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Connected: Hollywood tone-deaf to Napster's pleasing pitch
Saturday, September 24, 2005

It's near the corner of Melrose and Doheny -- right where West Hollywood and Beverly Hills meet. What a perfect place to run a company that, even in its infancy, has had a dramatic impact on the way we buy our entertainment. It's an unassuming building, just like many Hollywood media companies -- even though we often expect them to be palaces. If not for the Napster kitty logo, we might have turned around thinking we were in the wrong place. But this is Napster HQ -- the home of the music service that broke the mold of buying our songs on platters and tapes.

As soon as we got inside, we realized something special happens here. Pictures adorned the walls in a horizontal stream -- each one looking like a record album cover. But they can't be records. We're in the world of digital downloads, not 12-inch vinyl. We had obviously followed a well-worn path through the entry doors, as proven by the hundreds of signatures that adorn the reception desk. They were placed there by musicians, including Counting Crows, Rufus Wainwright, and Kelly Clarkson, who came to see, meet, and perhaps make deals to get their music onto the Napster subscription service.

While Apple holds the lion share of the market for digital music players and downloads, Napster has turned the model on its ear. Instead of charging a fixed 99 cents a tune like Apple does through its iTunes/iPod business, Napster charges a fixed fee per month of $9.95 to $14.95 for unlimited access to a catalog of over 1.5 million tracks. It's a totally different model: subscription vs. individual purchase. With the Apple model, the budget-minded consumer has to carefully select the music he wants to hear. With the Napster model, he can choose the music he wants to hear today; then change it tomorrow -- without paying extra.

Even as Steve Jobs at Apple is staving off music industry executives who want him to raise his prices, Napster pushes the model for music by subscription. They've both been successful in their own way. Computer users have downloaded over 500 million songs through Apple's iTunes Music Store to play on 22 million iPods already sold -- an average of 23 songs per iPod. Napster has attracted over 400,000 subscribers with their all-the-songs-you-want-for-one-price model.

While many people still think of Napster as that illegal, free music service -- one that I railed about many times in print and on the air -- it's no longer that service. It's legit, and it is operated by professionals. They just don't do things the way other companies do.

When colleges decided to crack down on illegal music downloads, Napster struck subscription deals with the schools -- first with Penn State, and more recently with Grove City, the 16-school University of North Carolina system, and others. The deals let students and faculty listen to their hearts delight through the university networks.

When Katrina struck the Gulf Coast, Napster put together a special music compilation, with all profits sent to hurricane relief.

They have even built their own recording studio, around the block from headquarters. The day we arrived was nestled between recording sessions for the Dandy Warhols and Billy Bob Thornton. Napster continues to look for new artists and established acts -- and is often ready to lend them the use of the Napster studio. While the artists are there, they exchange ideas with Napster music directors.

So even though Napster is physically within a few miles of the Hollywood establishment, the company is impacting the media in ways that are light-years from what the established moguls are doing.

First published on September 24, 2005 at 12:00 am
David Radin is a Pittsburgh-based consultant whose daily nationally syndicated radio show can be heard locally on XM and Sirius. You can sign up for his tip letter, contact him and find an archive of his previous columns at www.MegabyteMinute.com.