Re: [Slate] Napster: Show Me the Money

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From: Antoun Nabhan (
Date: Wed May 03 2000 - 23:17:47 PDT

At 03:43 PM 5/2/00 -0700, you wrote:
>I love it: "Not only does Napster have no profits, it has no revenues.
>Not only does it have no revenues, it has no business model." The MTV
>of the Internet, indeed.

But Napster isn't like the other audience-first/revenue-later Web plays.

Difference 1) may be a throwaway, but if you've ever managed the costing
side of a startup you know it's huge: they got all those users without
spending anything in marketing. Cheap audience growth.

Difference 2): They actually have a technology at the center. Granted it
might not be as nifty as Gnutella; its easier to use and already
up-n-running, which suggests that they can package the underlying
architecture and sell it to other application providers. Wouldn't it make a
great "term paper warehouse"? Or, lay some encryption on top and it becomes
an interesting RAID-style "digital safe deposit box."

Difference 3): Unlike the and ... well, whatever else of the
world, Napster is providing a service (or I guess "experience" in the
latest marketroid-speak) that people have historically been willing to pay
money for. Somewhere in between the $17.99 that $am Goody charges for a CD
and the $0 that Napster is currently charging is a price that users are
willing to pay Napster to supply them with the music of their choice.

So, how can Napster make money?

1) Sell physical CDs with Napster software on it. (If you can get $16.99
for the insipid "Jock Jams" compilation, I'll bet that you can get $10 for
500 hours of Napster access.)

2) Partner with the Evil Empire of big five record labels and have
passwords inside of a physical CD case giving you access to various MP3s.
If you buy, say, Metallica's "Metallica" album, you also get access to the
MP3s from the "Master Of Puppets" compilation. This would be a great
marketing thingy for the music labels if it were "buy the CD of the popular
artist and we give you access to the MP3s of the next big thing." Or
alternately, make it like a "frequent flyer" program, so the more CDs you
buy, the more MP3s you get access to.

3) Make artists - who are all chasing exposure, to greater or lesser
degree- pay to put their music up on Napster. Make them pay more for
billing on the "Napster picks of the day." (Payola *worked* for the radio
stations.) Don't even ask for an up-front, just ask for a percentage of the
take at the door of their concerts and a percentage of the merchandising.
For every Big Poo Generator there will be a Dave Matthews Band that gets to
be a huge draw based on grassroots.

4) Sell advertising to "worms" that target their ads directly based on what
you already own. The "Bloodflowers" ad can search out people who already
have the "ShowMeShowMeShowMe.mp3" file. Yeah, nobody does advertising
anymore. But 9 M users and zero costs? Maybe, just this once, the MTV
analogy is appropriate.

Some of these models make me squeamish and diminish Napster's "stick it to
the man" value, but the challenge was to find a way to make Napster
profitable. If I weren't already busy with a nifty idea (ASP for gene
expression analysis: I'd put my time where my mouth was.

Now, that little problem of 1701 U.S.C. - that may be Napster's
showstopper. But the MP3 folks may pave the way for big comprehensive
licensing arrangements.


P.S. I don't get Snapfish, though!

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