RIAA: New Data Show Napster Hurt Sales

L O S   A N G E L E S, Feb. 26, 2001 -- Recording industry officials have brought

forth new evidence in their attempt to prove that Napster, the

Internet music-swapping service, has cut into their business.

Shipments of CD singles sank by 39 percent last year, accordingto data released by the Recording Industry Association of America.

“Napster hurt record sales,” said RIAA president Hilary Rosen.In particular, Rosen pointed to the drop in the sales of singles,once the format that fueled the music industry, as evidence ofNapster’s affect.

The industry released the figures after a federal court ruledthis month that the service helped users to violate music copyrightlaws. Financial penalties and an injunction have placed the futureof the popular service in question.

Napster chief executive Hank Barry said the association istwisting the data to support the recording industry’s claim thatthey have suffered “irreparable harm” at the hands of Napsterusers.

“In order to argue we’ve done irreparable harm, it would begreat if there were some irreparable harm to show,” he said. “Wehaven’t seen a credible survey yet that suggests Napster is hurtingCD sales.”

Last week, music executives shook off Napster’s offer to settlea copyright infringement lawsuit, saying it didn’t offer a viablebusiness model and failed to address concerns over the security ofonline music.

Under the proposal, Napster offered $150 million annually forfive years to Sony, Warner, BMG, EMI and Universal. An additional$50 million would go to independent labels in each of those fiveyears. The money would come from a fee-based service that Napsterwould like to launch if given approval from the record companies touse their songs.

Record industry executives called Napster’s offer inadequate foran industry with annual revenues of $40 billion.

Same Old Song

Some experts trace the drop in the sale of singles back to therecord companies themselves. Industry watchers say that recordcompanies have cut production of an unprofitable product that nolonger serves the needs of the industry.

Singles, a mainstay of the industry in the 1950s and '60s, havefallen out of favor as a tool to inflate sales figures andinfluence radio programming, said Roy Lott, president of EMIGroup’s Capitol label. Even so, Napster is the “prime culprit”for the drop in sales, he said.

Industry analysts said the drop in sales can be attributed to anumber of factors, including economic factors and a weak year formusic releases.

“Napster alone doesn’t seem like a fair alibi,” said MichaelNathanson, a Wall Street analyst with Sanford C. Bernstein & Co.“It’s a combination of things. Softness in consumer spending. Thehit titles were for such a narrow [audience] that it was a verythin year, and lastly, the Napster factor. You can’t put yourfinger on it.”

“To be honest, it wasn’t a great music year,” said AndreasSchmidt, chief of the e-commerce group at Bertelsmann, which has afinancial stake in Napster. “There were some isolated events, butwe didn’t put that much good stuff out.”

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