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Commentary: Online music will sell itself and other music

File-swapping networks such as Napster and Scour.net are double-edged swords. They can boost sales for music aficionados and at the same time deprive artists and music companies of revenue.

    By Lou Latham, Gartner Analyst

    File-swapping networks such as Napster and Scour.net are double-edged swords. They can boost sales for music aficionados and at the same time deprive artists and music companies of revenue. However, they also can deliver copyrighted music legally and for profit.

    Even pirated material can bring revenue to artists and record companies by whetting listeners' appetites and causing them to buy more music through legal channels. However, free music isn't necessarily pirated. For little or no compensation, plenty of start-up bands are glad to put their work before an audience in the hope of developing a reputation that will bring them to the attention of the industry. This practice will certainly continue.

    See news story:
    Study: Napster users buy more music
    Moreover, downloaded music does not have to be free. Within a few years, a substantial fraction of legally purchased major-label music will probably be delivered online rather than via CD. Although piracy is the dramatic part of the early story on Web music, legal and commercial pressure will soon drive most online music sites to revise their business models to incorporate the necessary payments to record companies and artists.

    One of them, MP3.com, is already busy making agreements with several major labels, and others will follow. Digital rights management technologies now being put in place can be highly effective in regulating the majority of music sales and ensuring that they are indeed sales--and not illegal trades.

    Although a certain amount of piracy will always exist on the Web, the law is on the side of copyright holders. Pressure can be brought to bear on Napster, MP3.com and other Web music purveyors that are server based and centralized because they can be shut down through technical means or by legal action.

    However, peer-to-peer technologies such as Gnutella, which allow individuals to log on to each others' computers and trade files directly, will be much more difficult to regulate because no central site exists.

    (For related commentary on music files and network bandwidth, see TechRepublic.com--free registration required.)

    Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.