Will subscription service kill Napster?

Napster Inc., the free music-sharing service, may soon ask you for a credit card to join.

Napster has announced plans to move to a membership-based service as soon as possible. Although the word “fee” is not mentioned, the new service will restrict how users can share copyright protected files, and may charge to compensate the recording industry and ensure quality and security.

The new Napster service faces both technical and ideological challenges. By adding restrictions to what users can do with music files on their hard drives, or even charging users to share, Napster will shift radically from a free community to a members-only club. Many current users may balk.

Even Napster’s fans often criticize the service for the hit-or-miss quality of the files. (The quality depends on how Napster contributors obtain and record the digital music.) The new Napster club will need to ensure quality in order to retain fans of the free service and justify any costs. The service also faces the technical hurdle of adding digital-rights management to files in a peer-to-peer network.

Napster and its partner Bertelsmann must hurry to launch a service that protects the record labels’ copyrights, because Napster verges on being shut down by the courts for infringing on those copyrights with its current file-sharing service.

Controlled Peer-to-Peer?

Although it released few details on the technology in a statement Friday, Napster maintains that a copyright-protected model can exist on top of peer-to-peer file sharing. However, Lee Black, director of research at Webnoize, a digital-media research firm, says Napster’s peer-to-peer architecture will have to change.

To ensure copyright protection, Napster must find a way to identify content before it goes onto the network, to see who has it and what they’re doing with it, Black says.

Napster has to put a digital-rights management layer into its peer-to-peer network, agrees Malcolm Maclachlan, a media analyst at International Data Corp. That, in turn, could also ensure only quality files are shared.

“I think it’s a great idea; if you can stick [DRM] into a service like Napster, when users enter a query for a song, the service goes out and makes sure they find you a good copy,” he says. Napster already incorporates quality ratings and download speed estimates into its current user interface, Maclachlan adds.

Adding DRM is required for peer-to-peer to work legally, he says.

A Big Brother Napster

But to add DRM, Napster will have to use some type of centralized server that feeds this identified music into the peer-to-peer network, Black contends.

In the end, Napster itself will be only a part of a larger service, Black suggests.

That larger service will be Bertelsmann. Napster has been working for months with a subsidiary of Bertelsmann AG, called Digital World Services. They’re creating a platform for the secure administration of transferred files within a peer-to-peer structure, according to Friday’s statement. Bertelsmann acquired a major stake in Napster as part of a deal to drop its suit against the file-sharing site. Bertelsmann executives said in January that Napster would launch a subscription service by June or July.

In this new structure developed with DWS, Napster can restrict what users can do with transferred files, such as limiting their capability to burn music files onto CDs. Napster technology will add a protection layer when one Napster user sends an MP3 file to another. The Napster client is being enhanced to support this protection, which will use a new security architecture tailored to file-sharing.

Quick Launch

Webnoize’s Black says he’s not surprised Napster and Bertelsmann want to get the new service launched quickly.

Napster is bringing in DWS because they need to get this subscription-based service done fast, Black says. If Bertelsmann and Napster wait too long, and Napster gets shut down by the courts, all the users will leave and the Napster advantage will be gone, he adds.

On Monday, the Ninth Circuit of the U.S. Court of Appeals ruled that Napster’s music-file trading service infringes on record company copyrights. The court stayed an injunction that would have prohibited the site from operating until the original court’s order is modified. But the fate of Napster’s current service remains tenuous.

According to Black, there have been close to 60 million downloads of Napster software. Webnoize estimates Napster’s unique user base is at 15 million people, he adds. He expects Napster to have some version of the subscription service up and running by this summer.

Besides technology and legal challenges, Napster must also lure the other major record labels to its new service.

“Right now we’re talking about BMG content and that’s it,” IDC’s Maclachlan says. “If Napster survives, it’s going to be very different. With the way legal cases have worked, it can’t continue like it has.”

Napster’s own executives admit that economic opportunity is behind Napster’s subscription plans.

“Today’s announcement underscores one key fact: The real questions about Napster’s future

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