The verdict was the culmination of a risky strategy by the 32-year-old billionaire. At the center of the dispute was MyMP3.com, a service Robertson launched in January by buying up 80,000 songs and allowing users who could prove they owned a CD to listen to that music online. The Recording Industry Association of America sued, charging that the songs had been illegally copied. In settlement talks, Robertson was then able to negotiate with each record label for licenses, effectively vaulting to the front of a line filled with other dot-coms that also want the labels’ approval. Unfortunately, Universal, which has a stake in an MP3.com rival, MusicBank, refused to play ball.
Analysts think music publishers and many smaller record labels will now see MP3.com as a fat legal target. Moreover, it’s unlikely that Universal would settle with MP3.com for less than $100 million. And that amount could snowball out of control, since the other major labels included so-called most-favored-nation provisions in their contracts, a standard music-industry clause that requires MP3.com to pay them the same amount it pays their rivals.
Coupled with last month’s judicial slap at file-sharing king Napster, the lower courts have now handed two big victories to the music industry in its war with encroaching Web start-ups. Though the Napster injunction has been stayed pending an Octo-ber hearing, David Pakman, founder of MP3 rival Myplay.com, thinks the development of online music will now slow down to suit the music industry’s cautious attitude. For companies like MP3.com that hope to rewrite copyright laws, this could be an ominous sign.
