Unplugging Napster

National | Free music-swapping service offers the record industry a billion reasons to settle; phone companies are running out of reasons to keep pay phones; and Microsoft is rolling out one big reason to save the PC

Issue: "Mel Martinez: HUD's man," March 3, 2001

The day the (free) music died?
Napster believes its millions of music freeloaders are willing to become honest citizens-honest enough to start paying subscription fees and allow the file-swapping service to offer the recording industry $1 billion to settle a copyright lawsuit that threatens to shut it down. Believing Napster is on the ropes and that they can make their own fortune distributing digital music over the Internet, however, record industry executives aren't expected to take the deal. The major labels claim Napster is an open sewer of copyright infringement. Millions use the software to swap gigabytes and gigabytes of music. Will those people pay $2.95 to $9.95 just to keep the party going? Napster CEO Hank Barry's plan would have to generate enough cash to pay the labels for their rights to their libraries. The company offered to give Sony, Warner, BMG, EMI, and Universal $150 million annually for five years, with an additional $50 million going annually to independent labels. This may be Napster's desperate attempt to keep their service going. Observers say today's free ride is all but doomed. A federal appeals court already signaled that the music industry almost certainly will win its lawsuit, which would simply shut down Napster. The 9th U.S. Circuit Court of Appeals ruled that the company must somehow stop the millions of people from infringing copyright. Napster has sparked a revolution in so-called peer-to-peer computing, with file-swapping services being developed for business and professional applications. If the bellwether dies, plenty of sources for free music with or without legal shades of gray will still exist. But Napster's massive collected libraries will probably be hard to equal. Disconnected
Where will Superman go to change clothes? Public pay phones may soon be an endangered species in America, thanks to digital wireless and cellular. In the southeast, BellSouth plans to pull all of its 143,000 pay phones out of service by the end of 2002. Most of the phones won't be shut off; they will simply be sold off to other companies. But since 1996, about a half million units have been disconnected and the seeds of change are sprouting. "People are making new choices," BellSouth spokesman David Blumenthal said in February. "We've obviously recognized that pay phones are not part of that." At least not in a very big way. Cell phone use is profitable and skyrocketing, with many customers glad to leave behind the inconvenience of inflated rates and calling cards. More than one in three Americans today totes around a mobile phone. Losing pay phones opens issues that have state regulators pondering the future: What about the places with lousy cellular service? How will people in obscure areas call for help in an emergency? Critics say that only the most profitable phones in heavy-traffic places (like airports) will find new owners, leaving many folks literally stranded. BellSouth's abrupt move may spawn a bunch of new laws mandating pay phone service in unprofitable areas. "A public-interest pay phone, by definition, doesn't pay for itself, so why would anybody buy something that doesn't pay for itself?" said James Ramsay, general counsel for the National Association of Regulatory Utility Commissioners. No word yet from the granddaddy of phone regulators, the Federal Communications Commission. Too little, too late?
The PC world has a lot riding on Microsoft's new release of its Windows operating system-due out later this year. Microsoft needs to show that Windows XP is a major leap to persuade customers to upgrade or buy new systems. In the age of the Internet, people need new reasons to care about their desktop machines. Windows XP fulfills a promise Microsoft made months and months ago: to convert its consumer operating system to the more stable code used by Windows NT and 2000. This has some computer buffs looking forward to fewer crashes-like the infamous "Blue Screen of Death"-and others worried about incompatibilities with some old hardware and software. Bill Gates calls XP "the most important release since Windows 95," making it one of the biggest products in Microsoft history. This $1 billion creation will add features intended to boost Internet functionality. Networking features previously only available to techie, high-end, and business users will be available on consumer PCs. Multiple users will be able to save files on the same computer while still keeping them private and safe from one another. One user can get permission to access his own or someone else's machine. The now-familiar look begun with Windows 95 has been changed around. This new release includes another factor: the beginning of the segue into Microsoft's planned .NET strategy. Over time, the company wants users to rely less on the software on their desktop and more on the Internet. Instead of paying a flat one-time fee for software, customers may wind up subscribing to a future Windows platform just as they subscribe to AOL or some other Internet service.

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