Napster was seeking to raise money from investors not long after it left the friendly confines of the w00w00 IRC channel. This was thanks to the precocious Parker, who took it upon himself to raise money for the project, running through a chain of connections that eventually landed Napster a $250,000 investment from a California angel investor on Labor Day 1999. By the fall of 1999, Shawn Fanning, Sean Parker, Jordan Ritter and another w00w00 regular, Ali Aydar (IRC handle: “mars”) were out in California turning Napster into a real startup.
Napster was like a supernova that exploded across the tech, media and cultural landscape just as the dot-com bubble burst in the year 2000. The grand-slam idea that everyone saw in Napster’s technology proved itself out spectacularly. By the spring of 2000, less than a year after launching, Napster had more than 10 million users.30 By the end of 2000, Napster could claim more users than even mighty AOL: around 40 million. And instead of taking more than a decade and billions of dollars to do so, Napster had attracted that many users on the backs of half a dozen barely postpubescent hackers and about $400,000 worth of hardware.31
Napster owed its success to all those college kids with their gigabyte hard drives and broadband dorm room Internet connections. By the spring college semester of 2000, an estimated 73% of college students were using Napster regularly.32 On some campuses, Napster was consuming nearly 85% of available bandwidth.33 When various institutions began enforcing Napster bans, students nearly rioted. For a long time, Napster was in The Guinness Book of World Records as the fastest-growing service of all time.34 At points early on in its development, Napster’s user numbers were growing 35% a day.35
But if Napster was a supernova, it was also the star-crossed startup of the Internet Era. Even nearly twenty years on, it’s hard to imagine how Napster could have ever succeeded. And that’s before taking into account all of the self-inflicted wounds the company visited upon itself.
A series of management regimes were recruited to try to build Napster into a proper company, but as Jordan Ritter has said of the quality of leadership Napster was able to bring in, “You would think the truly fastest growing Internet startup in the world would attract the best people. But it did not. It attracted the worst people.”36 Napster was not able to attract the best investors either. Unlike Google, which was raising money at almost the exact same time, Napster never landed a deal with the VC blue chips like Kleiner Perkins (though Kleiner took a hard look before passing).
It turned out that Napster’s biggest problem was what it actually did: allow users to exchange copyrighted songs for free. It allowed people to pirate music. It was hard to argue that this was not, at least in some way, illegal, and that was what scared off the blue-chip investors and big-name management types. Napster would argue vehemently that it was merely a middleman; a technology that allowed users to connect; in some ways it was no different than an ISP like AOL or a web service like Yahoo. People could—and did—exchange copyrighted material on AOL all the time, and no one argued that AOL was illegal. To this day, Napster insiders like Jordan Ritter believe that there was a sound legal loophole for Napster.37 In an age of computer networks, how did it make sense to blame a technology itself for how its users employed that technology? Ever since the advent of the CD, music was nothing more than ones and zeros, digital lines of computer code. When you bought a physical album, you had always been allowed to give it to your friend or make them a mix tape from it. Because you could now do the same thing digitally, because you could now store your entire music collection on your hard drive instead of on shelves—how did that suddenly make it wrong to do with your music what you wanted?
Nonetheless, the legal aspects of what was happening on Napster’s network were new and untested by precedent. Everyone knew that it was only a matter of time before Napster wound up in court, and sure enough, on December 6, 1999, the Recording Industry Association of America filed a lawsuit against Napster in San Francisco’s U.S. District Court. Napster was not even six months old.
This is another point that’s widely misunderstood about the Napster story. The lawsuits and the media publicity that came with them helped create the Napster sensation. It was almost a textbook example of the Streisand Effect, the phenomenon (as Wikipedia describes it) whereby an attempt to hide, remove or censor a piece of information has the unintended consequence of publicizing the information more widely. Before the lawsuit, there were maybe 50,000 users on Napster; a month after the lawsuit, that number had tripled to 150,000.38 By the summer of 2000, there were more than 20 million.39 The phenomenon of Napster, this seemingly organic impulse that suddenly inspired millions of everyday people to skirt copyright laws and social conventions and begin exchanging music freely with one another—it was largely inspired by the publicity surrounding Napster’s legal battles.
Napster played up the publicity for all it was worth. It cast itself simultaneously as (1) the little guy getting beat up on by greedy corporations, (2) the cutting-edge technology company that the dinosaurs of old media were threatened by and (3) the champion of everyday users who just wanted to consume their music the way they wanted. Napster quietly encouraged the campus protests when the RIAA pressured colleges to block Napster from their networks. As would later come out during litigation, Napster even paid some musicians to publicly support the service, encouraging them to laud Napster as a foil to the rapacious record industry. And when the vociferously anti-Napster band Metallica showed up at Napster’s offices to deliver a list of more than 300,000 Napster users it claimed were pirating the band’s tracks online, Napster organized a “spontaneous” same-day counterprotest to ensure that the event made front-page headlines. “Fuck you, Lars, it’s our music too!” protesters shouted at Metallica’s Lars Ulrich as he delivered the list of usernames.40
Napster also played up the by now well-worn angle of a young company founded by a bunch of kids who just wanted to change the world. Shawn Fanning and Sean Parker were paraded regularly on MTV and other television outlets. Napster made the cover of magazines from Rolling Stone to Time. Shawn Fanning introduced Britney Spears at the 2000 MTV Video Music Awards and hobnobbed publicly with famous artists such as Billy Corgan and Courtney Love. Fanning even testified before Congress alongside Metallica’s Ulrich.
But the bottom line was that Napster users were pirating copyrighted songs, and it was this simple fact that Napster couldn’t escape. Napster hired lawyer David Boies, fresh off his victory over Microsoft, to argue that Napster didn’t have any control over what its users did, that its servers didn’t touch, much less store, any of the copyrighted material, that it was no more liable for crimes committed because of its technology than the phone company was for allowing users to dial in to Napster in the first place. But none of it mattered in the end, because the courts decided that Napster knew; it knew what its users were up to, and that made all the difference in the world.
Napster was ultimately done in by internal documents that were uncovered during the RIAA trial. In a key email exchange between Shawn Fanning and Sean Parker (who was, ostensibly, the strategic visionary of the early Napster), Parker wrote about the need for Napster users to protect their anonymity: “Users will understand that they are improving their experience by providing information about their tastes without linking that information to a name or address or other sensitive data that might endanger them (especially since they are exchanging pirated music).”41 The emphasis on that last statement is mine, but at trial, the RIAA stressed that section as well. In her initial ruling against Napster, the judge in the case, Marilyn Hall Patel, ruled that the evidence “overwhelmingly establishes that the defendant had actual or, at the very least, constructive knowledge” that users were using Napster to pirate copyrighted music.42 Napster briefly got relief on appeal, but ultimately, rulings came down that said the company either had to put a system in place that blocked copyrighted material on its network, or else it had to shut down the entire network. Fanning and the other Napster engineers tried ga
mely to implement algorithms to do just that, and they succeeded in blocking 98% to 99% of the offending material. But the judge was ultimately not satisfied unless the percentage of blocked material reached 100%, and Napster was never quite able to achieve that. When all legal options were exhausted, Napster filed for bankruptcy on May 14, 2002, and fired all seventy employees, including Shawn Fanning, who had stayed with his brainchild until the bitter end (Jordan Ritter had left in October of 2000, and Sean Parker had been quietly shown the door after his damning emails had come to light).43
Napster was perhaps the victim of its own naïve faith in technology. Did Napster know that people were largely using its technology for pirating music? “Yeah we knew,” Napster engineer Ali Aydar would say years later. “But we also knew that this thing called the Internet existed. And it was new. And as it evolved, these things were going to start to happen. And things were going to have to change. And the way in which the world worked was going to have to change.”44 The hope was that if the majority of the music-buying public could be converted to this new way of consuming music—of downloading, of storing songs on your hard drive, of every song in the world being available at your fingertips—that Napster could then cut a deal with the record companies, something along the lines of “Hey, all your customers are now on our platform. Let us help you reach them, in a mutually beneficial, profitable way.” In internal strategy documents drawn up by Parker, this was laid out explicitly: “We use the hook of our existing approach to grow our user base, and then use this user base coupled with advanced technology to leverage the record companies into a deal.”45
Surely the record companies would see that digital distribution was more efficient. They would see that Napster could help people discover new artists and promote existing ones by creating a central hub. In retrospect, there is no shortage of people, even inside the music industry, who imagine how different the world would be if it had worked out that way—if the music companies had partnered with Napster and accepted the inevitability of technology. “Something like thirty million–plus music fans were in one spot online,” says Jeff Kwatinetz, a former representative of music artists ranging from Linkin Park to Mandy Moore and Ice Cube. “At the time, the idea of all the music you would want for $15 a month was an appealing thing and studies showed most users would have paid it.”46 Napster could have been the portal for all of music, a Yahoo of music, a Google of music, maybe even a Facebook of music.
Of course, a less polite word for “leverage” is “extortion.” Perhaps Napster’s biggest misstep was trying to leverage the record companies into a deal, given that the music business has always been known as one of the most notoriously cutthroat and aggressive in the world. This was an industry with quite literal mob ties throughout much of its existence. Napster simply picked a fight with the wrong adversary. The music industry was never interested in a deal. The music industry was only ever interested in suing Napster dead.
The RIAA would follow up its victory over Napster by attempting to sue other digital technologies out of existence, and even, eventually, suing music consumers themselves—tens of thousands of them, in fact. Of course, all this did nothing to halt the advance of file-sharing technology. In Napster’s wake, first came Gnutella, from Justin Frankel, who had created Winamp. Gnutella spawned a whole ecosystem of next-generation file-sharing networks like LimeWire, BearShare, Morpheus and many more. A few years later, in 2003, a twenty-five-year-old coder named Bram Cohen released the BitTorrent protocol, which took file sharing to new frontiers like movies, TV shows, and video games.
If Napster had been naïve to think it could have done a deal with the record companies, then the record companies were certainly naïve to think destroying Napster would somehow make the threat of digital technology go away. But, as has been endlessly discussed and is widely understood, the music industry was caught in a classic innovator’s dilemma, tied to a highly lucrative business model it was loath to give up, even in the face of an existential threat presented by new technology. Everyone knew the music industry had gotten filthy stinking rich on the back of the compact disc in the 1980s and 1990s. Having convinced all of us to repurchase our record collections in digital form, the music industry went from selling 800,000 CDs in 1983 to 288 million in 1990 and nearly a billion in the year 2000.47 Unlike with most digital technologies (the price of which almost always declines over time), the price of the average CD seemed only to inch upward every year, approaching nearly $20 a disc by the turn of the century.
But even this analysis—the record companies were wedded to the cash cow of the CD—doesn’t quite get at the truth behind the revolution that Napster began. Napster was the first signal that the web had changed consumer behavior in a fundamental way. Today, we live in a world where consumers not only expect, but demand, infinite selection and instant gratification. Amazon had first introduced the concept of infinite selection, and now Napster was training an entire generation to require the instant gratification. Shawn Fanning had been right from the very beginning: digital really was a better way to distribute music. Computers (at least, the gadgetry computers would evolve into) would turn out to be pretty damn good music consumption machines.
Advertising might have been the first industry the web disrupted, but Madison Avenue adapted to the change, quickly following our attention spans and our eyeballs as they drifted online. The record companies, in contrast, refused to budge as the habits and preferences of music consumers changed. It was never piracy that was the problem for the music industry (at least, not entirely). But rather, it was the stubborn refusal to adapt to a revolution in consumer expectations that has, at its root, truly bedeviled the record companies, and the television companies and the movie companies, and on and on and on over the course of the Internet Era.
Infinite selection. Instant gratification. On any device. When it comes to digital disruption of media, it is almost never about free content or piracy, not at the core. It is always about giving people what they want, when they want it, how they want it. Napster seemed to understand this intuitively, even if its execution on this insight was bungled. In early interviews where Shawn and Sean were trotted before the media to explain what Napster was trying to do, Sean Parker would say things that, in retrospect, were completely dead-on. “Music will be ubiquitous and we believe you’ll be able to get it on your cell phone, you’ll be able to get it on your stereo, you’ll be able to get it on whatever the device of the future is. And . . . I think people are willing to pay for convenience.”48 The Internet and the web and Google had already made information ubiquitous. Napster was the first company to prove that, in the future, media would be ubiquitous as well.
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EVERYONE TENDS TO FOCUS on the Napster trial as the pivot point in the history of modern technology versus traditional media. But there was another trial, from around the same time, that would ultimately have a larger impact on how we consume media in the digital era. In September 1998, a small company called Diamond Multimedia released one of the first portable MP3 players, the Rio PMP300. The PMP300 had only 32 megabytes of storage, so it could only hold about 30 minutes of music—half an album or so, at decent sound quality; a whole album and a couple extra songs if you didn’t mind compressing everything to a level of barely tolerable sound quality.49 About a year before it sued Napster, the RIAA sued Diamond Multimedia. Before it had even heard of Napster, the record industry knew it didn’t want MP3 as a technology to catch on. But while Napster was eventually defeated, the RIAA lost the Diamond Multimedia case. The Rio PMP300 went on to become the first commercially successful portable MP3 player.
As the author Stephen Witt has noted in his book How Music Got Free: A Story of Obsession and Invention, from the perspective of history, the music industry won the wrong lawsuit.50
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RIP. MIX. BURN.
The iPod, iTunes and Netflix
At the turn of the century, Apple was not anywhere close to the technology behemoth it
is today. In fact, Apple was dangerously close to bankruptcy before its original cofounder Steve Jobs came back to Apple and saved the company. Because Apple was such a niche player in its main market, personal computers, it didn’t have much of a role in the first part of the Internet Era. In the late 1990s, Apple’s share of the computer market in the United States fell below 3%.1 The dot-com world was a Windows world, and so Apple simply wasn’t a company Internet players paid much attention to.
It’s legendary now how Jobs returned to Apple, ruthlessly streamlined its product lines by killing extraneous projects, brought in a young executive named Tim Cook to turn Apple’s supply-chain and manufacturing processes into the envy of the technology world, and embraced a then-obscure industrial designer named Jonathan “Jony” Ive to churn out innovative and beautifully crafted computers that stood out from the dull beige boxes produced by the likes of Dell and Compaq. The product that would change Apple’s fortunes was the iMac, the Ive-designed translucent and colorful computer that debuted in 1998 and would become Apple’s biggest hit in a decade. The “i” in iMac was meant to suggest an innovative, but also individualized, device—a return to the “personal” in personal computing. But the “i” was also meant to suggest “Internet.”2 In a time of near-total Windows domination, Jobs and Apple struck on the idea of rebranding their Macs as machines uniquely designed for the Internet Era.
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