Napster Intellectual Property Rights vs. Music for Free Master in International Transport, Trade & Communication 2017 Dr. Judith Clifton Judith.clifton@unican.es

Introduction to the case This case study is of interest as it involves a young business operating in a world of legal uncertainty International trade of services Techology and business do not wait for the law to regulate them! Differently sized actors, very small and large Though the Napster saga is now over, the issues remain relevant: dozens of similar cases – AllofMP3 (Russia), eDonkey, BitTorrent, Spotify, etc. It seems the issue of trade in services, intellectual property rights and law is gradually being resolved.

Initial task Analyse this case study and explain How is the information organized? What information is included? How is this information structured, and why?

Evolution of the music industry Music was first recorded in the C19th In the 1940s tape recordings flooded the industry: records (plastic) 1950s vinyl records 1966 Eight-track player for cars 1982 introduction of digital recording – Compact Disc (CD) Latest development: MP3

MP3 Technology Compresses sounds into a very small file while preserves quality MP3 can be played on most computers Using a “ripper” programme a song can be transferred from a CD to a computer hard drive Or music from MP3 can be downloaded from a “P2P” system, such as Napster – at no cost

P2P and Napster P2P An internet network allowing users to swap files Decentralised NAPSTER Napster technology made sharing of MP3 files possible through its P2P network Napster does not store the MP3 files

Stakeholders Napster management team – wants a successful business Hummer Winblad – venture capitalist supporting Napster BMB/Bertelsmann: Could offer a subscription service with MP3 RIAA – The “Big Five”. Represent 90% of all published music. Individual Music Artists Consumers Governments – US etc.

Copyright Each country has its own copyright law Copyright defends the artist though there are exceptions In the US, as in many countries, personal and noncommercial use is allowed

NEGOTIATION TASK A group of Spanish students from the University of Cantabria abandon their studies to set up a system music sharing called “LatinHot3” and allow free exchange of files world-wide They are charged by the Giants in the Music Industry of violating copyright LatinHot3 now must negoatiate with stakeholders and decide on their business strategy

Negotiation task Stakeholders LatinHot3 The Giants of the Music Industry (Giants) One Venture Capitalist “Youth” Independent musicians wanting free media coverage Traditional rock bands wanting IP protection

Process All stakeholders must seek to influence other groups to achieve their aims After 25 minutes, LatinHot3 must pronounce their business strategy Other stakeholders must assess their business strategy. LatinHot3 requires: Investment Consumers Products to sell Legality

Conclusions It is unclear whether declining record sales are due to downloading Heavily downloaded music can still sell well Falls in profits in the music industry are generally associated with cost-cutting Technological change cannot be controlled -