The cash-strapped independent digital music retailer Emusic.com is hoping its fortunes will improve by joining the recording industry's legal crusade against Napster.
Until Wednesday's decision to file suit against Napster, Emusic had been on the sidelines watching the legal wrangling, while trying to work out a solution to its own copyright issues with the file-trading company.
But after the recording industry successfully argued for an injunction in federal court that requires Napster to remove infringing music files from its directory, Emusic decided it was time.
"Now that the RIAA has gotten an injunction that will stand up, it makes sense for Emusic to try to piggyback on that," said IDC analyst Malcolm Maclachlan. "It doesn't seem like they're really trying to ride it for publicity, they seem to just want Napster to stop trading their files."
This isn't the first time the company has followed on the heels of the recording industry, either. Emusic filed a copyright infringement suit against MP3.com for its creation of the My.mp3.com service.
That lawsuit came just two weeks after MP3.com had re-launched its streaming locker service, after settling its lawsuits with record labels and music publishers.
Waiting for the RIAA to forge ahead in the legal realm has proven to be a successful strategy for other companies. TVT Records won a summary judgment against MP3.com on Tuesday for the creation of its My.mp3.com database.
TVT filed its initial complaint in May, after a federal district judge in New York had already ruled against MP3.com in a copyright-infringement case brought by the RIAA.
But Emusic hasn't exactly been a johnny-come-lately in this matter. Emusic CEO Gene Hoffman has been asking Napster for several months to remove infringing files from its file-trading directory.
Until last Friday, officials at Napster said that was impossible. That flip-flop upset Emusic executives who felt as if they had been lied to.
"If you remember back in November, we raised litigation as a possibility depending how responsive and cooperative Napster was toward Emusic," said Emusic spokesman Steve Curry in an e-mail. "We tried to work with them in good faith and were basically ignored.
The lawsuit has come rather late in the legal game, however, as Napster has been slapped with a temporary injunction that requires the company to filter out infringing songs from its system –- the very action the company told Emusic that it couldn't do.
Joining the lawsuit at this stage in the game could set the company up for a big payday, at a minimal legal cost. That's a move that could prove to be fortuitous since Emusic continues to struggle towards profitability.
"They didn't have to lead the charge in this matter," said New York entertainment lawyer Whitney Broussard. "This is a Hail Mary pass for them. As a practical matter, them getting Napster to stop allowing downloads is going to have a very incremental effect on their business. What they need is a big fat settlement."
Staying in business has been a very real concern for Hoffman, who has seen his company's stock slip below the $1 mark on the Nasdaq -– the threshold for staying listed on the stock exchange. The company has just enough cash to last four more quarters -– roughly the amount of time Wall Street analysts predict it will take Emusic to reach profitability.
At least two potential buyers have had discussions about purchasing the company in the past year, although both were put on hold until the digital music sector gets more stable and Emusic proves that it can create sustainable revenue streams.
