Napster 2.0 Could Be Put on the Auction Block

You’d think that with the passage of the Higher Education Act, which forces colleges and universities in the United States to block P2P and promote authorized music stores, that companies like Napster would have it made – obviously, that’s not the case.

Note: This is an article I wrote that was published elsewhere first. It has been republished here for archival purposes

It is starting to look like Napster may once again become a symbol in the copyright debates. A report out of the LA Business Journal points to Napster’s current struggle to stay afloat in the business world. According to the report, Napster executives are now open to the idea of selling off the company. From the report:

The Los Angeles-based company has retained UBS Investment Bank as an advisor, according to Bloomberg.

In a letter mailed to shareholders on Friday, Napster stated that the insurgent shareholders have not laid out plans to improve fortunes at the beleaguered music download company and urged them to re-elect the board incumbents.

The three disgruntled shareholders, who own about 1.5 percent of the company’s stock, applied in June for election to the company’s board and were rejected. They have said they plan to seek election again at the annual shareholders meeting on Sept. 18.

Napster’s shares closed up 1 cent to 1.34 on the Nasdaq. Since reaching a high of $25.29 in April 2002, the company’s shares have declined 95 percent.

Napster became the symbol of the initial growth of file-sharing and became front and center when Lars Ulrich of Metallica sued for copyright infringement. Ultimately, Napster was shut down at around 2001.

Perhaps one of the other biggest signs of the struggle for the company besides a 95% drop in share value since 2004 was a report just a day before that Napster confirmed it woudl be getting out of the campus music service business altogether. As P2P-Blog notes, the move is as different as night and day compared to when Napster executives hailed the idea of subsidized campus music subscriptions as “groundbreaking”.

Janko Roettgers of P2P-blog also points to a report from earlier this month which shows the companies subscribers leaving in droves. Even dropping DRM (Digital rights Management) is proving to not be enough to save the company after raising subscription rates to $12.95 a month.

For numerous observers, this may just be another point to prove the case that DRM is not a good tool for a business model. Many have seen the business model from the start and immediately thought that the business model would fail – and the way things are going, they could have been right from the very beginning. Some may even go so far as to point to Napster as a symbol of the defeat of DRM in this day and age partially because it’s a big name going under with a model that involved DRM for quite some time.

Others may suggest that the possible second demise of Napster is pointing to the much wider major record labels business model as one that is currently undergoing complete collapse because of the internet era and just another sign that they have to figure out how to stop treating customers like criminals and just plain get along with them for a change.

On an international level, many countries have been heavily pressured to put copyright reform front and center which typically includes anti-circumvention measures. Canada has been one of those countries where the argument is that without anti-circumvention laws, there would be no laws to help a digital music market place. It’s not too much of a stretch to point to Napster and say that Napster had all the laws they could hope to have to help the digital music market-place flourish with laws such as the Digital Millennium Copyright Act and it’s still struggling to stay alive as a business.

In any event, it seems as though there is even more evidence that you can’t really force people to become customers, even if legislation is in place and lawsuits are flying. As Cory Doctorow once remarked about the current major record labels business model:

Customers are getting music online for free, so here’s the plan:

1. Sue all the people that are downloading music for free
2. ?????
3. Everyone goes back to the music store to buy music legitimately

Drew Wilson on Twitter: @icecube85 and Google+.

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