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Napster Disruptions

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By Tom Sheldon

Note: This article was written in 2000, when Napster was a controversial product. It has since gone through commercialization by the music industry, but this article still makes some important points about content distribution.

Napster is (was, per above note) a controversial Internet application that lets people put digital music in the form of MP3 files on their computer and make it available to others over the Internet. Napster keeps track of where music is located and directs people in search of a song to an appropriate site. Numerous articles describe Napster as some kind of evil tool that people use to steal music and violate copyright law. That view favors the music recording industry and not the consumer. Being an author, I fully appreciate copyright, but if I already own the vinyl version of Santana Abraxas, why should I pay extra to download the digital version?

I agree that theft of music must be controlled, but not by shutting down Napster sites. In reality, Napster (and its look-alikes) provide a new electronic distribution model that is disrupting the media industry. The industryís "old-economy" distribution model is based on controlled packaging, a "buyer beware" attitude (ever try to return a CD?), and the problems of physical inventory.

Napsterís new distribution model lets end-users become distributors and their computers become digital content warehouses. You have to bend your mind a little to grasp that concept. Instead of distributing content via retail stores or even, the new model turns users into distributors. It means that the best place to get music is from an "Internet DJ" that has a collection of music that matches your own taste.

Media producers see this as a threat, but they should try to exploit it. Instead of attacking Napster sites and trying to stop an emerging Internet technology, the media industry should focus on creating settlement systems that compensate not only artists and producers, but also the Napster-equipped distributor. An outrageous concept? Maybe not.

It turns out that Napster works really well in an Internet model where information is not just on Web servers, but is "massively distributed" out to countless small devices on the edge like home computer, handheld portable, home entertainment systems, and even automobile consoles. This movement of information out to the edge will naturally occur as users obtain "always-on" DSL or cable connections and high-capacity storage. Say Iím interested in some music that is stored on your computer. I should be able to get it directly from you via high-speed local connections rather than transferring it across the Internet.

This makes sense in a wireless world. In a few years, wireless devices will be everywhere. Pocket organizers, MP3 players, and handheld computers will spontaneously communicate with "nearby" wireless devices (kiosks, neighboring computers, home entertainment systems, laptop computers, and handhelds). Devices will electronically announce themselves and advertise content and services. In this scheme, short-range wireless is an advantage. As you walk through an office or an airport terminal with your wireless handheld, you move in and out of wireless spheres of influence.

For example, you might walk into the vicinity of someone you know and be alerted of their presence by your pocket device, which looked up their announced ID in your address book (for privacy, just turn off your device). In an airport terminal, your wireless handheld might pick up an advertisement from a nearby user who has a collection of music, books or video that interests you. This content is downloaded directly over wireless connections. That keeps excess traffic off the Internet and is just more efficient in terms of content delivery.

Ideally, artists and producers are compensated via an automatic payment system and the guy running Napster gets a cut as well. Cyber-money payment systems are ideal in this environment. They are like phone cards where you purchase a certain amount of credit and burn up the credit as you make on-line purchases. Cyber-money is safe and eliminates the need to supply personal information and credit card information every time you want to buy online. Who wants to give out that information online in the first place. Cyber-money supports micropayments of less than a dollar, which is about the right price to pay for songs. Payments are easily passed on to producers, artists, and even the distributor running Napster on his personal computer.

Cyber-money systems exists, but it may take Napster to get them kick-started. For example, InterTrust (ITRU) has developed a digital rights management system that AOL recently selected for its own music payment system. InterTrustís DigiBox technology puts digital content in encrypted packages that can be opened for a price. But it may take a while for such schemes to take hold. Most important is an easy and anonymous payment system. I really donít want to give out personal information every time I make an Internet transaction. How can I trust that the recipient of my information will keep is private and secure from hackers and thieves?

What about traditional retailers? Eventually, the CD and its related packaging will become a production and inventory burden. Perhaps music stores will turn into merchandiser like Disney stores, marketing music-related products, not disks that carry digital media. For example, you would buy a book of lyrics that contains a code to download MP3 music off the Internet. Or you buy a stuffed Lion King with music built-in on a chip that can be transferred to your other MP3 devices.

In the mean time, the Napster concept has taken hold. I talked with a college student in a chat room who said his generation thinks music should be free. Indeed, many artist are bypassing the traditional recording industry and becoming their own producers. The Internet is their distribution mechanism, via Napster, word-of-mouth, or listener feedback methods.

The recording industry was unprepared and caught off-guard by the activities of the 19 year-old student who created Napster. While his software is disruptive to the media industry, attempts to shut down Napster and Napster-like sites are only attempts to buy time. Eventually, the media industry will need to support electronic distribution.

Copyright (c) 2001 Tom Sheldon and Big Sur Multimedia.
All rights reserved under Pan American and International copyright conventions.