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Networks image CEO defends online music service

Network World Fusion

(IDG) -- Just days after his Web venture was hit with one of the stiffest legal penalties of the Internet era, CEO Michael Robertson defended his company's music downloading service before an audience of venture capitalists and Internet entrepreneurs.

In an upbeat, often-humorous speech at the Internet Outlook conference Tuesday, Robertson claimed's service supports the spirit of the nation's copyright laws despite a federal court's ruling to the opposite. Last Wednesday, a District Court judge fined an estimated $118 million in damages in a copyright infringement lawsuit brought by Universal Music Group.


Robertson was a keynote speaker at the conference, which showcases 100 start-ups in such areas as e-commerce, digital media and online communities. After demonstrating features of during a lunchtime address, Robertson convinced more than half of the conference attendees that his service should be legal, according to an informal poll of raised hands.

"There's going to be a fundamental shift in the way people listen to music and buy music," Robertson asserts. Instead of purchasing CDs in a store or online, "music is going to be a service," he says.

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Robertson argues that the music industry should mimic the movie industry and develop different levels of service as music ages. For example, as a movie migrates from the box office to pay-per-view to video rental to free TV, so music should migrate through different usage and fee arrangements.

Aiming to be the first music service provider, offers free music downloads from 87,000 artists, a syndicated radio show and monthly subscription services for classical music, children's music and retail outlets.

But what got the company in legal trouble is a service called, which allows users to register their CDs with the company's database of 80,000 CDs and then listen to the songs they own from any computer with an Internet connection. Universal successfully argued that violated its copyrights by including an estimated 4,700 of its CDs in the online song database without permission.

"Our argument is that when you buy a CD, you buy a license to listen to the music, not a piece of plastic," Robertson says. "The music industry argues that consumers don't have a right to copy that piece of plastic."

Robertson says he is "disappointed" in the judge's ruling that is illegal and that the company willfully violated copyright laws.

"This lawsuit is about consumer ownership of the 18 billion CDs that have already been bought that consumers can't bring into the digital world," Robertson says.

Robertson says will appeal the judge's ruling in the Universal case after the amount of damages is finalized in November.

Robertson pointed out that settled similar copyright infringement cases with the four other major music labels - Warner Brothers Music Group, EMI Group, BMG Entertainment and Sony Music Entertainment - and will soon relaunch with the entire catalogs of their music. was deactivated in April pending the outcome of the lawsuit.

Despite the court ruling, Robertson asserts that's business strategy is sound. The company's revenue topped $20 million in the second quarter. The site has 10 million users, a half million songs and is adding new artists at a rate of 200 a day.

"We're the leader in everything, including lawsuits," Robertson jokes.

Robertson made a point to differentiate the service from that of Napster, the popular music Swapping service that also was sued by the recording industry for copyright infringement.

"Legal or illegal, Napster doesn't feel right," Robertson says. "It doesn't give the copyright holders their share."

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May 12, 2000

Turning the music biz inside out
(The Industry Standard) CEO: Universal negotiations continue
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Warner sells digital singles online
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(The Industry Standard)


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