Upon hearing the offer from Napster to pay the record labels 1 billion (yep, with a B) dollars over the next five years, I began to wonder if the RIAA would look at this as a strategy to put public pressure on the labels, or if they would see the opportunity to make a claim in the digital market.
Most of the comments surrounding this recent announcement point to the fact that Napster is going to have a hard time making their $200 million a year settlement agreement, as they would have to get a fair number of it’s users to subscribe to the service. Even Chief Executive Hank Barry says that they will go out of business if they can’t raise the $200 million in promised payments.
Note to RIAA: This is what you wanted all along; some way to turn digital downloads into profit while shutting down Napster. If Napster does indeed make its $200 million/year, then you get $150/year without doing a thing. Go ahead and argue that you’re losing album sales, but I’ll guarantee that most use Napster to find songs from an album that they wouldn’t laydown $15 for, or are downloading rare and unreleased material. The RIAA has failed miserably at their own individual attempts to rake in some digital dough, here is a service that already has millions of users that weren’t using the labels method.
A deal with Napster will also save the record labels millions in distribution costs. The record companies fear the loss of control over distribution, but the flip side is that they offload distribution costs to ISP’s and Napster users.
One can’t help but be reminded of the battle between the music industry and the VCR. Jack Valenti, president of the Motion Picture Association, cried out that the VCR would be the demise of the movie industry, and nearly two decades later video sales account for the majority of the industries profits. New revenue models aren’t the devil here, especially when the old revenue model is still in place.
The music industry might see it this way: they already make approx. $40 billion in revenue every year, is $150 million worth signing a deal with the devil? Seeing as more and more decentralized P2P networks are being developed, the RIAA better jump on the train or they’ll be left behind.
One other curious thing I noted this week at the O’Reilly P2P conference: there wasn’t a single representative for the record labels in attendance that I could see. This shows me one more sign that the labels don’t quite grasp the potential of digital distribution.
During today’s “What We’re Learning from Gnutella” session at O’Reilly’s P2P conference, Kelly Truelove gave a brief history of Gnutella and the technology behind it, and put forth a very interesting idea in terms of scalability. He compared Gnutella to a steel-built skyscraper, which has a limit as to how high you can build before it will collapse on itself. In much the same way, this is what happened to Gnutella when it grinded to a halt following the injunction against Napster. Gnutella shouldn’t act as one big skyscraper that houses the entire network, but we should think of Gnutella as a series of skyscrapers that make up a city.
This next generation of Gnutella will incorporate better content management rules and drop unresponsive hosts from the network, which would otherwise chew up much needed bandwidth. Those on a dial-up connection connect to a broadband reflector, which is deemed a “super-peer”, which is connected to the network, greatly decreasing the amount of bandwidth used across the network due to dissimilar connection speeds.
We’ve found out how high we can built skyscrapers in the real world, and they are good enough for what we need them for. The challenge now for Gnutella developers is to make the scalability good enough to meet user expectations.
A few notes from the P2P Discussion with Ray Ozzie (Groove), Ian Clark (Freenet), Johnny Deep (AIMster), and Gene Kan (Gnutella). Clay Shirky, moderator.
Ray Ozzie: The Internet is fundamentally broken because of NATs and firewalls. It will break again because of the limitations of centralized DNS. With Groove, we looked at, what underpinnings do we have to build to get to the point where mere humans can treat it as a symmetric network?
Ian Clarke: Our intent was to provide anonymity and privacy for people who wanted to both consume and provide information on the Internet. If you have any form of central server, for our goals, it was essential to create a compeletely decentralized service. This is difficult; there are issues of scalability, efficiency, balancing bandwidth contribution (some users have modems, some have broadband). We’ve taken a very different approach than Gnutella. The most surprising thing to an original developer (if one was transported from the 1960s to the present day) would be that we have a phrase to describe something they took for granted.
Ozzie: There are big technical differences between the enterprise and consumers. Enterprise users are behind some pretty nasty firewalls. If I were designing for consumers, I wouldn’t have put nearly the emphasis on security that we did in Groove.
Clarke: Freenet is quite an efficient way to distribute information, in that it moves informatiob closer to where the demand is, and it duplicates popular information.
Kan: Gnutella is very bandwidth-consumptive. The enterprise is a closed environment. For gnutella in the enterprise, we’ve provided a gateway for gnutella use, much like clip2 Reflector.
Deep: In the enterprise, their problem is how to give control to users while still making IT’s life tolerable. We’re going to give control to users everyway we can without centralization.
Get Clay Shirky’s perspective on IT concerns vs. users in his latest column, P2P Smuggled In Under Cover of Darkness.
Stanford University is installing new network equipment that will allow them to give “entertainment” use of the network a lower priority than other traffic. Currently, the Stanford community is consuming more bandwidth than is currently available.
Date: Fri, 9 Feb 2001 13:43:00 PST
From: "CNS Client Serv Ctr"
Subject: Internet Traffic Management
The Stanford community is consuming its Internet resources at a
greater pace than existing equipment capacity and funding sources
can support. To assure that faculty, students and staff continue to
have timely Internet access that enables them to do their work, ITSS
will implement new tools that will control overall Internet
bandwidth and give traffic to entertainment sites (e.g., Napster) a
Stanford provides access to two Internet networks. Stanford's
connection to the public Internet, often referred to as the
"commodity" Internet, provides access to sites that typically end in
.com or .net. Additionally, Stanford provides a connection to an
education/research network known as Internet2 or simply I2. This
network is restricted to universities, other educational
institutions and public and government research sites and provides
access to sites that typically end in .edu or .gov. Internet2
traffic will not be restricted by the new network management
ITSS recently made the Provost aware of the effects of Stanford's
increased use of the Internet. While the University did provide
one-time funds for ITSS to increase Stanford's total capacity from
its Internet connections, current use exceeds even this incremental
bandwidth increase. Consequently, you may experience noticeably
slower transfer rates during peak periods and occasionally,
connections may be dropped. New network management controls should
help reduce the impact caused by entertainment traffic and these
controls will remain in effect for the foreseeable future to assure
that Stanford is making the best use of its bandwidth.
ITSS is committed to avoiding any intrusion into Internet traffic
content and has no plans to "block" any Internet traffic. ITSS is
implementing network controls to optimize University resources.
ITSS will continue to monitor the situation closely in its efforts
to provide this critical service. To help the community be aware of
how they can help in this effort, ITSS is preparing guidelines for
using the network. These guidelines will be distributed campus-wide
in the near future.
Installation and testing of the new equipment is under way, and
implementation is planned for Tuesday, February 20, 2001. If you
have any questions or concerns, please send mail to