Scottster: A Legal And Fair Alternative To Napster
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Feature Article
Scottster: A Legal And Fair Alternative To Napster

June 1, 2000
By Scott Lewis

I am backlogged on topics for this column. This month I was supposed to write about my new Kodak DC280 Digital Camera & Hewlett Packard P1000 Photosmart Printer. For the moment, know they are both excellent. The column has been written, but it needs to be delayed for this month’s topic. Expect it soon.

Next, I planned an in depth article on MP3. The article is ever evolving because of the constant changes on this matter, particularly the legal battles with Napster, MP3.com and the RIAA. The article covers those and other legal issues, as well as covering MP3 from moral and technological points of view. I have been working on that column for over a year. As new issues come up the article is updated. Hopefully I will post the article next month.

In that MP3 article I mention that Napster should be turned into a subscription service. But how could you have it work as a subscription? That is what this column is all about. With the heightened legal battles going on, I figured Napster might try to come up with a business model that will please the RIAA and the artists. So I felt it was necessary to explain my plan for Napster’s replacement, Scottster, so you can read about it here first.

Scottster

Yes, it’s a lame name. If Fanning can name his application and company after his nickname, why can’t I invent a similar style name for version?

Scottster is a music file sharing program like Napster. However there are some key differences. For starters, Scottster will be a paid subscription. Second, as part of the service Scottster will actually store copies of music on our servers.

Since this will be a subscription service, the problem becomes how much to charge. This is the only hard part for me. I lack the numbers for CD sales to get a reasonable idea how much money is already being spent on music. So I will have to guess. And guess huge.

Let’s say $20 a month. This is only a little more than buying one CD a month. Most college students buy more than one CD a month. The service would require a minimum commitment of at least 6 months. We could make that a year, like all the cellular service providers, once it takes off. The minimum time is mostly a deterrent to abuse.

For $20 you get the Scottster application to run on your computer. This application will work almost exactly like Napster does now. The key differences will mostly be behind the scenes.

We would maintain servers that hold copies of songs, where Napster just maintains a list of the files on computers logged on at any given time. Our servers would be spread out around the country/world to help provide better download speeds for users.

When you do a search for a song you will see these servers, as well as individual user’s copies. You can choose to download from either. When a new artist comes out, his songs are put on the servers. When an established artist releases a new song it is also put on the servers.

Everything seems pretty basic. At this point we have a system that is very much like Napster, but Scottster maintains these central servers.

So what’s wrong with this system? It seems perfect. Let’s approach the rest of this plan in a question and answer format.

Q. How do artists get money for their work?

A. Artists would get royalties based on how many times their songs are downloaded. We would do this on a percentage bases. Let’s say Song1 was downloaded 100,000 times for the current month. This same month there were a total of 10,000,000 downloads. That means the song had 1% of the total downloads. The artist of that song would receive 1% of the month’s pot.

Q. What is the "pot"?

A. The pot is the money from that month’s revenues of subscribers. Let’s say we have 1,000,000 current subscribers. That’s $20,000,000 in revenue for the month. Since we all know the music industry is comprised of greedy pigs, we will concede and let them have half of that just for providing this service. That leaves $10,000,000 for the pot. In our example the artist would receive 1% of the pot, or $100,000.

Obviously we will need to track downloads, whether from our servers or through trading. They count the same since our servers act as "seeds" for new material, and for heavily traded music.

As soon as an artist’s songs are downloaded he would start generating money for himself. We would probably put a minimum dollar value that must be met before we cut a check. An artist must generate at least $100 for a month to get a check; otherwise the amount generated is credited for the next month until they finally accumulate $100. Then they get the check.

Q. What is to stop a band from getting a hundred friends to download their songs a 100 times each? This would skew the numbers and they could get a lot of false royalties.

A. Part of tracking downloads would be to keep track of how many times each person downloads a song. We would only count the first completed download toward the pot. Under our example above each 100 people would need 100 accounts. Each account is a billable item, paid in advance. So it would never be financially sound to do this kind of padding of numbers.

Q. You mentioned downloading a song more than once would not count. But how about when a song needs to be downloaded more than once? Sometimes files are lost, or downloads are bad or incomplete.

A. Those are the real reasons we don’t count multiple downloads. We would maintain logs on when songs are started and finished. These would be collated to determine if people are consistently having trouble downloading songs, or trying to cut downloads short to pad the numbers. We would only count the completed downloads toward the pot; a person can re-download a song without effecting the count used for the pot. Each person’s downloads are tracked both for this auditing purpose, and for targeted advertising.

Q. Targeted advertising? If this is to be a paid subscription, why is there advertising?

A. Advertising is probably the wrong word. Let’s call it "announcing." We would have both generic announcements, and targeted announcements. As part of the license agreement you must receive e-mails from us. At the least, we would send two e-mails to every user. One is a generic e-mail that everyone receives. The second would be targeted to you based on your download habits. In return for forcing you to receive two e-mails a week (of course we would have e-mail lists you could join if you want more announcements) we promise never to release your e-mail address.

Q. What incentive would there be to get new users on board? What’s to stop a handful of people from joining the service to get the music and redistribute it though other applications such as Gnutella or CuteMX?

A. Let’s answer those in reverse order. Ideally this system would be so fair to the consumer that we won’t need to fight piracy. Music would be such an inexpensive (on a monthly basis) commodity that we don’t think this would happen. If it did we could always rehire lawyers to go after those abusers. We would hope that by offering such a simple, inexpensive, and fair system we will no longer need to bully people into submission.

As for incentives? Our price model should be enough of a selling point. Cable and Satellite companies offer digital music subscriptions now, but that is only for "radio station" like listening. With our system it is truly music on demand. And you keep the songs for as long as you like.

We would expect people to spread the word like this:

Friend1: Have you heard this song?

Friend2: No. Who is that?

Friend1: That’s The New Band.

Friend2: I never heard of them.

Friend1: Didn’t you see them listed in the Scottster e-mail?

Friend2: Scott-what?

Friend1: OH MY GOSH! You aren’t subscribed to Scottster? You are missing out. You get to download all the music you want for only 20 bucks a month. It’s totally cool, and it’s legal. You’ve got to join.

If that weren’t enough, we would offer a discount to people for getting their friends to subscribe. A referral would get you a 10-20 dollar discount. That should be plenty to get people to join.

Q. How do new artists get on?

A. If a new artist wants to be on our system they only need to record a song in MP3 format, upload it to our server, and fill out a form online. That’s it. In return we will add that person to the e-mail announcements.

In fact, it might be time to explain our targeted announcements in more detail. We would keep this massive database of artists. Each artist would be associated with up to 20 other artists that play similar music. New artists choose these associated artists when they fill out the upload form. Targeted announcements will be generated based on downloads of songs by artists. When a new song is added, we send an announcement to everyone that has downloaded songs from at least 5 of the associated artists for the new band.

If new artists want to advertise on their own that’s fine. We will maintain e-mail list directories that artists can be listed on. Artists and Customers can join those lists. This is part of the community that this application is trying to build. The artist is free to advertise in any way they want though the Scottster web site, or on their own and point people to the appropriate places on Scottster. The only time an artist would incur a cost is if we find artists abusing the system, or they need hands on intervention. That would probably be handled by an hourly charge for the technician to fix any problems the artist has with the service provided to them. Our cost to promote a band within the Scottster community would be negligible.

Finally, our pool of talent scouts would be required to listen to songs uploaded to see if we would like to promote the new artist in the tradition manner. Since the artists upload the music, at least they know they will be heard by at least one scout.

Q. What about people that will only download a few songs?

A. One possibility is that we will have a tiered subscription service. We could have tiers like this: 10 songs a month for $5, 25 songs for $10, and unlimited songs for $20. That would allow people to try the service for a nominal fee in the beginning. We would still require a minimum commitment to prevent abuse.

We may reconsider the subscription price and charge per song. However this presents a few hurdles. Songs would have to be cheap, no more than $1. I remember buying big (for their day) vinyl 45s for $1 with 2 songs. 50 - 75 cents a song would be appropriate today. This price could go down for large downloads. Say 25 cents per song if you download more than 100 songs in a month.

Under the charge-per-song model, billing would still be done monthly. Artists would obviously get royalties based on a percentage of the revenue their songs generate.

Also, problems might arise for multiple downloads, but it could probably be solved with tighter security in the software.

Q. Won’t this be a problem for retailers? Aren’t you going to put them out of business?

A. Hopefully not. One of the biggest things we would expect from the retailers is to act as a service. Kiosks would be in retail outlets that let people log onto Scottster and burn songs to CDs. This would be a great service for the retailer. They could charge a nominal fee. The music is already paid for through the customer’s Scottster account. Remember we don’t count repeat downloads.

Consumers would pay maybe a base price of $5 for a CD with a charge of 25 cents per song. This extra fee would be to account for the amount of time it takes to record a CD. But that’s still only $8.75 for a CD with 15 songs, and they are all songs the customer chooses. With the cost of blank CDs below a $1 retailers would make $7+ profit per CD, just for the time spent creating it. That’s much more than they are making now. Of course, competition in the retail market could drive that price down considerably. This would only be better for the consumer.

Kiosks could also be setup to download songs directly to a portable MP3 player. Just charge 5 or 10 cents a song to allow people to download music while in the store. It costs almost nothing for the retailer, but it is another revenue stream.

Retailers could also act as a signup service, collecting the referral fee facilitating setting the customer up with their Scottster account. Then offer to burn them a CD as well. There will be plenty of ways for retailers to provide services on top of Scottster for their own revenue.

Q. This seems to good to be true. How can you do this?

A. The music industry would be greatly streamlined. We would only need a really good team of computer programmers to maintain our massive databases of songs, artists, and statistics. They would always be trying to create new and better ways to use our information to create better targeted announcements.

Our pool of talent scouts would travel less, because there would be a central place for new artists to attempt recognition. The entire industry can streamline as brick and mortal sales migrate to an online world, and retailers act as an added value service provider.

People will actually welcome the e-mail announcements. They will hopefully tell you about music that you will really like. And it is all included in the price. You have nothing to lose. We have everything to gain. Word of mouth will spread like wildfire, because we would be providing a truly great service at a reasonable price. Eventually we would have more subscribers than we would know what to do with.

Q. So how do you start it? Napster has such a strong following, what will you do to overcome this and get people on the straight and narrow?

A. Narrow is a word I would avoid. We are not going to narrow people’s choices. For this system to get off the ground, we will start off a little slow. This slowness would be necessary as we build the company to handle the amount of business we would expect. The building process will consist of ramping up employees to code the database backend, the client application, and the statistical driven e-mail announcement system. We will also have to build up hardware for storage of songs, as well as gradually acquire more and more bandwidth to meet users’ demand.

We will call this period a beta program, and it will be free to all that sign up. But we want our intentions clear. It will be paramount that we keep the public informed of our progress as we make it. This is information the music industry has never been forthright with in the past. People will know well in advance when we will start charging for the service. We cannot let the free trial period last too long. Just long enough to ensure we have the necessary hardware, bandwidth, and songs to provide a good customer experience. Hopefully this will be no more than 6 months, but 1 year may be necessary.

After the initial application is written, and we have our first server filled with a few thousand songs, we would go live at the free/beta level. We would continue to add servers and mirror sites to spread resources and improve user satisfaction. Since the software lets people trade as well as download from us it hopefully won’t be a big problem getting started.

The free introductory offer would extent into the pay arena. All users who sign up before a certain date will be offered a 25% discount on the first 6 months or year worth of paid service.

When we are in full swing we will provide that same 25% discount to anyone that pays for a year of access in advance.

To be fair to the artists during the free period, we will average all the download statistics for the free period into the first two months of paid service. Royalties for the beta program will come from this. Artists would get less revenue during this free period, but at least it’s something.

Conclusion

That covers most of the questions on an industry friendly version of Napster. All I need is a few million dollars to get the ball rolling. If any millionaires out there want to become billionaires, just contact me and we can get this project running. But hurry, before someone else beats you to it.

Do you have any questions not answered here? Send them in and in a few months I will revisit this topic and answer those questions. Together we can come up with an artist/consumer friendly music trading application/community with Scottster.

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