Independent Musician Reaction to 2/12/2001 Napster Court Decision and Subsequent Offer

by Matthew Montfort

Matthew Montfort, leader of the world fusion music ensemble Ancient Future, was named as a potential class representative in a motion for class certification filed January 16, 2001, in the Napster copyright proceeding pending in U.S. District Court in San Francisco. In the wake of the Feb. 12 opinion issued by the United States Court of Appeals for the Ninth Circuit in favor of the major labels, the class of independent musicians would like to see Napster become a service that tabulates and pays royalties to independent artists and labels.

The Feb. 12 opinion against Napster is a double edged sword for independent musicians seeking to sell their music over the Internet.

On the one hand, I applaud the decision because it affirms the rights of copyright holders, which is absolutely essential for the advancement creative music in the digital age. A lot of damage has been done to the value of independent music by the belief, promoted in the media in the Napster debate, that music should be free on the Internet. With this decision, some of that damage may begin to be undone. But a whole generation of kids has come of age thinking that free music was somehow their birthright. This sort of cultural damage may take years to correct, and indeed may never be fully reversed.

On the other hand, the decision gives the major labels less incentive to come to a settlement with Napster that would allow consumers to download music by any artist for a fee. From my perspective, the best outcome would be a settlement between Napster, the major labels, the independent labels, and independent musicians that would allow for file sharing to continue, but with adequate payment to the copyright holders.

The year 2000 saw overall album sales increase 4% over 1999 according to SoundScan, a fact widely quoted in support of the argument that file sharing doesn't hurt sales. However fewer titles now account for a greater percentage of sales. SoundScan reported 88 albums that sold over a million copies, and more than 200 that sold more than 500,000 copies. There were fewer albums selling 100,000 copies, which has traditionally been an important sales milestone for emerging artists.

Over the last decade, there has been a consolidation of retail record stores. Retail outlets now charge labels for bin space, wall space, and to feature CDs in listening booths. This favors the major labels who have the resources to commit, and they focus those resources on titles they believe will sell millions. This has a chilling effect on new music. Genres such as world music, classical, new age, and jazz have been particularly hard hit.

Because Napster allowed consumers to download music for free during the crucial easy venture capital stage of the development of the Internet, none of the pay-for-download sites has been able to get a strong foothold in the industry. Indeed, my band, Ancient Future was offered a sizable advance by one of the pay for download sites, but before the deal could be concluded it had become apparent that it was not a viable business model to charge for downloads when Napster was offering them for free. Ancient Future never received the advance, which could have been used to fund marketing on our new CD, “Planet Passion." Instead, 500 signed and numbered limited edition preview CD-R copies of the release are being sold at $30 each through the Ancient Future web site ( to raise a portion of the funds needed to release and market the CD in retail outlets.

If Napster goes out of business, a potential source of future licensing revenue for independent artists will be removed and it will be difficult to collect damages for income lost while Napster was offering the public a way to trade our music for free. I believe that this lost income was a more severe blow for independent artists, for whom every CD sale is crucial for survival. Major labels respond to uncertain market conditions by taking fewer risks and concentrating on the few artists who sell millions of CDs, thereby protecting their profits but hurting diversity in the marketplace.

It has been a hope of many that the Internet could help level the playing field. But I have some concerns about major label control over download sites. If the major labels buy up all the popular sites, independents will be faced with the same problem that exists in the brick and mortar world where consolidation and major label control works to the detriment of new music. A Napster that respected copyrights and treated independent musicians and major labels the same would be a step towards a level playing field.

Napster has proposed a $1 billion settlement over five years that would pay $50 million yearly to independent labels. While this is a step in the right direction, it is massively inadequate. Using Napster download figures from July 2000 of 14,000 songs per minute, the independent’s share of one year of mechanical royalties alone from Napster downloads at the statutory rate would be 151.7 million dollars*. The statutory rate for mechanical royalties, which are paid to the publisher of the song and do not cover the performance of the musicians, is 7.5 cents per song per copy sold. In order to allow for payments to the artists who record the songs, the payments to independent labels would need to be in the range of $300 million and $600 million annually.

Hopefully an agreement can be reached that will allow Napster to continue that does not take advantage of independent musicians. Both the major labels and Napster will have to give a great deal of ground for this to happen.

*How these figures were arrived at:
14,000 downloads a minute July 2000
x 60 minutes an hour
x 24 hours a day
x 365 days a year
x 7.5 cents mechanical royalties only
x 27.5% independent musicians and labels share of downloads

151.7 million dollars yearly for mechanical royalties alone

Note: Napster now respects copyright law, and Ancient Future tracks are available. Feel free to download them all you like. However, streaming rates are still far too low on all of the streaming sites, so please buy the music you enjoy.


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