Former Guns'n'Roses bass player Duff McKagan is now sober, has earned a college business degree and writes a weekly financial column for Playboy.
Anyways.... I found interesting his latest installment, in which he comes back on the Napster debacle.
Most of us remember Napster for its forced shutdown by Metallica, an episode which both triggered unjustified anger by music fans and the beginning of the demise of the music industry.
What most of us (at least I) don't know however, is that apparently Napster at the time tried to negotiate a transaction with the major record labels.
Napster proposed in essence a revenue-sharing deal: Since it was one of the most viewed sites (or the most viewed, according to Duff) on the Internet, advertisers were fighting to get access to this large public. I don't have any figures, but in Duff's words, "Napster was making truckloads of dough off banner ads back then".
Napster offered to share this advertising revenue with the record labels, so that they would use the money to compensate the artists "for the downloadings that Napster made available for free."
The labels declined, and we know the end: the record industry is now in tatters.
I agree with Duff's view that a considerable opportunity was missed, and find this revenue-sharing idea very interesting. Perhaps it could it be applicable in other industries?
1 comment:
this is an interesting revenue sharing idea that I didn't think about in my blog post (music biz and the internet). However, if you cut the labels in on the ad revenue - would there really be enough to go around? If this business model was adopoted, then it seems that it would squeeze out all the small players. For the ad revenue to be large enough, there could only be 1-3 highly trafficked sites where music was distributed or sold. It might create a mini-monopoly for music content and distribution. Which might be okay if the site had everything users wanted. But if it didn't...another industry rebellion might break out!
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