More Pain For Napster

The labels' dream is that you will go to a portal like AOL, discover any music you like and move it anywhere you choose, in a process so seamless that you won't mind paying for it monthly. The nightmare scenario: a poor selection of music in confusing and conflicting file formats that will drive you underground to a Napster clone like Aimster. So every portal needs to do a deal with MusicNet and Duet--at the very least. "None of these services can survive without content from all five major labels," says Dannielle Romano, music analyst at Jupiter Media Metrix. Not to mention the hundreds of independent labels they'll need licenses from.

This is a tough business to take online, and it will need more than a few dazzling new services to succeed. No one knows that better than Napster CEO Hank Barry, who is still earnestly trying to fashion a legal compromise that will keep his company in the game (just like MP3.com which is still alive after losing millions in lawsuits to record labels). Along with Henley and Morissette, Barry tried to sell the Senate on compulsory licenses--giving websites the same status as radio stations, which pay royalty fees for playing music. Says Barry: "It's government intervention. It's not my first choice. But collecting licenses [in the open market] is not just painful, it's impossible." If AOL and Yahoo start feeling his pain once MusicNet and Duet kick in this summer, you may see a lot more rockers singing the Senate blues.