Media Firms' Shareholders Rejoice as Mighty Napster Is Felled

Memo to shareholders of the major media corporations fighting Napster in court: Your copyrights are safe.

In a court ruling issued Monday in the music-business-vs.-Napster case, an appeals court held that Napster users do appear to be committing copyright violations -- making this at least the second time that legal authorities have told Napster that it's just not right for 50 million strangers to be swapping copies of old Spike Jones records and Tiny Tim singles.

And that's good news for the publicly traded U.S. companies -- including Vivendi Universal's (V) Universal Music Group, AOL Time Warner's (AOL) Warner Music Group and Sony's (SNE) Sony Music Entertainment -- who, fearing for the safety of the copyrighted music, movies, TV shows and books at the roots of their content businesses, have been trying to shut down the file-sharing-service-in-search-of-a-viable-business-plan.

The appeals court agreed with the lower court's ruling that Napster harmed the music business by reducing CD sales to college students, who presumably are using Napster over their schools' high-speed networks, and by making it harder for plaintiffs to introduce their own digital music businesses. Of course, there's "harm" and there's "harm," given the money that the record industry is making: Manufacturers shipped $5.7 billion worth of CD albums in the first half of 2000, up 9.9% from one year earlier, according to the Recording Industry Association of America.

Those media giants rose slightly Monday, with AOL Time Warner up 28 cents to $47.53, Vivendi up $1.91 to $71.40 and Sony up $1.40 to $73.51.

But though Napster may be down, it's not out of the picture. First of all, it looks as if record companies want to stop Napster from enabling its users to allegedly violate their copyrights, they'll have to ask. The appeals court ruling, which nixed Napster's attempt to avoid a preliminary injunction ahead of a copyright infringement trial, instructed the lower court to come up with an injunction short of putting the burden on Napster to prevent all copyright violations -- a burden that's been seen as enough to shut the service down. Instead, the court places the responsibility on the people suing Napster to notify Napster of the existence of their copyrighted works on Napster's system "before Napster has the duty to disable access to the offending content," the court wrote in its opinion.

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