "Don't Stop Believing").

However, consumers neither need nor deserve control over content they did not create.

Illegal downloads have been said by many to stimulate sales; the Radiohead album Kid A is often cited as a case in point. But when users are downloading media as a substitute for actually purchasing it, the paradigm hurts musicians far more than it helps. I would venture to speculate that in P2P ecosystems, users get the glory and commercial musicians get the hard knocks. Users have dozens of ways - P2P, YouTube, a bajillion file-sharing sites - to share music that profit the musicians themselves little or not at all.

But where are the online toolkits for the thousands of working musicians - often independent of record labels' heavy duty promotional machines - who live and die by their ability to promote and sell their songs?

Napster introduced a single-edged paradigm: free content for users at musicians' and labels' expense.

What has the Internet done for musicians and labels lately?

Napster Worked Actively Against Musicians, and No One Worked (Well) With Them

Napster spent the first part of this decade showing complete disregard for the promotional and sales needs and wants of musicians. Can you imagine what the musical online landscape would look like if they had seen the copyright wars as an opportunity rather than a legal problem? What would have happened if they had invested that time and money in creating a workable solution for getting users to pay for content? If they'd worked with bands to create and market non-audio, extracurricular content for fans? If they'd been creative instead of passive-aggressively litigious?

Here's what happened to musicians working online since 1999: MySpace.

MySpace, a tragic tale of clunky interfaces, slow fan-finding, spammy marketing tools, confusing events organization, bad media players, and no revenue.

While consumers were rejoicing in the newfound glut of free tracks, working musicians (as distinguished from lolling-about-in-the-Playboy-Mansion-grotto musicians), especially the independent ones, had to struggle with the most time-consuming, noisy promotional channel possible. And when a challenger sprung up (Facebook, duh) to take that channel's place, the musicians were homeless because the challenger included no music-related tools.

What's the Future Look Like from the Napster P.O.V.?

Currently, our musician friends are struggling to craft cohesive online marketing and sales strategies from a patchwork of odds and ends.

And Napster?

Gorog examines the current landscape of a la carte online music stores (such as iTunes) and streaming media sites (such as Pandora), concluding, "No service has cracked the nut and figured out how to create a profitable business model." What's his company's solution? "With Napster's new offering introduced on May 18, we believe we bring the best of both worlds together. Five bucks each month gets you 5 MP3s" plus streaming audio.

Let us introduce a long, thoughtful pause in honor of Napster's $5-for-5 subscription plan, which is as unoriginal as it is a bad deal. It's a mashup of two models that Gorgog just stated didn't work, and when compared to Emusic's and other sites' subscription plans (about $12 a month gets you about 30 MP3s) and Last.fm/Imeem/Pandora's free streaming offerings, it seems very financially stupid - especially considering that Napster introduced the now commonly held expectation that all this media should be free. Gorog states he sees a future of subscription plans for unlimited, on-demand music. But again, this is a probably not a paradigm that will profit bands.

It used to be that record labels were in charge of screwing musicians over (click the link for a classic article by producer Steve Albini). Now, that task has passed to the fans themselves, with special thanks to the developers who focus on illegal file-sharing over usable platforms for musicians and consumers alike.

In the coming days, we'd like to address the concerns of and online tools for working/commercial musicians. We're aware of a few good ones, but we encourage you brilliant RWW commenter-types to leave your thoughts - and pointers to musician-friendly startups - below. We've got a cabal of techie-musician-hybrid dudes just waiting to beta test them.

At 5pm PST the new Napster will launch with a $5 monthly subscription plan (down from the old $15 plan) and what you get for that price looks quite good. 5 MP3 downloads per month (screenshot shows free credits for an initial 35 MP3s too), free on-demand streaming of more than 7 million songs and additional download purchases for between 69 cents and $1.29. There's a screenshot of the new interface below and our thoughts on where this new version still falls short.

New Interface

That interface looks like what iTunes would have looked like if it was a native Windows app.

The company says it is still working on making mobile a more compelling experience, something we expected to be a big part of the plan when the acquisition happened.

So how does this compare to other music solutions? Here at RWW we use Pandora, Lala and Amazon MP3. Obviously playing particular songs on demand is something Pandora doesn't do, but Pandora nails discovery and the iPhone. It's also free and very easy to use. Lala has a much nicer interface than Napster, it's less expensive but it's also a little confusing. Lala does, however, allow you to listen to new albums all the way through one time for free. Amazon MP3 is just a store, but works well when used in conjunction with Pandora or Lala.

This new Napster seems like a compelling offer but remains an incremental change from everything else the industry offers. Give me a $5 monthly subscription that combines Napster's streaming options with an entire album's worth of monthly MP3 files (5 songs is half an album), the full album previews of Lala, the recommendation and iPhone awesomeness of Pandora and the artist profile quality of Last.fm - and then we're really talking. Though for now, the new Napster seems like a pretty good deal.

At about $160 a year, Datz' plan is comparable to most subscription services, though the high upfront cost and limited selection might make quite a few potential subscribers think twice about the value of this new service.

Mark Mulligan from Jupiter Research argues that Datz is a big deal - not because it might become a market leader itself, but because it has laid a licensing groundwork for the rest of the industry.

Indeed, it will be interesting to see if other services will offer similar all-you-can-eat plans in the future and if the music industry as a whole will be willing to go along with this.

At the end of the day, it is good to see yet another new business model for music services and that at least some of the labels are willing to experiment with new licensing models as well.

It's All About Mobile

Best Buy must think that it can push Napster to be a profitable part of its company, but over the last few years, the company never turned a profit. Best Buy, of course, does have a considerable amount of marketing power both in its ubiquitous big-box stores, as well as through TV and print advertising. Judging from the wording of the press release, it seems Best Buy is mostly interested in Napster's mobile business. In the mobile business, Apple doesn't have the dominant market position it has in the regular MP3 player market, so by positioning Napster there, Best Buy might be able to carve out a lucrative niche for the service.

Bundles

Chances are that Best Buy will start bundling Napster with anything from toaster ovens to overpriced Monster cables in the coming months. The holiday season, after all, is right around the corner and if Best Buy still wants to get some value out of the acquisition this year, they will have to act fast.

LimeWire Store

The site claims that they will be adding thousands more tracks per day, but the big question is: from where?

It wasn't that long ago that the RIAA went after LimeWire's P2P service, claiming "LimeWire has sat back and continued to reap profits on the backs of the music community." LimeWire countersued, claiming antitrust violations among other things, claims which the judge in the matter promptly dismissed.

And today, the RIAA case against LimeWire continues (Arista vs. LimeWire). The current status has fact depositions and expert reports as needing to be provided to the court by March 31st, 2008; rebuttal reports are to be provided by April 30th and expert depositions by May 31st. By the looks of it, this case will be ongoing for quite some time.

So where does LimeWire expect to get all the tracks from? It seems highly unlikely that the same industry that is still involved in a hot lawsuit against LimeWire's P2P software is going to hand over rights to songs that will soon be integrated with that very same P2P software.

Even Napster, which re-launched with support of the recording industry offering legit tunes, has yet to pull off a successful online store. As of January 2008, the company was showing a nearly $10 million loss in the most recent quarter, giving it only 18 months to until it will need another cash infusion or go bankrupt. (It's also a bad sign when the CFO resigns, as did Nand Gangwani in Dec. 2007).

So, LimeWire expects to not only do what Napster could not, but do so without the support of the record labels and while being sued? Who are they kidding?

My advice, stick with Amazon for your DRM-free tunes, but if you must sample LimeWire, at least forgo the subscription plan. Something tells me they aren't going to make it.