When Online Got Off Base

Or: How Mark Cuban would have--and could have?--saved the music biz

On a good day, Mark Cuban might respond to a journalist's query with a terse, unpunctuated e-mail that reads like something dashed off by a hostage while his captors are in the can. It's understandable: The man's running the Dallas Mavericks, investing in movie distribution and exhibition companies, sticking it to NBA commissioner David Stern about bad officiating, getting daring 'dos...no, wait. But last week, a missive arrived in the electronic inbox that measured some 1,500 words--maybe he thought he was getting paid by the word. Titled "The Music Biz According to Mark"--punctuated with a little ":)"--it was the culmination of a week's worth of communication instigated last month, when I was fact-checking Courtney Love's claims during the South by Southwest Music Conference that Cuban once tried to buy Napster--something never before reported anywhere. As it turned out, Love was right. Yes, alcohol isa truth serum.

Cuban said that two years ago, he was approached by venture capitalists associated with Napster about buying the embattled peer-to-peer file-sharing service, which once allowed music fans to swap songs across the Internet like kids trading baseball cards. Of course, the deal was never consummated: Napster instead climbed into the silk sheets with the German media conglomerate Bertlesmann, which, according to a recent Business Weekarticle, has spent some $100 million since October 2000 to keep the sickly service on life support. As Cuban said in his first--and shortest--e-mail, "I told them if they did the deal they ended up with, it was like doing a deal with the devil and they would never recover, which they haven't and won't."

Cuban was right: At the moment, Napster is a non-entity unlikely to ever regain its position as the world's most powerful tool for exchanging music between fans tired of shelling out 20 bucks for 20 cents' worth of music. Tied up in what seems to be a never-ending legal battle with the Recording Industry Association of America and the major labels that is still unfolding in U.S. District Court, the company recently laid off 10 percent of its staff and has been replaced by copious other online distribution services, legit and otherwise. Due to relaunch sometime this summer, Napster will be a faint echo of its once-voluble self--if that.

All balls, not just on the court: Mark Cuban insists such online music distribution models as pressplay and MusicNet are the problem, not the solution.
Mark Graham
All balls, not just on the court: Mark Cuban insists such online music distribution models as pressplay and MusicNet are the problem, not the solution.

Cuban's initial e-mail suggested that had he bought Napster, he would have moved it offshore to shield the company from digital copyright restrictions that make it a crime to circumvent technologies that protect copyrighted material such as songs. The ramifications of such a move could have been extraordinary: Napster, at the very least, would have been more difficult for the RIAA to target (you can't shoot at what you can't see), and it might well be in service today--meaning such replacements as KaZaA and Morpheus (the best known of the so-called "Baby Naps") and label-funded paiddistribution services such as MusicNet and pressplay would be moot, since Napster's 80 million users would need no new place to swap (or steal, depending on your point of view).

The fact is, the music industry deservedNapster and its bastard offspring. After decades of ripping off artists, using the successful 10 percent to finance the 90 percent treated like indentured servants and stray dogs, the majors (BMI, AOL Time Warner, EMI, Universal and Sony) found out what it was like to get their wallets lifted. That's why National Academy of Recording Artists and Sciences President Michael Greene thought it appropriate to go on the Grammys in February to insult the very consumers who pay his check. He looked square (or sideways--the man talks out of the side of his crooked mouth) into the camera and had the audacity to insist piracy is a "life or death issue," blaming recent sales declines on online file sharing.

And, yeah, the numbers are down, if you believe RIAA puppet...pardon, PresidentHilary Rosen, who told a Senate committee that in 2001 sales of all recorded music were down 10 percent (or some $600 million), in large part because of the illegal pirating of music over the Internet. According to Rosen, 23 percent of music consumers surveyed--by whom, who knows?--said they didn't buy more music last year because they refused to pay for what they found for free.

But as Cuban insists, CD sales overall are up some 2 percent, at least according to figures provided by Soundscan, which tabulates sales at retail outlets. The RIAA's numbers are down, if that, simply because the labels are releasing fewer cassettes and CD singles.

"Let's put this in context," Cuban writes. "Imagine a business where they cut the number of products released; raised the prices of their products to more than 20 bucks a pop; had a significant number of their distributors go out of business (Valley Media and National Record Mart, as examples); reduced the amount of marketing money spent to promote each product; saw major promotional money and discounts from the two years of dot-com mania disappear; and saw complete turnover and management problems at one of their biggest providers, EMI. Yet in spite of all of these things, [the industry] sold moreCDs and for more total dollars than the previous year. I would tell you that is a business that has had a great year. The RIAA has tried to paint the picture that the industry is suffering because of file sharing. It's not. There is more evidence that it has benefited from it."

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