NAPSTER: Our new connective future
Sep 1, 2000 12:00 PM, Nathaniel Hecht
For those unfamiliar, Napster is a program that allows the sharing of MP3 files. Although this may make record company executives squirm, the implications are only now coming into view, and in the end,Napster will be remembered historically as the company that started the digital download revolution by making millions of us comfortable with the process. You see, Napster is actually doing the record companies a favor. According to Billboard magazine, a typical $17 CD generates around $0.59 in profit for the record label after deducting all costs and markups. When you consider that distribution and shipping costs account for around $9.50 of the cost for each and every CD, it becomes clear that if that money were not spent, it would increase the profitability for the labels nearly 16 times. The beauty of this scenario is that it costs the record companies nothing to change the habits of millions of their customers with approximately one million new users signing on each and every month. With research firm CyberDialogue reporting that the number of adults online getting music content jumped 48% from December 1999 to March 2000, this format may be the most rapidly growing in the music industry's history.
None of this will help the labels until they develop their own technology, and that is exactly what they are doing. Eventually, the major record labels will have their own file systems, allowing the purchase of their products online in much the same way as people do now with MP3 files and thereby preventing the free distribution of their product. With the savings over conventional media, customers will flock to them. At this time, the record companies may be sacrificing short-term gains, but they will become stronger and more profitable. The old adage is correct here; smaller companies with innovative new ideas will almost always revolutionize the older, larger and more staid companies who are set in their ways and resistant to change.
There are even bigger ramifications for this Napster debate. What has happened is a new revolution in sharing information, the idea that another person's PC can be used as a server for information sharing. Napster is just the tip of the iceberg because others have already moved beyond music in some areas. In particular, a new program called Gnutella has emerged along with a search product called InfraSearch that is Gnutella's Web front-end, allowing users to make any file they have on their own system available to others and then seek and retrieve those files that reside in any computers connected to the Gnutella network. Privacy not withstanding, these new developments will revolutionize the way we all use the Internet whether it is job related or just for fun. This has been happening in the business world of computers for years. Although much of what is on many hard drives out there are e-mail messages of little import to those other than for whom they are intended, there will no doubt be tools developed to deal with those issues as we continue to evolve these complex connecting lines between all of our systems.
What does any of this have to do with you and your business? The arrows point to a seamless integration of information between suppliers, designers, integrators, contractors and all other industry professionals. How you acquire product for a job, how a job is bid, how people connect with you, how we learn about new products and jobs, and how professional liaisons will be made will all be effected. We will have to become very good at organizing our data in our own computers as well as guarding our privacy for it all to work. Sounds overwhelming? That's what they said about the Internet when it was first introduced.