Napster stayed online this week, but just barely. A federal judge had ordered Napster to immediately stop allowing the exchange of copyrighted files over its service -- a decision Napster officials said could have effectively shut down the service completely -- but the company won a stay on the injunction at the last minute.
This particular fight isn't over yet; Napster www.napster.com still faces the full trial in the music industry's lawsuit against it. But regardless of the outcome, one clear lesson has emerged from the fracas: Internet media companies, including Napster, are now convinced they need a way to control access to their content if they want to stay in business, an imperative that has thrust new attention on technologies for managing digital media.
Indeed, independent of its six-month-old legal battle with the recording industry, Napster is actively looking into ways to control the content that traverses its file-sharing network. Prior to the ruling last week, the company said it will license Liquid Audio's Genuine Music technology, which incorporates a digital mark into MP3 files or other audio formats to verify their authenticity.
"We're supplying technology that allows them to distinguish between legitimate and pirated MP3 files," said Rick Fleischman, marketing director at Liquid Audio. "But we're not dictating how the Napster folks are using it."
The two companies have close ties: Both Napster and Liquid Audio are backed by Hummer Winblad Venture Partners, and Hank Barry, Napster's interim chief executive, represented Liquid Audio when he was a partner at law firm Wilson Sonsini Goodrich & Rosati.
Napster executives didn't return calls requesting information on how the company intends to use Liquid Audio's technology. However, it could conceivably allow Napster to exclude pirated files from its system in favor of legitimately licensed music.
Similarly, content producers and entertainment companies of all stripes are showing an urgent and renewed interest in digital-rights management technologies, which protect and manage rights to digital content. While Napster proved that consumers have a ravenous appetite for digital music, DRM is necessary for anyone to profit from it, according to industry observers.
"Now digital-rights management is front and center, absolutely," said Scott Burnett, marketing executive for content distribution in IBM's Media and Entertainment Division. "When you have 20 million Napster users gobbling up files, ultimately there needs to be commerce attached to that transfer."
IBM, InterTrust Technologies, Microsoft and others in the DRM space are stepping up their efforts to secure partnerships with media and Web content companies. IBM this week licensed its Electronic Media Management System to Sterling Sound, an audio mastering firm, to incorporate security features into music for digital downloads; EMMS has also received support from BMG Entertainment and Sony Music Entertainment. InterTrust, meanwhile, scored a big win last month, with America Online to become its preferred DRM provider.
"A lot of content is just not going to be available electronically unless it's protected," said Edmund Fish, InterTrust's chief business officer. The trick for the industry will be to find the right balance between those content-safeguarding mechanisms and Napster's illicit, free-for-all appeal.
