Napster Calls MusicNet Monopolistic; Judge Agrees

MattW writes "Yahoo is carrying an article from the AP about a development in ongoing Napster litigation. Several major labels and RealNetworks formed MusicNet. Napster complained about an anti-competitive clause in the contract they signed with MusicNet, and Marilyn Hall Patel, best known to this community for her stern condemnation of Napster, agreed, stating that MusicNet had all the hallmarks of an anticompetitive business. The article goes on to state that, "If the recording industry was found to have misused its copyrighted material, it might not be able to successfully pursue an infringement claim on those works.""

Here we go again

[bstrahm]

Well it looks like we will never be able to download music on the internet. First it was because we weren't paying the artists, just shipping the music to each other, now it is because we have exclusive contracts with the artists to only use the one service that pays them...
I Want my Net-TV (to paraphrase Sting from a Dire Straights song)

Should have dealt with this earlier

[gorillasoft]

From the article: "Napster's attorney argued to the court that an agreement reached earlier this year between MusicNet and Napster contained a provision unfairly giving MusicNet the right to terminate the contract if Napster sought agreements with other labels."

This seems like something that Napster should have dealt with or drawn attention to during negotiation of the contract. It makes one wonder why they would even sign a contract of this nature. If nothing else, calling attention to it earlier may have helped them in ealier litigation. The only plus for them in signing the stringent agreement is that they have rights to the music now, and may be able to strike this part of the contract to enable them to gain rights to other labels' music in the future.

who /is/ fair?

[SirSlud]

Exclusivity deals are quite the hot topic right now. Intel is taking heat from the EU for exclusivity provisions it has with computer distributors. my boss and I were wondering why someone like Coke or Pepsi is allowed to ensure exclusivity with its distributors (fast food chains, etc)? Whats the difference?

Perhaps Patel has seen the light...

[Green Aardvark House]

If the recording industry was found to have misused its copyright material, it might not be able to successfully pursue an infringement claim on those works.

Could this be new life for Napster? Some of the public has noticed this, that the labels act in a form of cartel, especially since they are investigation for anti-trust violations [slashdot.org]. They have also been successfully sued for price-fixing in the past as well.

The judge should have noticed these types of actions sooner.

Now they're on to something

[weez75]

It seems Napster has figured out that when members of a market collude (act in concert) they are in fact an oligopoly. This in many cases is more powerful than a monopoly. The number of companies with the resources to promote and distribute music is very small. That means that by antitrust definitions they have the most influence over price as well as the ability to create unfair barriers to entering the market.

What this means is that someone finally has figured out that the way to fight the situation isn't to attack record companies for protecting their works but instead, attack their methods of controlling the market.

You and I can in turn support this effort by not buying music from those colluding in this market. Quit complaining about the record companies and the way they handle Napster and Morpheus--just quit buying their products. Buy independent label artists, listen to the radio, pick up an instrument and play it. Let the file trading companies fight the antitrust battle...

'bout freaggin time.

[Hooya]

tho napster's 'business' model was questionable, it was questioning something more questionable.

bear with me. napster by itself -- wrong. but napstering the products of a cartel -- at least it brought to light the cartel that is the RIAA. hope something is done about the cartel. until then i have boycotted 'em by not buying any music (yeah, yeah, what difference can i make? right? well, you're not getting my $16.) no i don't steal it either. i just play what's on radio (that's still legal right? even tho i don't pay for the content 'streamed' to me thru my radio...) in other words, i have done away with the concept of owning any CDs or tapes. we don't 'own' them anyways right?

my $.01. what can i say, the economy is shit and i can't afford $.02 for this crap.

Not at all.

[werdna]

If nothing else, calling attention to it earlier may have helped them in ealier litigation

Only if they had a crystal ball. Napster DID counterclaim for misuse, by the way, albeit on other grounds.

But your facts are way off. The agreement did not exist at the time of the preliminary injunction hearing, so it couldn't have been raised at the time. Facts not on the record (that is, not adduced in the earlier injunction proceedings) are not relevant to the appeal, which is what we have been watching the past 18-24 months.

It couldn't have helped them on appeal. It can only help them going forward. They will use this, and already have.

Re:Should have dealt with this earlier

[Atlantix]

If during the negotiation of the contract Napster had successfully removed this clause, then they would not have been able to accuse the music industry of anti-competitive practices. By leaving it in, they gained the ability to say "Hey look at this terrible thing we were forced to sign." It might be a bit dirty, but Napster clearly needs anything they can use in their favor. And I'm sure no one here thinks the music industry is being completely open and honest while trying to knock out P2P sharing.

Re:Here we go again

[eXtro]

Thats not entirely true. We'll always be able to download music off the internet. The only real question is when will we be able to legitimately download music off the internet? Napster got in trouble for two reasons 1) RIAA is extremely greedy and 2) Napster was greedy.

The only reason for Napster itself to exist was to skim money off of peer-to-peer networking. Once Napster became involved in fact it was no longer really peer-to-peer networking, there was an entity in the middle that operated as an information broker. Some percentage of the songs transferred via Napster were copyrighted, it seems fair that the copyright holders of those songs should be able to negotiate a percentage of Napster's revenue based on that. The RIAA, through its extreme greed, did the wrong thing and for all intents and purposes shut down Napster. If they were smart and/or less greedy they would've negotiated a fee based on the knowledge that they can't really stop file sharing but can get an indicator on what percentage of files are infringing. This would've been pure profit for them since their distribution costs are zero.

Instead they're going after each new adulterated peer-to-peer network and shutting them down. The problem is they still aren't stopping file sharing and also aren't making any money off of it. Every side really loses, including the consumer who obviously really wants to be able to download files off of the net.

Nobody's fair.

[e-gold]

And everybody (most-especially me, to get any self-interest out of the way) wants to be the middleman. The question artists and consumers should be asking themselves is, "what kind of middleman do I want?" The current middleman/men? is what I call a quintopoly (a five-way monopoly) which has survived up to now largely because of the difficulty artists have had in directly reaching their fans through traditional means. The quintopoly is top-heavy with management who are used to (as Courtney Love put it [hole.com]) lots of trips to Scores and other perks. Life for the artists (even when they "make it") is therefore not nearly as lucrative as many imagined before Courtney's rant [hole.com], which appeared in Salon a while back.

The internet changes (or should change) all that (and yes, I hope that the change will benefit me). How can music consumers make sure that most* of the money that they spend on music goes to actual musicians instead of non-producers? Well, I have a few ideas, but

http://www.scottmccloud.com/comics/icst/icst-5/ics t-5.html [scottmccloud.com]

and

http://www.scottmccloud.com/comics/icst/icst-6/ics t-6.html [scottmccloud.com]

show some cartoons that explain things visually better than I ever could in this rant. Enjoy.
JMR

* - anyone promising artists "all" the money is probably lying.

Speaking ONLY for myself!!!

The end of the RIAA?

[Anonymous Coward]

I doubt that the RIAA will lose their ability to enforce their copyright, but imagine if they do: there will be an awful lot of artists (actually, a few big names) who will be really pissed at the music companies for throwing away an important source of income. Can you say "major lawsuit"? This would finally dispel the myth that the RIAA is looking out for artists (when a growing number of people understand that the RIAA is only there for the record companies - which don't mind if a small percentage of artists actually make some money).

YACC - Yet Another Anonymous Coward

Re:It's never fair

[greenrd]

Well it's quite simple really. Without adequate government intervention, capitalists will conspire to destroy free markets. As... guess who... said?

Adam Smith.

Re:Excuse me?

[Magius_AR]

What right does Napster have to complain about ANYTHING?

Why shouldn't they have a right? The music labels went out of their way to drive Napster out of business, and now that Napster is ruined and out of the picture, they intend to profit heavily through almost the same exact means Napster was using. If I were Napster, I'd be pissed too.

Magius_AR

ah the good old force a settlement play

[terrymr]

This was perfect timing - suddenly point out that the RIAA are in fact not the copyright owners and that they are a monopoly.

The same thing happened in the MP3.com case I believe.

The RIAA's members have been misrepresenting copyright ownership for years --- look at a cd does it say "&copy 2001 insert band name here"? - no it says "&copy 2001 insert really big record company name here".

Now go look at the copyright notice in a book - it shows the author as holding copyright doesn't it ?

In the same way the artist owns the music and the record industry licenses certain rights from the artist (unless they have an express agreement transferring the copyright to the record company - this may be the case with smaller newer artists but anybody who knows the business isn't going to assign their copyright to a corporation for life).

And don't tell me that the music is a "work made for hire" because neither the courts or congress believe in that fairy tale so the record companies can't claim ownership that way.

Oddly enough the RIAA don't even own the rights to publish the music that is owned by the music publishers. All the RIAA owns is the "mechanical rights" in the CD,tape or whatever. Or at least that's what the licenses I used to have for public performance of recordings say.

BTW IANAL

You mean they're finally figuring this out?

[dpilot]

CDs list for $17.00.
Cassettes list for about $10.00.

CD media is one piece, no replication time because it's stamped. CDs are SOOOOO cheap that they're the AOL distribution method of choice.
Cassettes have between a half dozen and a dozen pieces that need assembly, and even though they're thermally dup'ed much faster than the 1 7/8 ips they're played at, there is still a duplication time. As soon as possible, software makers got out of the cassette business.

So cheap cost = expensive price, so much for this being anything but a marketing exercise. The cost appears to have NOTHING to do with the price.

CDs came out over a decade ago at about the same price, when they were a novelty. At the time, one figures these are computer-stuff, and prices will come down as technology gets better. They haven't.

Moreover, we have many recording labels producing CDs, but there doesn't appear to be ANY significant competitive pressure. Just about any other industry would get strung up for 'collusion' or something like that, in this situation.

Napster wasn't just people cheating because the technology became available. IMHO we all know we're getting ripped off. That doesn't make Napster right, but also IMHO this puts the current situation into a more Prohibition-like setting. The current situation allowed/required by the law is STUPID and WRONG.

IMHO whenever crime reaches the epidemic proportions of Napster (or Prohibition, or drugs) something needs to be done besides simply enforcing and stiffening the law. In the case of Prohibition, it was repealed. IMHO in the case of drugs, the collateral damage of drug financing and attempts at enforcement are worse than simply controlling drugs like alcohol and cigarettes. IMHO for Napster, serious examination of pricing and collusion are necessary, combined with a review of copyright provisions. (My kids are Beatles fans, and last I know Michael Jackson gets the revenue. How does this encourage the Beatles to produce more music this many years later?)

Things we can do?

[beowulf_26]

I'm surprised to see that Napster's still fighting the recording industry tooth and nail. And while file sharing programs are 'fun' I'm the first to admit that such specific 'free music' programs are illegal.

Like many other consumers I can't stand the idea of the large recording industry's strangle hold on the market because of inflated prices, exploitation of green artists, and copy protection (who else is dreading the advent of copyrighted CDs [cnet.com] which are already here, SACDs, and DVD-As?). At first this disgust led me to use Napster like a maniac, thinking (like many others did) that it would be a good way to combat the industry. Instead, I fear that it has gained the big labels sympathy within the legal system.

So now I ask you. What other ways can we combat big labels and put the power back in the hands of the artist and the consumer, while still getting the music that we love? I'm very interested in hearing every suggestion possible. Currently I can think of the following.

Buy From Independant Labels

Buy used CDs (I love my local used CD shop :D)

Write a letter to 'the industry'???
Does anyone know of other avenues to these goals? Is there some sort of organization that people like myself can support to help remedy the situation?

Please if you know anything...let us know!

Re:anti-competitive contract

[MarqDaLuser]

Napster complained about an anti-competitive clause in the contract they signed with MusicNet

Question: Why would they sign such a contract?

Because they didn't have any other viable options. It was either bend over for the RIAA or be forced into liquidation via legal fees/fines/reparations/etc...

Re:Here we go again

[eXtro]

Napsters business model isn't "clearly illegal" any more than a pawn shop is "clearly illegal". Just because many goods sold in pawn shops are of questionable origin doesn't make the business itself illegal.

I never really defended Napster either, I think the RIAA is entitled to demand a cut, or sue them out of existance. I'm just arguing that they were assinine for doing so. They're now in a situation where Napster's down, but who's next? Kazaa? Maybe they'll be down soon too. What about Audiogalaxy, Morpheus or all the other repackaged not-quite-peer-to-peer services? They're going to spend an eternity in court because programmers can whip together their next nightmare faster than they can sue it out of existance.

They're in a bad position. As new businesses come on line, no matter how illegitimate, they're losing out on a share of the profits. On the other hand by making an agreement with these businesses they're giving them an air of legitamacy but at the same time are undermining their profits. They can't expect to charge a buck per track for an electronic copy of a song.

The most basic analysis of their situation is that the RIAA's business model has been destroyed by the advance of technology. Their business is based around shipping truck loads of plastic discs and relying on peoples lack of knowledge of the miniscule costs involved in distribution. People now see that they can download recordings off of the net for free and that any distribution costs are negligible. In addition the RIAA's actual costs of production and promotion have been exposed and people realize that they're being absolutely raped on the price.

In the mean time the RIAA is trying to crush what little rights consumers have left in order to protect their profits. Laws shouldn't be passed to help companies make a profit. The RIAA isn't even losing money at this point, though I forsee a future where they will no longer be a viable business if their current business plans stay intact or they can't purchase the legislation they require.

Interesting, but flawed. Money is not goal.

[twitter]

The I Can't Stop Thinking logic is underpinned by this statement they make, "Money...is never far from the minds of artists in a capitalist society." This is true only for a class of artists and it's the same logic is used by the "middle men" he disparages.

Many artists are not dependent on their craft for their livelyhood. They have jobs that may or may not be related. They work for wealthy patrons and institutions. They do all sorts of things and consider their crafts luxuries. Some people even make things for the people they like, without looking for a reward. Anyone can do this if they want, you don't have to be wealthy to water paint. People painted, sang and made cool things for each other before money was invented.

It is arrogant to think people like that can not develop their crafts as fully as those who have to hussle them. D'Vinci was mostly a military advisor and party planner. His society was as capitalist as they come. In fact, artists who are indepenent of their craft are the only ones who can produce the artwork without editorial constraint.