[CEI Senior Fellow James V. DeLong is participating in an on-line Roundtable Discussion of the Napster controversy that is being conducted by The American Prospect. This C-Spin contains his most recent contribution to the debate. For the entire discussion, see http://www.theprospect.com/controversy/napster. ]
An interesting feature of this exchange is how muddled the sides can get. I, an “anti-Napster,” find much to agree with in the “pro” statements, and some areas of disagreement with in my fellow “anti.”
I have four major comments on the first round.
First, demonizing the record companies is not a worthy argument. I am willing to stipulate that they are full of selfish, egotistical people out to make a buck or a rep and willing to trample anyone, including artists, to do so. (Sort of like a typical media newsroom, come to think of it.) So what? As far as I know, this is a competitive industry that places a premium on creating or signing the best artists, and the artists are making the best deal the economics of the business will allow.
The artists’ problem is that it is a winner-take-all business. A Celine Dion has sold over 100 million albums. The average singer, who may be just a hair less good (or who simply did not get a crucial PR break at some point), sells zero. No one can predict who will succeed and who will not. In such situations, the record companies must pay heavy search costs and must subsidize a lot of losing efforts, and recover the costs of these from the winners. So the basic economics is that the losing artists get nothing, the medium successes get very little, and the winners win big.
A second myth is that Napster somehow represents some new anti-capitalist hybrid, purer than the nasty record companies. As an amusing story in the Wall Street Journal on July 26 noted, Napster is funded by big Silicon Valley money that hopes to become even bigger. To help it out, it has hired David Boies, fresh from his raid on Microsoft. Bois is the new king of the plaintiffs’ lawyers, the most piratical group since the wreckers of the 18th Century, who put false beacons on shore to lure ships onto the rocks where they could be looted. There is something rather fitting in Napster’s choice of lawyers. It is also amusing to note that Napster is a ruthless defender of its own intellectual property. [See www.napster.com/terms]
A third point is that this whole controversy is part of the Internet revolution that is putting the squeeze on intermediaries. Auto dealers, book publishers, record companies – all are under pressure and all are fighting back. But it is not an either/or situation; sometimes the pressure is legitimate, sometimes not. Some means of resisting (such as defending intellectual property) are valid; some (such as getting legislatures to pass laws outlawing auto sales over the web) are not.
Fourth, the numbers on how Napster helps record sales are irrelevant. They may well be correct at the moment – certainly, the ability to sample before you buy should provide a tremendous boost. And this is one of the great, legitimate uses of the technology. But the fact that people now listen, then buy, is a short term artifact of storage space problems and of the fact that CD burners are not all that common yet. As these facts change, sample and buy will be replaced by sample and steal.
Judge Patel made the right decision yesterday, shutting down Napster’s pirating operations while leaving it free to pursue the valid uses of the technology.
