LOS ANGELES -- Napster CEO Konrad Hilbers says the government should consider compulsory standards requiring music labels to license music at a fair price if they don't close deals with Napster and other independent distributors.
"Like any other business person, I'm hesitant to bring government in," Hilbers said. "But government has an obligation to set standards. If there's no agreement, the government should consider compulsory licensing."
Of course, the government has already gotten involved in digital music over the last few months.
The Department of Justice announced it had opened an investigation into potential anti-trust violations committed by the five major records labels. The outcome of the government's civil investigation could lead to the open licensing standards that Hilbers mentioned.
At the same time, the new CEO claimed the company is "closer than ever before" to an agreement with all the major record labels to settle copyright disputes and license their music. He also predicted that Napster could re-launch in the first quarter of 2002 if it gains access to label material.
Hilbers' comments at the Webnoize conference on Monday in Los Angeles reflect his delicate balancing act: pressuring labels to cut a deal without alienating them altogether, while not eliminating access to material Napster needs to survive. Hilbers is leveraging the government antitrust investigation into whether intra-studio collaborations such as MusicNet, Pressplay and Movies.com are breaking U.S. antitrust laws.
Hilbers is the latest to voice his concerns over current licensing practices employed by the five major record labels.
Earlier this month, trade associations representing the consumer electronics industry, video retailers and the library association sent a letter to members of Congress asking their support for -- of all things -- music distribution legislation.
Rep. Rick Boucher (D-Virginia) and Chris Cannon (R-Utah) introduced the Music Online Competition Act in August. The bill would create an open licensing system that would enable digital entertainment companies to license music.
Other industries view the bill as the first step toward developing open licensing standards for all digital entertainment.
While Hilbers called for a new licensing standard, Napster is itself part of the MusicNet alliance, which is jointly owned by major labels BMG, Warner Music Group, EMI and digital media company RealNetworks.
German media conglomerate Bertelsmann AG -- parent company to major label BMG where Hilbers was chief administrative officer until taking the helm at Napster three months ago –- has loaned Napster over $100 million in exchange for the option to purchase a majority ownership of the file-trading company.
In a sign of how far Napster has come from its own days as a bastion of freely traded music, Hilbers said free services "have to cease to matter because they are taking music that is copyrighted."
But he said massive litigation against the sites wasn't the best approach. "I'm not in favor of turning them into terrorists," he said.
Still, the company's flip-flop on file-trading comes after several applications have overtaken the once mighty Napster.
Today, four services -- FastTrack, AudioGalaxy, iMesh, and Gnutella -- have more users than Napster, which has seen its 70 million registered users all but disappear since a federal judge forced the company to shutter its service.
One component that is needed in an agreement with record labels and movie studios is the creation of a comprehensive database of intellectual property that will allow the immediate, digital assignation of royalties for everything from songs to record covers, Hilbers said.
Any agreement, Hilbers contended, will only increase music sales, since consumers are likely to buy more music if they have access to a reasonably priced subscription service. "It is important that we move beyond Napster's youth," he said. "The vast majority of consumers are, and always will be, willing to pay a fair price for music."
