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Napster Bigger Than AOL
October 1, 2000
Waltham, Mass - In research conducted Sunday, October 1, in Bentley College's new Center for Marketing Technology (CMT) Napster.com was found to be the next potential Mega Brand in the global cyber economy. Napster's potential size, consumer satisfaction and profitability exceeded all other music downloading formats combined and was shown to exceed even America Online (AOL). Findings are certain to concern the recording industry which Monday went back to court in San Francisco in its effort to shut Napster down.
Bentley College surveyed 675 high school students and their parents in what is believed to be the largest consumer attitude and usage research ever conducted on users of music downloading. Bentley's research coupled with other studies clearly indicates that Napster.com outranks AOL in current users, potential users, awareness, trial, consumer satisfaction and profit potential. The online survey, conducted during Bentley's annual Fall Open House for prospective students, underscores the tremendous popularity of Napster which claims 32 million subscribers, surpassing AOL's reported 24 million customers.
Survey results are available online at: http://atc.bentley.edu/resources/openhouse
"MP3.com ranked second to Napster in awareness and trial, but faired poorly in consumer satisfaction," says Bentley College Marketing professor Perry Lowe, who directed the study. "The number of files saved by users was seen to be less than expected, while a large group of heavy users was found to download music at least once a week. Serious music buyers indicated they spend up to $50 every month."
By a wide margin, respondents favored Napster over all other music directory/download web sites; 58% claimed Napster as their favorite site in this category, with the runner-up, MP3.com, garnering only 8%. "This is a phenomenal differential," said Lowe, "making Napster a category killer with huge potential for success in e-commerce. If Napster successfully fends off the legal attacks and comes up with a viable business model, they have the market share and traffic to be bigger than AOL."
In conjunction with the research, Lowe and his colleague, Law professor Marianne Kulow debated the hot start-up's business concept and the ongoing legal controversy surrounding intellectual property rights at its roots. During the session attended by more than 1,500 people on Sunday, there was avid interest in the issues of potential copyright infringement versus the unstoppable e-commerce model Napster.com represents.
"It's all about money," said Lowe. "The record industry has missed the trend to digital technology. By the time they reacted, it was too little, too late. Napster had the user base. The advent of Napster threated the recording industry to its very core. Its control over product (artists), price (CD costs), distribution and promotion mean the major labels maintain a balance of power. Artists don't make money on their albums, only on t-shirts and concerts. That's why they tour, they have to."
Lowe suggested three viable financial models to turn Napster's current "zero income" status into a profitable operation: pay for each item downloaded, pay a flat monthly fee for unlimited usage, or set a reduced priced offset by advertising on the site. The survey found that consumers prefer a flat monthly fee option.
"It is important," said Marianne Kulow, the Law professor, "to recognize that Napster simply provides a directory of people willing to share their music. It does not itself download these music files. So any copyright infringement is actually being committed by the users. But are they really infringing? All Napster is facilitating is comparable to electronically walking down the hall in your dorm and asking a friend if you can borrow an album. Since the record industry won't sue their own customers, they are suing Napster to try and stop this activity. Sharing for personal use is not necessarily a violation of copyright law. Point-to-point sharing may be deemed to be a fair use exception to copyright law, which would mean that downloading music by an individual is not copyright infringement and, therefore, that Napster has not contributed to any copyright infringement. The question for determining whether this fits the fair use exception is, does this practice materially affect the market value of the music? Napster says it does not, since CD sales are actually up since the inception of the web site- arguably due to the sampling that the web site facilitates."
BENTLEY UNIVERSITY is one of the nation’s leading business schools, dedicated to preparing a new kind of business leader – one with the deep technical skills, broad global perspective, and high ethical standards required to make a difference in an ever-changing world. Our rich, diverse arts and sciences program, combined with an advanced business curriculum, prepares informed professionals who make an impact in their chosen fields. Located on a classic New England campus minutes from Boston, Bentley is a dynamic community of leaders, scholars and creative thinkers. The Graduate School emphasizes the impact of technology on business practice, in offerings that include MBA and Master of Science programs, PhD programs in accountancy and in business, and customized executive education programs. The university enrolls approximately 4,100 full-time undergraduate, 140 adult part-time undergraduate, 1,430 graduate, and 43 doctoral students. Bentley is accredited by the New England Association of Schools and Colleges; AACSB International – The Association to Advance Collegiate Schools of Business; and the European Quality Improvement System, which benchmarks quality in management and business education. For more information, please visit www.bentley.edu.
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