Apple and the legacy of Napster

When Napster shut down in July 2001, remember how loudly the recording industry cheered?

After working long and hard to defeat Enemy No. 1, the music moguls celebrated their victory over the renegade download Web site.

Funny how the wheel turns. Three years later, the music industry is looking to digital downloading to help it end a years-long slump. At just less than $100 million, the digital music market still constitutes a relative drop in the bucket when compared with the nearly $12 billion CD business. But downloaders are now projected to make up 20 percent of the music-buying universe within the next five years, according to JupiterResearch.

Apple deserves the kudos it's gotten--but will squander a lot of that good will if it goes ahead with a jihad against RealNetworks.

That shows how far the needle has moved. During the height of the Napster controversy, the sides remained too far apart to figure out how to make it work: You either believed that bits and bytes should be free or dismissed Napster as the epitome of corrosive cyberanarchism.

What a stale conversation--and one that missed the bigger point: Napster had the technology, Hollywood had the music, and something big was on the horizon. If only the opposing sides could ever see the forest for the trees. That was not to be. The music industry was too afraid of losing control, and Napster couldn't run away from the fact that it was a clearinghouse for stolen intellectual property.

The future was put on hold until Apple Computer helped break the stalemate with the introduction of the iTunes Music Store. Just as only Nixon could go to China, Steve Jobs had the credibility with both the Silicon Valley and Hollywood communities to change the debate terms. Apple deserves the kudos it's gotten--but will squander a lot of that good will if it goes ahead with an ill-considered jihad against RealNetworks.

The company had a classic hissy fit last week, after RealNetworks released its Harmony software.

RealNetworks had sold songs from its digital song store since the start of the year. But the files only ran on a handful of portable devices. With Harmony, songs sold from RealNetworks' online store will now work on a variety of portable players, including the iPod.

Where does the user figure in this story? Good question--one that Apple can't answer with a straight face.

Apple came unhinged. A few days after the RealNetworks announcement, Apple hinted about possible legal action and threatened to block Harmony from access to the iPod the next time it updates the device's software.

The truth is that RealNetworks poses little competition to Apple, which has a huge hit on its hands with iPod. Ditto for the company's music store, which has rung up more than 100 million downloads.

A history of bad blood between Steve Jobs and Rob Glaser, his opposite number at RealNetworks, no doubt plays into this developing novella. But ego takes a back seat to a bigger consideration: power. Apple would like nothing better than to exert Microsoft-like domination of the music business.

Too bad. In the struggle over Napster, the music companies turned out to be their own worst enemies. So intent on kneecapping Napster, they ignored the best interests of their customers--which would have been to find a way to coexist with the new Internet technology. Is Apple going to go down a similar path?

Maybe big companies periodically can't help conducting business as if Tony Soprano were running the show. But I can't figure out who's looking out for the best interests of the user in this cockamamy story. It's a question that Apple can't answer with a straight face.