There's an old saying involving cows and free milk that applies nicely to the online music marketplace.

The phrase might be unfamiliar to the youngest of Napster's 38 million users, some of whom might also be unfamiliar with the origins of milk. But many of those millions will be asking themselves something similar in the wake of Napster's stunning partnership with Bertelsmann AG, owner of one of the world's largest record labels.

The companies say they want to create a fee-based song-swapping system that compensates record labels for the files that users download. Their plan raises many questions, but most vexing will be the one asked by users if the system ever debuts: Why buy the songs when you can copy someone else's for free?

Napster helps Net users find music files on other people's computers and make copies for themselves. The software is free and so are the songs, allowing people to build a digital music collection without ever visiting a record store.

This doesn't sit well with the record labels, which have filed a lawsuit accusing Napster of widespread copyright violations. A verdict in their favor would be a death warrant for the revenue-starved software company.

Imagine the music industry's surprise, then, when Bertelsmann threw Napster a life preserver. The German media conglomerate agreed to loan the company an undisclosed sum in exchange for a future equity stake and an agreement to develop a service that generates revenue for artists and publishers.

The lawsuit is still pending, but company officials said they hoped their plan would convince the other labels to send home their lawyers and come on board.

Song swapping

What would this system look like? Nobody knows. The companies suggested that Napster might be split into two services, including one with free downloads and another that charges users a monthly fee for access to licensed tracks from BMG and other labels.

The challenge lies in stopping users from swapping these commercial songs for free. In its legal defense, Napster has said it's impossible to stop pirated songs from being traded through its system. The music industry, meanwhile, has been unable to produce a file format that prevents people from making unauthorized copies of songs they might buy online.

This seems to leave the company with little choice but to restrict song-swapping privileges to paying customers. Free users would probably be limited to a selection of bonus tracks, artist interviews and other promotional fare from the company's own servers.

This scheme would require Bertelsmann to convince other labels to sign on. This won't be easy, since they've each been making plans for their own subscription services.

But if Bertelsmann is forced to go it alone, the industry's lawsuit will continue to hang over Napster's head like a foot over an ant unless the company can figure out a way to block unauthorized songs from its file-swapping service.

Even if that were possible, the limited selection of licensed songs left to trade would look more like a lame record club than the digital bazaar that Napster users enjoy today.

If each of these cards falls into place, Napster would stand a chance of maintaining its dominant position in the online music world. But it would be competing with a familiar foe: pirated music traded among users of some other system.

Paying customers

If Napster restricts song swapping to paying customers, another program will surely emerge to serve those who demand a free music market. Napster would then be competing against its philosophical offspring, a generational duel for the digital age.

Could the new, corporate Napster prevail? It would enjoy at least a 38 million-user head start and the credibility of major label endorsements. If the service was reasonably priced and easy to use, it just might attract a critical mass of customers with a combination of conscience and convenience.

But as any Web publisher will tell you, it's difficult to charge for something the guy next door is giving away for free. And Napster's current users already have proven willing to go out of their way for free music by downloading the software in the first place.

The only sure winner in the deal is Napster itself. The privately held company stands to make a fortune if this long-shot deal pays off. And even if the company ends up losing all its customers, it'll be making exactly as much money off them as it does today: nothing.

To contact syndicated columnist Joe Salkowski, you can e-mail him at or write to him c/o Tribune Media Services Inc., 435 N. Michigan Ave., Suite 1400, Chicago, IL, 60611.

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