Napster and the PC Market

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You sure couldn't tell that there was a personal computer slowdown during my trip to Gateway (GTW:NYSE - news - boards) this past weekend. My youngest has been fighting nightly with my eldest over computer time, so I decided it was time to get the 6-year-old her own machine.

We work the way many houses work with PCs: the trickle-down method. My wife gets the new one, hers goes to my eldest and my eldest's goes to my youngest. Pretty orderly.

I managed to eavesdrop during the hour-long computer test drive and everybody in the store was buzzing about one product only: CD burners. That's right, it seems that the heavy publicity from this Napster lawsuit is bringing many buyers into the store. They are all anxious to download music and create their own CDs before some court shuts down Napster. People were calculating how much money they will make back after they bought a PC with CD-burning capabilities. They were approaching the process as if they were developing a home-entertainment center instead of a personal work station. I found it fascinating.

At a dinner I went to that night, one of my kid's 10-year-old friends was using his new PC to create a massive CD collection. He was downloading CDs that his folks might have bought for him for his birthday. Sometimes we forget the revolution that is going on around us. I have been a big believer in this thesis. Our fund has been short companies that sell CDs at the mall.

But I had no idea how the copyright protection that existed for so many years in this country has now taken on almost a China-like quality. I thought this whole phenomenon was completely illegal and unethical. But when your PC comes with the feature, you do start thinking, "What the heck? Why did I buy a CD burner if I am not going to use it?"

This fall, I think the Napster/CD-burning trend, now estimated to be used only by 10% of the country, will go mainstream. And soon, it won't matter what the courts do. The damage will be done.

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James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Gateway. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at [e-mail].