The music file-swapping company on Tuesday offered to hand record companies UJS$1 billion over five years if they were to allow their copyrighted works to be traded on its network, which is set to become a tiered subscription service as early as July.
Napster is struggling to shepherd a legal truce with the record industry before a federal judge acts on last week's appellate court ruling and effectively shuts down the service.
Regardless of whether Napster succeeds in burying the hatchet with the record labels, its plan to create a legal subscription service highlights many of the key problems facing the industry as it seeks to create a sustainable online distribution model. Although downloading is considered "free," it is anything but, the costs are simply hidden.
By taking advantage of Napster's peer-to-peer model, the record industry could create a subscription service that moves much of the Net's priciest features--network bandwidth and storage costs--to subscribers and their Internet service providers.
For subscribers who might pay a few dollars a month in return for all-they-can-eat music, taking on roles as nouveau Net storage facilities might be part of the bargain. But for ISPs already worried about networks clogged by today's Napster use, this could be an expensive proposition.
"There's no question that's the case," said Aram Sinnreich, an analyst at Jupiter Research. "The ironic thing is that the record companies' worst fear is losing control of distribution. But the upside is that they offload the distribution cost."
Several major ISPs declined to comment for this story. But previous actions taken by ISPs and private institutions that play the same role show just how much of a concern it could be.
Last April, Cox@Home, a cable modem service from Excite@Home and Cox Communications, sent a letter to several hundred subscribers warning them that they were potentially violating that ISP's terms of service agreement by allowing hundreds of megabytes of files to be uploaded from their computers. Similarly, dozens of college and private business networks have clamped down on student and employee use of Napster, citing clogged networks and bandwidth costs.
An Excite@Home spokeswoman said the company has no official policy on Napster as yet. If the economics for ISPs do grow dangerous, Excite@Home may consider moving to a tiered subscription model, in which some subscribers might pay more for unlimited uploads, for example.
"We would certainly want to look at working with a legal Napster," Excite@Home spokeswoman Alison Bowman said.
