Where Napster Is Taking the Publishing World

The music industry, described in breezy prose in John Alderman's Sonic Boom: MP3, Napster, and the New Pioneers of Music, is coming under intense pressure from Internet-based technologies that challenge traditional property rights. Industry executives are denouncing the upstarts, but Napster and companies like it are actually producing efficiency, not anarchy. To understand the full force of the Napster challenge, reviewer Clay Shirky says, one has to look beyond Sonic Boom's collage of people and events. Music has always been a business of high fixed costs and low marginal costs, and Internet technology is reducing marginal costs to practically zero. Before Napster, music industry executives assumed they would apply traditional per-unit pricing to sales over the Internet. Napster's success means the all-you-can-eat model has won. Newspaper and software publishers have already begun to adapt to this reality, and now it's the music industry's turn. This shift actually represents a big revenue opportunity for the industry, not a clear loss. Per-unit pricing imposes enormous psychological barriers to purchase, so shifting to an unlimited-access, subscription-based model will unleash pent-up demand for music. And the industry's abilities to develop and screen talent will be even more important to consumers in a Napster world.

• Internet
• Finance and investing
• Intellectual property
• Industry analysis
• Customer relationship management