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

2. 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.

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

4. 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

5. 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

6. 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

7. 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.

8. 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

9. 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

10. 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

11. 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

12. 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 -