The Recording Industry Association of America (RIAA) is suing Napster and, according to both parties, all settlement attempts have failed. Napster’s CEO said this week that the company had offered to charge users up to $5 per month in an attempt to settle with the RIAA; but the RIAA refused the offer.
While the RIAA might win the case and put Napster out of business, the majority view seems to be that it would be short-sighted for it to do so.
Napster claims to have built up 32 million users. If Napster is shut down, logically, most of the users will look elsewhere for their on-line music. One alternative source is Gnutella, a file sharing system that has no database of users because files are not held on a central server, making it difficult to monitor.
There is apparent scope for an ISP to enter the settlement negotiations between Napster and the RIAA, in part due to its role as a “neutral” party.
An ISP might be able to persuade the RIAA that it can take over and regulate the Napster service, ensuring financial reward for the record industry. If Napster was taken over in this way, members would be told that in order to continue using the service, they will have to change ISP to Napster's new owner.
In the US, most ISPs still charge monthly subscription fees anyway, so increasing the fee to generate a sum that could compensate the record industry might scare away fewer Napster users than charging them per-downloaded song, a business model favoured by the record industry. An ISP that controlled the Napster brand would be in a powerful position, although it would face the expense of harnessing all the traffic in the large MP3 files.
According to a reporter from Inside.com, an information and analysis site for the media industry, Napster has asked one of the interested ISPs for a figure “in the vicinity of $500 million.” An official from the ISP who spoke to the reporter apparently considers the figure too high because it is based on an unrealistic number of Napster users following the service to the ISP and because Napster is optimistic about its prospects in court.