Asked whether the film industry is doomed, Big Champagne CEO Eric Garland predicts that it has more advantages in the Digital Age than music labels.
(Credit: Big Champagne)During a visit to Hollywood last week, I wanted to talk to people who knew a thing or two about the film industry's burgeoning meltdown. One of the people I sought out was Eric Garland, CEO and co-founder of Big Champagne.
Beverly Hills, Calif.,-based Big Champagne has collected data on file sharing and sold it to media companies for almost 10 years. Garland's company has survived all that time, even while making the same sad pitch. He tells the music labels and film studios they are going to be chopped down at the knees by the Internet and online piracy--but that doesn't mean they can't survive.
As anyone might have guessed, almost everybody in media initially told Big Champagne to stick a cork in it. Back in the early part of the decade, nobody wanted to hear it, and Garland logged lots of five-minute meetings. Thanks to his persistence, though, he saw up close how digital technology buffeted the music industry. Now, some of the big labels are striking partnerships with his company.
What makes Garland an important speaker on this subject is that despite his gloomy message, he's bullish on both the Internet and movies. His interests and Hollywood's are aligned, he says, because if the studios don't survive then he loses customers. He wants them to do well but he just doesn't think that telling them what they want to hear, the "bedtime stories" as he calls it, is going to help.
In his interview with CNET, Garland predicted that the film business is in for a period of downsizing and cost cutting; that Hollywood's digital evolution will likely be similar to the music industry's but will unfold much faster; and that great wealth will still flow into the sector.
Question: Your business is watching file sharing. So is it spreading to the mainstream? Is Mom and Dad from Sheboygan pirating content?
Garland: Oh yes, particularly Mom and Dad in Munich; Mom and Dad in Seville; Mom and Dad in Paris. When we talk about video the reason I single out the European cities is because that's where people are forced to wait a long time to see content legally. In the digital world, we don't want to wait three months, six months. We're just not accepting that anymore...we want it all, we want it right now and even Mom and Pa Kettle are getting to the point where they say if it's not on, let's just fire up the computer and watch it. If they want me to wait six months, I've got other options. And people don't really have a conscious or qualms about that, or at least it's mitigated by their feeling that they are entitled to keep up with the Jones'. It is the Twitter, real-time Internet expectations.
What we're seeing is a tremendous pile-on of feature film and television content, led by TV worldwide. In terms of growth, it is eclipsing the sharing of these little music files. I mean most of the new adopter activity, most of the increase in terms of people, transactions, and downloads is coming on the video side.
That means that this year or next year is going to be Hollywood's year to really start to lose audience--not just at the fringes but in regular middle-American living rooms. They'll lose them to the other box, to the smart box.
Q: Reed Hastings (the CEO of Netflix) wants to see every TV set come equipped with the ability to access the Internet. That will only accelerate Hollywood's demise, no?
Garland: Again, I think it drives both. The winner is the one who ultimately wins on the merits, and those are ease of use. Certainly the legitimate markets should win there. It did in music. Remember, iTunes wins in large part because it works so much better than anything else. So, Reed should win. His competitors should win on ease of use. Quality of content? They should at least be competitive in terms of having great on-demand, high-definition, rich audio, video. But when it comes to depth of catalog, that's where pirate markets have the edge. They have it also in timely delivery. Sorry. Go to Hulu right now and type in 24. There's just a clipped sort of terse message that says "Sorry about season 1 and season seven...
Q: Because they want to sell me past seasons on DVD, right?
Garland: Yes, but Surfthechannel.com, (an online site where users can find links to a plethora of unauthorized shows and films) doesn't care about that. They're happy to serve up current and past episodes of "24." And just like music, Hollywood's first reaction to that will be "Well, that's just not fair. That's jumping the turnstile, that's breaking the rules. We have to shut that down, because if you remove that option then people will be more patient." You won't remove that option, and you're losing valuable time if you focus on removing that option at the expense of improving that option and bettering that option, beating that option.
The music people used to say, "How can you can compete with free?" And now you ask anybody in digital music and they'll tell you, "I'm just trying to compete effectively with free." They've embraced the very condition that up until very recently they said they would reject. I'm telling you, you are going to compete with free. Sometimes you're even going to win, once you make the commitment to living in the marketplace as it is and not as you wish it were or as it once was.
Q: That's got to be hard for people in that industry or in any industry to hear. After hearing that, I almost want to start collecting donations for Matt Damon.
Garland: But I want to be clear that I was far more bearish on music than I am about Hollywood's prospects.
Everything that the customer demonstrated that they wanted starting with the original Napster was diametrically opposed to what the music industry needed. Everything that the distributor or the (bandwidth providers) wanted was diametrically to what the music industry wanted. In other words there was no place to hammer out a marketplace that would work for both sides. Customers would say "I want MP3s" and the music industry would say "We can't do MP3s because we have to have (digital rights management)." The customer would say "deal breaker!" The customer would say "I want every piece of music ever recorded. I want access to everything, everything I can remember dancing to no matter what year I went to prom and I want it right now."
Napster said sure. The music industry said "We can't do that. We can only license these titles." Deal breaker.
The customer said "I want to eat all I want at one low price that feels like free." The music industry said "No my friend, it's a dollar a track." There was no point of agreement. Hollywood conversely, is very different.
Hollywood says we like DRM, we would like to extend to you this content but on terms that we control and the customer says "Yeah, that's cool. I've always been good with that. I like renting. I'll give it back to you when I'm done." The music industry says "How come we can't we do that?" The customer says "No, because it's not my expectation. It's not the contract that we've had all along." But in video this is in the contract we've had all along. Blockbuster has always given us stuff and we paid for it and then we had to bring it back. We're good with that. There are all these places where what the online consumer is demanding is actually a workable proposition to Hollywood. There's a lot of alignment but some really some important places where there isn't any. There's no easy fix. When I tell the film studios "The good news is that you want people to rent and not just own and people are happy to do that. Check."
I say "You want some DRM--people are accustomed to DRM. There's DRM on DVDs." But when you get to one where you want customers to wait two months for a DVD, then they say that's not negotiable.
Anybody who really understands the film business will tell you that's the end of our lives as we know it. That's the end of our industry as we know it. We have to be able to preserve those windows. We have to regain at least enough control to say you can have it, but not today. And when I tell them you're never going to get that, that's when the conversation breaks off and curse words are uttered and we go back to our corners.
Q: What windows are you referring to? They have windows that allows cable channels and broadcast stations to get exclusive access to a film title for a specific amount of time. But you can't be talking about theaters too. What is Hollywood if it can't promise theaters exclusive access to films?
Garland: I think the theatrical experience is totally viable. We love going to the theater. But when we walk out to the lobby I want to be able to pick up the DVD. If I got my 3D glasses on and my kids say "Can we watch it when we get home?" The answer has to be "yes." If the answer's no, the film industry loses.
Garland: These are tough lessons. By the way, I don't want to sound like the armchair pundit. You end up sounding not very empathetic. You sound like some ass who says "This is how it's going to be and if you don't like too bad." I'm not trying to be dismissive. I'm not trying to be glib about this. I understand the implication may well be tens-of-thousands of jobs lost, billions of dollars pouring out of the industry, shutterings, downsizings...I'm not trying to make light of that. I'm just telling you that in the final accounting i think some things we now know. Some of them are very unpopular even in concept and some of them are very hard to incorporate into strategic thinking, but that doesn't make them any less avoidable or inevitable.
Q: Are paywalls one of the solutions? That's what Hulu's leaders are considering.
Absolutely not. What you have is a very effective antipiracy tool in Hulu, and I'm specifically drawing on the numbers and not just citing anecdotal evidence. People really do prefer the Hulu experience. So you actually have cannibalization, for once, of a pirate market by a legitimate market. You have a legitimate market stealing share and audience away from a pirate market. Put that behind a subscription wall and they'll just go back.
Q: But it doesn't appear that Hulu is making the kind of money that will satisfy content owners, at least those News Corp. and NBC Universal (Hulu's backers).
Garland: The cute answer, which is probably the truest answer, is that growing a sector is a privilege and not a right. There is no right size. There is no correct or God-given size for any sector. Why do we get to make movies that cost $300 million to make? Because we have found venues where people will spend more than $300 million on the result. If people spend only $50 million then the price of a movie must be $49 million or less.
I think in today's dollars no one could make "Gone With The Wind" because at the time this movie was made when everyone went to the movies. It was something like 79 percent of the population. The cute answer is that movies will get smaller.
I know people are tearing out hair and spinning in graves, but maybe "Transformers" has to be made for $75 million next time. Oh my God, what am I saying? Put the words back in your mouth. That is just a pretty plain faced observation. One outcome might mean that in the Digital Age the return on investment on a major International tent-pole franchise is not a billion dollars. It's a quarter of that or a third. Therefore we have to get our costs in line with the market value.
When we talk about this in 3 or 5 or 7 years, one thing we will all have to concede is costs have to come down. We don't have the total control over the distribution chain that we exploited so well as industries for so long. Without that you can't take advantage of the consumer in the same way.
Q: I feel like I just heard the doctor give his prognosis and the patient is a goner.
Garland: It's just "Lose weight man (laughter). Get on a treadmill, change your diet and lose weight."
Q: Has Hollywood given up on fighting piracy?
You mean has changing the name from "antipiracy" to "content protection" a symbol of a retreat or a softening? No. Not at all. It's likely that (the Motion Picture Association of America, the trade group of the six major studios) is trying to be more focused, more strategic. They are upping their game because that's how seriously they take it and that's how high a priority it is. On the contrary this is not the end, this is early days.
We now have the benefit of hindsight. We have watched an industry go through this. I think we can say with some confidence we know how this unfolds. What will happen is the studios will exhaust every available remedy and there will be a series of evolutions, meaning they will exhaust one remedy and a new one will present itself. These things will be pursued in tandem. They will pursue technological intervention on the Internet. This goes to the study at NYU that basically says this has had no effect. Ultimately, because they are spending a lot of money and not getting results, they'll become disillusioned with these vendors. They'll clean house. But something else will present itself.
"Well, maybe we were focused on trying to disrupt the networks and we should have focused on a technological solution to mass notification." Well be on to the next thing. Well spend some number of months--I'm just essentially recounting the music industry's journey--filing vast numbers of infringement notifications, letting everybody and their granny know you're infringing our content. They'll take the temperature and they'll do surveys and collect data and they'll try to convince themselves that this is having a real effect in reversing the tide and then after some period it will just not have been convincingly demonstrated to have worked. And they'll realize that by any number of measures the piracy problem has only grown worse. But they will have to exhaust all of those things and more. They will have to chase legal remedies, legislative agendas, all the way to what they view as being the end of the line before they say "OK, so this really is the landscape we're stuck with. As much as we didn't want it, this appears to be it. Now we have to just dive in and make businesses that work here."
And that's where music has only just arrived in this country and note it hasn't even come close to arriving in a lot of European countries. If you ask Universal Music Group in the U.K. "Are you going to win this war on piracy?" They will say "Oh yes, swiftly and decisively and soon. The rate of peer-to-peer infringement will be down 70 percent in the U.K. in the next few months. They have specific targets. Not here. We've exhausted all of those paths. There's a big gap. If the music industry in this country just now sort of arrived at the conclusion where they say "We just have to play on this field even through it ain't home court and there isn't a lot of advantage." And in some territories, music hasn't even gotten there yet, then how can Hollywood be there? This is early in the journey. I do think it's going to be a quicker path. It has to be. The economics are going to come down faster.
I spent years when everyone ignored what I was saying because I know it's not pleasant to hear. But my job is to help businesses all over this landscape to get from point A to point B with the least amount of pain. But that means getting smart and getting ready for the transition before the competition. I want them looking in the mirror now and not when it's too late. It's tricky. I want these guys to do well but l don't' want them to tell themselves bedtime stories. That's what the music industry did.
They spent a lot of money going back to antipiracy and spent a lot of emotional dollars on vendors who sold them panaceas and told them everything is going to be okay. "Don't listen to Eric Garland," they said. "He's a gloom-and-doom guy. He gets off on telling you things are going to be terrible. Spend a few million dollars over here and we'll clean up the Internet for you. Hey, I understand that. I want to open up my wallet for that guy too. It's comfort food.
But my message to media companies is they don't have that kind of time anymore.
Sure, rocker Trent Reznor's example has encouraged plenty of music acts to reject the label system and search for a new industry paradigm using the Web.
Lars Ulrich suggests that Metallica may want to dump its label, and he wants Trent Reznor's help to do it.
(Credit: The Los Angeles Times)But did anyone expect that among Reznor's disciples would be Lars Ulrich?
Ulrich, a member of the rock band Metallica and once one of the leading critics of peer-to-peer sites, said during an interview last week with The Los Angeles Times that Metallica no longer needs the backing of a big record company and suggested that the group may be ready to go independent.
"The primary--not the only, but the primary--function of a record label is to act as a bank," Ulrich told the Times. "When you're fortunate enough to be successful and so on, you don't need to rely on record companies as the banks...We're doing a bunch of shows with Trent this summer in Europe. I look forward to sitting down and talking to him about what's on his radar."
Because of Reznor and efforts by Radiohead, which also dropped its label and has since used the Internet to market itself directly to fans, Ulrich told the Times "there's nothing but possibilities."
What's the significance here? To many music fans Ulrich became the hated symbol of anti-innovation, anti-technology, and heavy-handed copyright owners when he was among those who tried to sue Napster--and indeed file sharing--out of existence.
Now, a decade later, even he wants to sit at the feet of Reznor.
Reznor, leader of the band Nine Inch Nails, has won accolades from digital-music fans for attempting to make music more affordable for the public while helping artists earn a living. He's done this by rejecting the major-label system and distributing music via the Web directly to the public.
Ulrich's nod to Reznor is, at the very least, an acknowledgment that digital distribution is here to stay and that the best way to survive as a music act is to understand it.
15-year-old David Nelson co-founded Muziic, a new music service, with his father. Whether the site is legal remains unclear.
(Credit: Mark Nelson)David Nelson, the 15-year-old co-founder of the free site Muziic, idealizes Napster creator Shawn Fanning. But that doesn't mean he's going to run his business the same way.
Muziic, which launched two weeks ago, is a music service that piggybacks on YouTube. Nelson's software rounds up YouTube's music videos and enables users to sort and add them to playlists as if they were MP3s. There's no messing around with YouTube's search engine, videos, or advertisements.
There's little about Muziic that compares to Napster, the peer-to-peer service that helped demolish the traditional music business and usher in a new digital era. Yet, Napster in its original trailblazing form didn't last long. The site, some would argue, doomed itself by defying copyright law. For Muziic, Nelson has more modest goals and higher hopes.
Nelson, who lives with his parents in Bettendorf, Iowa, about 60 miles east of Iowa City, said: "We knew when we started out that the key was to develop something legal."
But the question of the site's legality is still unanswered. Mark Nelson, David's father and Muziic's co-founder, acknowledged this week that Muziic was built without the consent of YouTube or any of the major recording companies. What's unclear is whether Muziic complies with the terms of service for YouTube's API or whether the big record companies will object on the basis of copyright.
Last weekend, a YouTube spokesman said that after a preliminary review of the site, Muziic appears to violate its terms of service. The spokesman didn't specify how. On Thursday, Mark Nelson, 45, said he and David were contacted by YouTube and talks between the companies have begun.
Later in the day, a YouTube spokesman issued a statement about Muziic that at best was noncommittal: "We encourage people to leverage the power of our open API to embed YouTube videos in creative and innovative ways that comply with our terms of service."
Representatives from the three largest labels still doing business on YouTube, Universal Music Group, Sony Music Entertainment, and the EMI Group, either declined to comment or did not respond to interview requests.
What is clear is that a teenager--armed only with a good idea and precocious coding skills--has plopped himself into a rapidly shifting and legally shaky digital music climate. The record companies, perennially struggling with the digital world, may just now be developing serious doubts about sites like Muziic.
During the past two years, the big labels partnered with ad-supported streaming services such as Imeem, MySpace Music, and Last.fm (owned by CBS, parent company of CNET News). They hoped the sites would one day generate big advertising bucks and spur download sales, according to record industry sources. Recent studies show, however, that free streaming may compete with sales, the sources said.
'Can you do that?'
"We don't have anything against sharing with the music industry," said Mark Nelson when asked whether he worries about lawsuits or paying licensing fees.
If some in the music sector think the elder Nelson sounds arrogant, on the phone he sounds more naive than confident. One must remember there's no public relations rep coaching the Nelsons during interviews. There are no MBAs, no lawyers, not a dime of venture capital money.
There's nothing but father and son.
Nearly a year ago, Mark and David were watching "Star Trek" in their living room when Mark suddenly asked: "Wouldn't it be great if we could use YouTube's API to build a music site?"
David got excited. "It needs to be a desktop app," he told his father. "It's got to be something that anybody can open up in Windows. Imagine if you took YouTube and could play the videos in a media player."
"Can you do that?" Mark asked.
David paused to consider what it would take. "Yes," he said.
He was 14 at the time.
David taught himself how to write code, he says. At age 8, he started messing around with HTML. He moved up to JavaScript, PHP, and finally Visual Basic. He said while other kids were outside playing, he was inside reading manuals on scripting languages. His father, who works nights operating machinery at U.S. aluminum giant, Alcoa, says he knows his way around a PC, but doesn't know how to write code. "David did all the coding," Mark says.
What does David do for fun? Like most teens, he hangs out with friends. But he also enjoys reading about two of his other heroes, Google co-founders Larry Page and Sergey Brin. "I'm into Google history," David said. "I like learning about business."
Besides helping his son generate ideas for the site, Mark Nelson's biggest contribution to Muziic is paying the bills. According to David, the entire Muziic project has cost the Nelson family less than $10,000.
Those costs are likely to rise, however. A story about the service published last Saturday by CNET blogger Matt Rosoff helped raise the site's profile. Muziic now sees a total of 70,000 visitors per day, says Mark. Before Rosoff's story, the site received about 4,000 daily visits. In the two weeks since the site's launch, Muziic's software app has been downloaded more than 500,000 times.
Managing this kind of growth isn't easy for a two-man operation (in David's case "man" is used loosely). On Wednesday, Muziic saw some performance issues as a result of making too many queries to YouTube's API servers, David said. YouTube limits the amount of traffic from developer sites.
David said he solved the problem by caching queries made by Muziic's users so information can be pulled from his site's servers instead of YouTube's. It's obvious by the way David explains the fix that he enjoys trouble-shooting tech problems.
Other challenges may prove less fun.
Navigating the music sector
When Fanning unleashed Napster in 1999, the record companies were still very much in the dark about digital music, file sharing, and the power of the Web to transmit songs.
In some ways, it was easier then to launch a disruptive music service than for today's start-ups. Music executives have a greater understanding of technology. They also can be more wary. They still cut plenty of deals with digital services, but negotiations can be complex. The costs of obtaining licenses from a major label can run into the millions. For companies that don't negotiate, litigation can be just as expensive.
In Muziic's case, the Nelsons also have to worry about television networks and film studios. On YouTube there are a lot of music performances recorded from television or film. Do YouTube's licenses cover sites like Muziic?
Mark and David may have had some of these questions answered prior to launch had they spoken with YouTube. They said one reason they didn't was to avoid exposing their work to other developers. The other reason was David and his father didn't want to risk getting shutting down, David said.
That could rankle some label executives. One of their major complaints about digital music services over the past several years is that many launched first, built followings--enticing visitors with free music--and then told the labels "we're here, so there's nothing to do but negotiate a licensing deal with us."
Often the labels do just that. But music execs say using their libraries to draw an audience and then later ask for rights can undermine potential partnerships. They also emphasized that a site with a big following isn't guaranteed a deal. Just ask Project Playlist, a service that launched first, got sued by the recording industry, and as a result has been bounced off the top social networks.
The Nelsons say that they want to deal in good faith with the labels and they suspect the record companies will welcome them. "We think we solve a lot of the problems confronting digital music," Mark said.
One thing the Nelsons say they don't worry about is YouTube.
"We're not scared of Google," said David. "Those guys know a good idea when they see one, and I think they're going to recognize our service is a great way to listen to music."
David Pakman, eMusic CEO
(Credit: eMusic)David Pakman, CEO of eMusic, is leaving the online music service at the end of the year, he said in an interview with CNET News on Monday.
Pakman said he is departing after five years at eMusic to become a partner at a venture capital firm. He declined to specify which firm.
An important part of Pakman's legacy at eMusic is that the company continues to exist. How many CEOs of digital music stores have been around for five years or longer? I can think of only one: Apple's Steve Jobs.
Pakman has watched stores from MTV, Microsoft, Sony, Yahoo, and AOL come and go. "We outlasted almost every other digital entity in the space," Pakman said. "We've proven the business model, growing the company by five times. I've had an amazing team."
That business model he referred to was based on selling music subscriptions to a niche market. Unlike Napster, or Yahoo's now shuttered music store, eMusic sold music in the MP3 format, which allowed songs to play on any digital music player.
Because the big music labels didn't want their songs distributed without copy-protection software on them, they shunned eMusic for years. The service carved out a niche by selling music from unsigned artists or those with smaller labels. Pakman's strategy has been vindicated now that the big recording companies have acknowledged erring in their MP3 strategy by embracing the format.
His relationship with eMusic remains a good one and he will have a role in helping to find a successor, he said.
Best Buy's acquisition of Napster is likely to mean RealNetwork's Rhapsody music service will wave goodbye to more than just one of its biggest partners.
Rhapsody of course powered Best Buy's digital music store. Two music insiders told me on Thursday, while I was reporting a story about whether Apple is wise to get into music subscriptions, that the Napster acquisition will almost certainly mean Best Buy will sever it's relationship with Rhapsody. This means that RealNetwork's CEO Rob Glaser would no longer have the muscle behind him to demand electronics companies make their players compatible with his service.
As the largest electronics retailer, Best Buy could lean on electronics makers (all except Apple) to make sure their devices worked well with its music service, Best Buy Digital Music Store, powered by Rhapsody. There's a story behind this tortured name and I'll get to in a sec.
"The acquisition news was just announced so we are still in discussions with Best Buy about our longer-term relationship," a Rhapsody spokesman said in an e-mail.
The situation illustrates a major headache for music subscription services. Napster and Rhapsody have had to cater to the host of digital music players on the market. When those devices made changes to their software, it could cause serious glitches in how the music service performed on them.
Considerable expense and effort went into looking for problems each time a device was upgraded.
One of the questions raised by the Best Buy-Napster deal is whether the retailer intends to battle Apple. That seems unlikely. According to one source close to RealNetworks, what Best Buy has complained about for a long time is not having enough control over its music service. Best Buy began offering the Rhapsody service in 2003. Two years later, Best Buy cut a deal with Napster and also bought a 10-percent stake in that service.
In 2006, Best Buy execs went back to Rhapsody and said that it wanted to offer a branded music service. That's how the Best Buy Digital Music Store powered by Rhapsody was born.
Losing Best Buy won't mean the end of the world to Rhapsody, said the source. Yahoo Music has encouraged former customers to join Rhapsody. Best Buy was a healthy driver of subscribers and of course, there was the strategic value. But overall, the outlook for stand-alone subscription services doesn't look good.
Electronics retailer Best Buy is acquiring the Napster music service--its entree into the hot online-music sector.
The two companies on Monday announced a merger deal in which Best Buy is to launch an all-cash tender offer for outstanding Napster shares at $2.65 apiece, with the full acquisition valued at $121 million. That total value represents $54 million net of approximately $67 million in cash and short-term investments in Napster as of June 30.
In Napster, retail heavyweight Best Buy is getting itself a one-time contender in the field of online entertainment. A decade ago, Napster was virtually synonymous with digital music--a notoriety that earned it the wrath of the music industry. That contributed to its demise, along with the rise of alternatives such as Kazaa and LimeWire.
Napster eventually reinvented itself as a subscription service, and it says it now counts 700,000 subscribers.
Best Buy plans to use both Napster's technological capabilities and its subscriber base to reach consumers looking to explore digital music and other forms of entertainment "beyond music subscriptions" over a variety of electronic devices. The acquisition, Best Buy contends, will give it extra oomph in dealing with record labels, movie studios, and hardware makers.
But the digital-music stage is already crowded with stars ranging from Apple's iTunes powerhouse to Amazon MP3. In the very near future, meanwhile, the social-networking scene is expecting not one, but two, big debuts: the likely arrival this week of MySpace Music and the possible unveiling of a music strategy for Facebook.
Los Angeles-based Napster has 40 employees. For its fiscal 2008, which ended in March, it reported a loss of $16.5 million on revenue of $127.5 million.
The deal is expected to close in the fourth calendar quarter. Napster CEO Chris Gorog and other senior managers have signed deals that will keep them with the company after the acquisition is completed.
Beleaguered online-music pioneer Napster announced to shareholders in a letter Friday that it's still employing investment bank UBS and may be positioning itself for "strategic alternatives" to keeping the company public--i.e. a sale.
The letter was sent on behalf of Napster's board in order to urge shareholders to not vote for three activist candidates for the board. "The press release recently filed by the dissident group appears to imply that your board is not willing to consider a sale of the company," the letter read. "This is not true."
The board additionally recommended that in place of the dissident candidates, shareholders re-elect existing board members Richard Royko, Philip Holthouse, and Robert Rodin.
Napster was the original name in digital music, and a notorious one at that. The free peer-to-peer service was silenced after a high-profile court battle. Its attempts to resurface as a legitimate subscription-based music service just haven't gotten it back on top, and the addition of 6 million DRM-free MP3s would've been more impressive, if Amazon MP3 weren't doing the same.
Napster's letter to shareholders insisted that the proposed new board members would lead the company in a wrong direction. "The dissident group's nominees have no relevant experience in the digital-music industry, have no public-company board experience, and the dissident group has not put forth any substantive plan for how their nominees will enhance value for our stockholders, if elected to the board," the letter read.
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