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Too Legit to Quit: At one point, the RIAA wanted Napster run out of town. Now they're good friends.

Hello Kitty

As the music-downloading market opens up, how does the future shake out for the medium's original outlaw, Napster?

By Jim Harrington

THE KITTY is pimping something, and it ain't Purina. Whether flipping through TV channels or magazine pages, it's hard to miss the feline with the Pantone 368C eyes and chunky headphones. The icon can be found in Rolling Stone, Spin and Time, on ESPN, MTV and Comedy Central and spots all over the web.

To a generation of computer-savvy music fans, Napster's kitty-with-headphones icon was as familiar as McDonald's golden arches or the Nike swoosh. The kitty entered our consciousness at the dawn of the new millennium and completely remixed the possibilities for music distribution with its revolutionary online file-sharing technology.

Napster sent a wave of fear through the recording industry. Some artists--like those penny pinchers in Metallica--worried about the loss of artist royalties in a system that allows fans to pass music around as freely as a blunt at a Jay-Z concert. But users loved Napster because it gave them an alternative to dropping $18 on the whole Afroman album when all they really wanted was that one damn "Because I Got High" song.

"Napster was great," says Sunnyvale resident Jim Scriba, a former Napster, current iTunes user. "It worked great. It was free. Give me a break!"

Anything good and free can't last forever. A flurry of copyright-infringement lawsuits effectively put the kitty to sleep late last year. Napster-heads still speak of the first time they went to the defunct site and found the cat's head drawn on a tombstone. The caption simply read, "ded kitty."

It seems that reports of the Napster's demise have been greatly exaggerated. Napster 2.0 made its debut one month ago as a completely legit, pay-to-download music service, competing against the likes of Apple's iTunes and RealNetworks' Rhapsody for the wallets of online music fans.

"There are significant differences between the old Napster and Napster 2.0," explains Seth Oster, Napster vice president of corporate, community and public affairs. "We are offering an enormous library that can be streamed and downloaded at a very fair price. It maintains the community features that made the original Napster so popular.

"And this time we do it legally."

Will it flourish? Napster faces a peculiar situation where it is now the underdog in a market it once defined, with a public that seems completely enamored with iTunes. Time went so far as to name iTunes "Invention of the Year" for 2003, and it recently became Windows compatible (you can't use Napster on Macs).

Napster 2.0 sold 300,000 songs in its first week, compared to 1.5 million reported by iTunes for the same period. That's not a bad debut, even considering that Windows users own a lion's share of the market. Apple, on the other hand, is touting it as a major victory and issued a press release saying that its product outsold Napster 5 to 1 (representatives from Apple refused to comment for this story).

Beyond Apple, Napster must deal with free file-swapping services like iMesh and Kazaa. And other major players are getting into the act, including Dell, Sony, Wal-Mart and America Online. Virgin Megastores will roll out a new service for the holiday season at its flagship store in San Francisco called MusiKube Personal Music Guide (PMG), a portable WiFi-enabled HP iPAQ that allows shoppers to scan virtually any CD bar code to listen to music clips, discover new music through recommendations and reviews, and maintain personalized music libraries and histories.

By visiting www.napster.com, music fans can download the free software that will allow them to browse a huge library of offerings from both major and indie labels. One of the things that differentiates the new Napster from other digital competitors is that it offers two different ways to experience music.

Napster has both an a la carte store, much like that of iTunes, as well as a premium subscription service, which will be familiar to those who use RealNetworks' Rhapsody. Napster gives users free 30-second clips of all songs in the catalog to help them determine what they wish to purchase at a price tag of 99 cents per song and $9.95 per album.

But it's going to take more than functionality to win back the hearts of music lovers. To its fans, the old Napster was more than just a website. It was a place to discover and share new music with others. Napster 2.0 attempts to embrace that sense of community and revive that sense of user loyalty by incorporating some of the original spirit in the new site. The new service provides users with the ability to integrate tracks from Napster with existing MP3 collections, share playlists within the Napster community, send music to friends both within and outside the service, and maintain a personal inbox for music and messages.

"I've used Napster 2.0, and it's really great," says Shawn Fanning, creator of the original Napster service and an adviser to Napster 2.0 on the user experience.

"It has community features and tools for discovering new music that were important parts of the original Napster experience. It's fast and easy to use, and the sound quality surpasses that of the original."

What the new Napster doesn't have is a lot of industry controversy, having received the blessing of many of its old enemies that once worked to shut it down. The site has inked extensive content agreements with the five major record labels, as well as with hundreds of independents. The new Napster has even been endorsed by the Recording Industry Association of America (RIAA).

In 2002, then-RIAA President and CEO Hillary Rosen drew the wrath of music downloaders with her notorious open letter that called for prosecuting individuals and included the line "Once the RIAA has stomped out file trading on the Internet, and a CD costs $35, it'll be a well-deserved hangover from your free-music binge, and you better believe you're going to regret it."

The official 2003 line about Napster from the RIAA is much different. "This is another welcome addition to a legal online music marketplace that continues to offer fans innovative and exciting opportunities to access the music they want," says Cary Sherman, current RIAA president. "The purpose of our enforcement efforts has always been to allow that legitimate marketplace--with services like the new Napster--a much-deserved chance to flourish."

Reviving the Kitty

In 2002, Shawn Fanning couldn't figure out a way to make money as Napster's notoriety grew. He had to find an answer to the growing list of copyright-infringement suits that were being filed against the company. By mid-2002, the music site filed Chapter 11, reportedly citing more than $100 million in debt and less than $10 million in assets.

A last-ditch effort to sell the company to German media conglomerate Bertelsmann failed, and the site closed shop--"ded kitty." Then Roxio stepped in. The digital media company, which is located right across the street from Santa Clara University, bought the Napster name out of bankruptcy for $5 million in November 2002.

Roxio would then purchase pressplay (the online music service owned by Sony and Universal) in May to be the backbone for the new Napster site. After spending millions to rework the service, Roxio unleashed a beta version to old pressplay users in the fall. The response was positive, and Napster 2.0 officially went live on Oct. 29, coinciding with a ritzy relaunch party and concert headlined by Ludacris, Dashboard Confessional and Interpol. With the relaunch came the obligatory marketing push to announce the return of the kitty with the headphones.

"We have begun marketing very aggressively on TV and in print. That marketing will amp up over time [and] support the enormous brand awareness that already exists," Oster says.

One month into its second life, Napster finds itself in the position of David vs. Goliath--this time it's playing a big-bankrolled, aggressively marketed David, one without the pirate mystique.

The competition features companies that have learned from Napster's original mistakes. The new Goliath could be iTunes--that's admittedly a new role for Apple but one that they seem content on keeping. It could also be Wal-Mart, the world's largest retailer and seller of compact discs, which plans to open its own music-download service by year-end.

High-tech pay-to-play distributors aren't the only competition that Napster will face. In the long run, Napster must not only face off with iTunes, Wal-Mart and Kazaa, it also must compete with traditional music-buying avenues. The question remains whether music fans will want to identify themselves with a service that basically sold itself out. And it isn't just that Napster is now charging for its music that has some people hesitant to jump aboard and eschew the old Tower Records down the street. Good thing a cat has nine lives because this kitty might need all of them to stay in the fight.

"It takes a lot of time fucking with all that [technical] crap," says Scriba. "It's easier for me to just buy a CD."

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From the December 4-10, 2003 issue of Metro, Silicon Valley's Weekly Newspaper.

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