Original subtitles

I released an early beta version of the Napster software during the summer, and

it spread quickly by word of mouth.

It hasn't stopped growing since.

Napster users can download musical selections in an MP3 format.

MP3 is what's called a Variable Loss Compression Algorithm.

Here's how it works.

Napster and downloadable distributions, the biggest excitement thing.

Disco rap in the Beatles.

It's like new radio.

The majority of usage of the MP3 format is for unauthorized sound reports.

Yeah, I would like a CD player, but I can't spend $16 on a CD.

Napster is an evil, evil, evil, evil place to go. This last fall

semester wore on. Hundreds quickly turned to millions, with the program

spreading across college campuses like wildfire.

I have never seen the industry under siege like this in the 30 years I've

in this business.

It's very important that the Internet go the legitimate route instead of

becoming a haven for pirates. So you don't think this is stealing?

Not at all, because you're just getting a few songs that you find interesting.

The N -word appeared, and we had to defend ourselves.

Whether we like it or not, Napster has changed everything.

And the record companies are sadly behind the curve.

At its peak, nearly 60 million people used the site to swap music files from

each other's computers for free. The whole internet could be re -architected

Napster -like technology.

Napster is the tip of the iceberg. I think you're talking about the

finger in the dike. Fuck Napster.

30 years ago, the San Francisco Symphony released its music on LPs.

Then came cassettes.

And now, of course, CDs.

But in the very near future, you may be able to download their music from the

Internet. We met over the Internet, and we knew each other for like three or

four years or something before we ever met in person. We met the first time as

result of Napster. Sean flew down from Boston to Virginia to meet with some

investors that I'd put up a meeting with. The doorbell rang. I was nervous

brief second, kind of like going on a first date with someone you're starting

company with.

And the door opened and it was Fanny. He looked at me and said, you look exactly

like I thought you'd look. And I said, you look exactly like I thought you'd

look. And he said, okay, great, let's go for the presentation.

So we jumped into the PowerPoint and went through all the slides and then got

my parents' minivan and my dad drove us to our investor pit.

I take issue with people who say, ah, the moment I saw it, I knew it was going

to be fucking huge and take over the universe.

They're all lying.

There's no possible way. No one had that conceptualization in the beginning. I

don't even believe Fanning did. You're saying that people are going to download

a client, put a client on their computers, and they're going to allow

stuff on their hard drive to be shared.

Most of the development of the web up until Napster was basically about

information storage and information retrieval.

It wasn't about connecting people to people. We're going to, like, download

stuff from each other. Like, I was like, nobody's going to open up their hard

drive like that. Nobody's going to allow their bandwidth to be used. This sort

of comes onto my radar, and it's really interesting. No one is going to share an

MP3. That was my quote. No one's going to share an MP3.

And, boy, was I wrong.

I was so wrong.

Our system has been built, this time -sharing system, for about six months

It's been working.

And in that time, we've gone from getting one console to getting about six

working now. Six more due the rest of spring.

What is internet anyway?

Internet is that massive computer network, the one that's becoming really

now. What does it mean? It's a giant computer network made up of...

Oh, I thought you were going to tell us what this was. It's like a computer

billboard. It's not a... It's a computer billboard, but it's nationwide.

It's several universities and everything all joined together. Right. And others

can access it. Right. And it's getting bigger and bigger all the time. I wrote

piece back in 1990 that it would shortly be the case that everybody under 20 at

that point would become native to a place where everybody over 20 at that

would always be an immigrant.

So I was a young teenager, and I was running a BBS, which was

somewhat sophomorically titled Realm of Darkness.

But online in the BBS era, Matt connected to potentially one, maybe a

other people, maximum.

And that's what was so profoundly different about the explosion of the

was that it was one network.

So suddenly you could be connected to everyone.

There are now a very large number of people that are online that are young.

And, you know, they have a completely different sense of how the world works

what power is and what authority ought to be. I mean, it's a profound shift.

It's the difference between vertical authority, you know, God -given,

enforceable authority and horizontal authority.

I've joked in the past that Fannie and I were like, where did you guys meet? And

we were part of this.

You know, Fannie and I were part of the same underground network of elite cyber

criminals.

And it's basically true.

We met through IRC.

As we both got thrown into IRC, we became more and more addicted to it and

and more fascinated by it, which made us fight much harder to retain access to

it. And then, you know, over time, it became our lives. It took over our

You're talking about revolutionizing the way we use computers and how we use the

Internet. Oh, absolutely.

Revolutionizing. Absolutely. I mean, this system, what's most interesting

it is you're interacting with peers. You're exchanging information with, you

know, the person down the street. And we're just beginning.

Absolutely. Sean Fanning is one of the smartest people I've ever met. He was

teaching himself how to program, and he saw this.

really simple way to find music that you could listen to on the internet.

Here's a guy with no clout, no connections, 19 years old, and he really

the way we think about the internet.

It's hard to explain where things were at back then. I mean, I was 18.

I didn't really, I hadn't really seen much of the world. You know, I didn't

really, I think it was, I mean, the best way to say it is it kind of came from a

very pure place.

I was excited because he was my first, so I thought, you know, I really did

think he was going to conquer the world. Everybody does with their first kid,

right?

I was born in Brockton and didn't have the most stable family.

You know, they made their best effort, but I grew up with a stepdad, and we

ended up...

in foster care a couple times brockton was just uh brockton was just no good

uh yeah i mean i don't want to i don't want to talk too much about like money

situation but like you know we grew up like not too well off you know and my

and dad there's five kids and my dad was a delivery driver you know and they did

the best they could but then we moved down to the cape that's when he got this

once we moved down the cape Being in the sports, I think it got his mind off of

other things so that life was a little easier for him.

I think music helped him too, like sports.

Every time he was on the computer, he had the radio there.

You see what I mean? He was always listening to music.

So there's really no surprise there that he ended up thinking

of something that made sense to him as far as the music and the computer

combined.

I was fortunate to have an uncle who was into technology and gave me my first

computer. There's a lot of insecurity that comes around being dependent on

others, you know, to get by. And so as a kid, it sort of influenced my social

confidence at school. We moved around a lot.

There was also kind of a, I didn't feel as connected to my family

intellectually. And so I didn't really have many others at school either in

front. So it was sort of.

Feeling a little bit lost and then displaced at times.

Going online and finding people who had the same interests or I could learn from

and where there was a no.

Your reputation was your own. It was not about how well off your family was or

how well you dressed or how well you spoke or body language. It was about the

merit of what you were saying, and I think that, for me, was just

In the early days of the web, the first time I ever saw music that was

downloadable was a song that I put up on my homepage on the campus internet with

an mp2 file.

I guess that would have been 93, around that time.

And there were very few people out there who could play it because you'd change

it into another file format or have a special card to play it. For anyone who

had been downloading stuff from the internet, it was such a colossal pain in

ass, it's not funny.

even for technical people.

It was a process and a constant, like, trying to get bits and pieces of files

and reconnect them all together, and that was kind of a pain in the ass.

You know, 1998 was when it really felt like, okay, this is real. This is the

I'm going to listen to music.

It became clear that the computer was going to be the place that we would

our music.

Then you started looking for tools to get the music into the computer, tools

play it back, tools to manage it.

I remember the first MP3 I ever downloaded, and I remember the first

ever, you know, basically ever played a track from the Internet. And I remember

just thinking, even though it's just information, it's just audio, there's

a crazy amount of emotion. The fact that you could kind of share emotion over

the Internet, it was really wild to think that...

something so important to you, you could just trade so freely.

So I think it was, you know, it's hard to quantify how important it was.

I was a freshman at Northeastern University in Boston.

One of my roommates was into MP3s, and he would skip class and sit home and

download music, and he was always complaining about how unreliable the

technology was. What were his favorite bands, do you remember?

I don't know. He listened to a lot of really weird stuff. I had very

incompatible tastes with him.

Like every roommate in college. Yeah, that's why it was a struggle. I didn't

want to make it any easier for him to find that music.

But, no, I mean, he was complaining a lot, and that sort of signaled to me

there was a potential, there was a problem that could be solved, and I just

looked into it and came up with the solution, which ultimately became

It felt like this way of sharing media between people could be used for sharing

anything. We started with music, but it made sense that it could work for

anything else. It also felt like...

This whole model for sharing media was superior to, like, going and buying an

album. Being able to both buy tracks as singles or

share them with your friends and find stuff your friends like, and then being

able to, you know, basically have access to the entire universe of recorded

music where independent creators can publish directly.

It just seemed, in every way, it seemed like a better system.

So I would spend a weekend working on it at my uncle's office.

You know, every time I had to go back to school, I kind of dragged myself back.

Two days would become three days. I'd miss a day of classes and two days of

classes. It was just becoming more and more difficult for me to get myself back

to school with any enthusiasm.

My cousin was actually driving me back to school.

And when I got there, I thought about it and finally realized what a sense of

relief I had when I thought about the idea of just leaving.

And that was the last time.

I really never came close to the campus, didn't pick up any of my stuff, didn't

tell my roommates, just went back. And I remember just feeling so excited.

He came in, and he was just like, I need to talk to you. I said, it's really

important. I'm like, okay, Sean.

And so he came in, and he says, you're not going to be happy about this. And he

was looking at me, and I'm like, what? And he was like, I'm going to drop out

school. And I said, oh, no.

Why would you do that?

And he said, you don't understand. I have this idea.

I have to go with it now.

I have to do it now. It's now or never. I feel like this is the time for me to

do it.

And I don't think you'll be disappointed.

I actually spent time working at my uncle's office in Hull, Massachusetts,

is about 45 minutes south of Boston.

It's a converted restaurant, like three desks in the place. I just sat there and

worked on it.

for a few months until it was actually building a user base.

I remember, like, I'd go up and hang out with him, and he'd be like, pizza's

everywhere, and he was just jamming out to Led Zeppelin.

He'd, like, sleep at the office on the floor. Like, he never left his computer,

you know?

It's not hyperbole. It was an actual closet.

You think you might have some pride or just want something more, but for me, it

was something so much fun building, and I just didn't care, you know? I'd get

occasionally a little bit uncomfortable when people would show up, and you'd be

crawling out of, you know, your sleeping bag.

So Fanning had written his version one and being not professionally trained,

trained at all, and just having his ideas and, ah, here's a computer and

wonderful learning and for absorbing, we just go and try and make it work. And

it didn't work. Like everyone's first Hello World program, his was file

stuff. Didn't work. Solicited the group for help.

And I was there.

At the start, it was pretty much myself and a lot of people online that were

helping out just to make it work, help fix problems, stuff like that. He sort

asked, hey, I can't get this to work. This thing keeps crashing. What do you

think? But unlike anyone else, he wouldn't let us see the source code.

He's like, oh, really?

Well, that sounds like it's probably a buffer overrun or an unsecked boundary

condition or something like that.

And show us code and we'll fix it for you. And he's like, nope.

Okay. This was kind of cool because...

It came out as a challenge, like, I'm not going to tell you, but I'm going to

keep soliciting your help.

So we're all hackers. This is what we do.

We, you know, established commercial vendor X does not want to share anything

with us, yet we are going to find a way in. Just the idea that we were going to

build the first decentralized file system, I think the patent actually, the

Napster patent, uses this terminology. We talk about a distributed file system

since 1998.

We've been discussing it with various different people in our community.

And we've been told by a lot of experienced technical minds that the

challenge associated with a decentralized file system was actually

difficult.

It was believed that this wouldn't scale.

You would load up this app, and it would basically connect to one of our servers

and ask.

for a Napster server that would be accessible in the lowest possible load,

allowing you to search the file names to find whatever

non -commercial legal

music was available. But you would basically have a chance to kind of

the sum of all those files that were out there, and then once you decided you

wanted one, it would actually...

facilitate the connection, but then the connection itself would happen directly

to that source.

It's funny that a lot of the file sharing technology is sort of stressed

people talk about Napster, but as I said, Sean and I met through IRC, which

chat -based community, and that's a huge part of why we created it as well. I

just wanted to create a way to meet people through music. Sometimes that's

overlooked, and I think that what we're providing is just a way for people to

share their personal material and meet people with similar interests and

communicate with them. That's exactly how people discover music in the first

place. You find out about music from your friends.

who maybe listen to something similar to what you listen to. They turn you on to

something completely new.

You go out and buy the CD. That's how people experience music, and that's a

part of the experience of music.

But this was the first time I know of in mainstream history where people had a

social life online. And then after Napster went down a few years later, I

started hearing about Friendster.

And then, of course, Myspace, and then, of course, Facebook and all that. But

everyone just thinks of it as being the...

file sharing technology, but I really think that it was the seed of that stuff

too. We were basically, you know, trying to create a platform that would allow

music to be shared more widely on a larger scale than ever before that

that would galvanize enormous excitement.

It would re -energize, re -energize the conversation about music.

And ultimately, that would lead to a golden age of music. We knew it was a

way off from all the music being available digitally.

And then there it was.

I mean, you open up Napster, and there it was. It's difficult to describe to

people who weren't experiencing at that time how much material was suddenly

available. I mean, there has never been a time before or since that you could

get as many different things online and experience as many different kinds of

music. And, of course, what people forget is what was interesting was not

they could get the latest Madonna album for free.

It's that they could get all different versions of recordings of particular

music from all the way back to the beginning of recording available in this

library -like form, the vast majority of which was not accessible commercially

at all. And, you know, I just felt like this was one of the great moments in

human history, and I still do.

But, of course...

Great moments in human history usually have an

opposition that is exactly proportional to their greatness.

So it was in L .A., it was a four -season hotel, it was all of the top

heads.

A lot of them knew that we'd filed a lawsuit against this kind of rogue

but not too many of them were paying attention to what it was. So I set up a

computer, and I said, okay, you know, Tommy, what's your, you know, give me

latest single, or Michelle, what's your latest single, you know, Richard, give

me your latest thing.

Literally, we played like Dump the Napster.

It was quite a sight on the heads of all these record labels, freaking out

that... A lot of pre -releases even were on there.

I would say that was a pretty big a -ho moment.

We saw the click of the numbers, and that's what they were downloading at

particular time.

That was shocking.

Not that it wasn't happening before, and not that we were naive, but we actually

saw it, and that was startling for all of us that were in that meeting that

But if someday soon you can store your whole music collection on your hard

instead of your shelves...

What's going to happen to record stores?

I thought that the way that people got music for the last 50 years worked.

You went to a record shop, you bought the record, you took it home, you played

it, you loved it.

You went to see the artist live, everybody lived happily ever after.

There are no record stores anymore, hardly any. You know, Amoeba on the West

Coast, and there's a few in England, but it's gone.

I mean, I never thought I'd live to see that.

Great stores like Tower Music are gone.

This business seems like it survives on a lot of older albums and reselling of

that, so this one, you definitely saw new CDs and new albums not being bought

much, but a bigger store that totally destroyed them, at least in the States,

because no one wanted to go to the store anymore. They can just get it on their

computer or punch in whatever thing they want. I mean, even iTunes now is

destroying the music industry.

Because of that, people can buy the song they want and listen to it for one time

and that's it.

It is now the number one record in America.

The 50s were the singles business.

The 60s, mid -60s is when albums really started to be important.

And before that, a hit single to an artist was...

Free promotion.

It wasn't a source of revenue.

The source of revenue came from the fact that if they had a hit, they could get

a couple of thousand dollars a night more.

Lovely.

Good morning, this is Ron Lundy. How are you doing on a Friday morning in the

greatest city in the world?

Little Manoshevich.

From my perspective, I believe that the point of labels is to, in a sense,

act as a filter.

In that regard, if Blue Note had signed an artist, you would feel, well, that

was an artist worth listening to, because it was on Blue Note, and they

great records.

All these major labels, the ones that existed and the ones that still exist,

were started as phonograph companies.

RCA Victor.

was the Victor Talking Machine Company.

EMI was the Gramophone Company.

Columbia was the Columbia Phonograph Company.

And then when rock and roll and LPs spurred the sales of vinyl, they figured

they didn't need to make furniture anymore, which is what they referred to

as. Technology has been very beneficial to the record companies before.

78s, when 78s became 33 and a third, you could sell all your music again.

When they became CDs, you could sell all your music again. When the CD was first

initiated, there was a true boom at that particular point.

The 80s were a very, very fertile period for giant music sales.

Not as much as when we got to the 90s, which it was commonplace to sell 10 or

or 20 million albums.

You know, the record companies in the 80s had sort of...

eliminated their technology department, their engineers, and pretty much ceded

it to the electronics industry.

All of a sudden, technology and how music was going to be recorded went

somewhere else.

It was sort of kind of the beginning of the corporatization more of America.

A &M was getting acquired.

Island was getting acquired. A lot of the great labels that were independently

owned were...

Falling away and getting put into the landscape of the corporation.

Once you had CDs came out, we're then in a digital world where the copy is as

good as the master.

And it's amazing that they didn't recognize that there was going to be a

change. I think it came back and hit them with a wallop, you know, with the

internet. The MP3, digital music for the quick download.

It's probably the most substantive change in music since maybe the advent

digitalized music or the compact disc or maybe even the LP. It has changed

everything.

Music is nothing but algorithmic processes right now. Every time you

you put it through an algorithm, you put an envelope around it, you zip it up,

and that's it. This is the first time technology actually attacked the

system and started to take it away.

The music industry was fairly constrained for 75 to maybe even 100

terms of how music was found, sourced, developed, created, distributed,

marketed, promoted.

And it was a fairly locked paradigm.

And Napster created an avenue for consumers to step out of that, which

superior in almost every way.

It offered greater convenience, obviously, a much improved price,

All of these things really conspired to produce an amazing consumer experience.

Welcome to Valley of the Dollars.

The valley and the entire Bay Area, in fact, are at the center of a revolution.

This was the, you know, height of the bubble in the valley. You know, in

the Bay Area, in San Francisco in particular, there was a euphoric amount

optimism.

Anywhere that you went, people were happy because everybody thought that

were going to be.

filthy rich whether they were involved in a startup or not um there was it was

magical time you thought you would be filthy rich what's that i actually never

did oh come on uh i actually never did but anyway okay sorry thanks um so

basically you know you would you would uh

That really wrecked everything.

You can start. Yeah, let me start over. Okay, start. So, how did people hear

about it? Did you pass around flyers on campus?

No, it was completely word of mouth. Totally word of mouth. I think we spread

initially through IRC, which is an internet relay chat.

It's basically a network of people who just sort of congregate around different

ideas. And we started a little master community.

And they just sort of spread the idea. It started spreading through, you know,

college, you know, universities and things like that.

The first point that we could sort of really take was there was a...

An article published. It was one of these internet news sites. It might have

been ZDNet.

And, you know, they touched on the legal issues, but we weren't sued at the

time. We were still working in Massachusetts, and that spurred a huge

of downloads. Before that, it was getting a good response, and it was

somewhat, but that kind of kicked off the whole, you know, period of insanity.

With the business side of it, we eventually took money from John

friend, Yosemite.

Sean Parker and I moved out to Northern California.

You know, we hired some people, and it became a company.

So at the beginning, it was just like Paca and Sean, and he surrounded himself

with a bunch of friends from Cape, and they were all good at computers, and

they're just all, you know, it was just like basically having a bunch of

teenagers in one place. It was pretty cool.

The first time that I typed a search term into Napster and saw the results

back, I think it was the Rolling Stones, and I kind of pushed back from the

desk, and I was just like, oh, like...

What just happened? Back in 99, over dial -up, shitty browsers, web

pages taking seconds to load, here was a fucking fast app.

That's what took me. From typing to submit to what happened after that, web

pages were not doing that at that time.

And you talk about my attraction to it and moving from Chicago to the Bay Area

kind of on a dime because, you know, of what I saw in the technology.

I think you could probably, to a man, go through the early people who were there

and they were drawn to it, almost like a tractor beam because it was this

emotionally true thing. So distracted you had to leave.

Right. Whatever you're doing right there, you just, I mean, a lot of early

employees where it's like you undid what and what and what and changed all these

things in your life.

We lived together in San Mateo in a small apartment at first.

Like I said, he was bringing all his friends out there, and, you know, when

first got out there, they didn't have, like, apartments and stuff, so it was

just kind of like an Irish flop house, you know? Like, there's a bunch of

sleeping on, you know, blow -up mattresses and things like that, you

Fannie and Parker were both trying to explain to me what Napster was. I'd

used it, never downloaded it, and at the time, there were about 30 ,000 to 40

,000 registered users, so it wasn't that big.

after asking a million questions and hearing from both of them.

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 you'll be able to... I think people

are willing to pay for convenience.

I had the aha moment, and I knew at that moment that

it was going to be... it was going to be huge.

There was no doubt in my mind.

And it was a matter of, could we... And I started to change the

language I was using. Could we keep the servers up? Could we make this thing

scale?

The area where we were in desperate need of help, which was making the servers

scale to support all the people who wanted to use it, was his sweet spot as

well. So he and Jordan worked pretty closely together.

What I remember most about that time is...

sleeping under our desks, the loud music.

It was all about making small, incremental wins with the code and with

technology. It was a rocky few months, but every time we had a little win, it

was a big party.

The night Ali and I figured out some seriously awesome stuff, one of the

capacity limits we had was the ability to index more than a million files per

server.

So 4 ,000 to 8 ,000 users could go on the server before the operating system,

which was Linux at the time, would drop to its knees.

It was an amazing night because we got it working.

It was probably on the tail end of one of our two - to three -day stints, our

binges. And it must have been after midnight.

And Ali and I were just thrilled.

He put on shades and he put on his hat backwards.

And I got up on the tail and I'm like, oh!

It was like this amazing celebratory moment, and there was one picture in

particular where we labeled it, one million files.

You know, we had those kinds of moments all the time.

By, I would say by December of 99, we kind of nailed it. By

then, there was a bunch of really technical stuff that we did that caused

be able to scale.

And it was just a matter of adding as many machines as we could at that point.

Just in terms of the amount of awareness and exposure that the work that we were

associated with gained was meteoric.

So in like a four or five month span, it went from 30 ,000 registered views to

over 20 million.

Total user count now, I think we just recently passed 20 million users.

AOL has 23 million.

Even as it really blew up.

I know on the engineering side, we're watching these numbers go up. The

simultaneous users go up and up and up, and then there's more and more press

coverage, but it's still a small company in a bank building.

And I think some people had a better understanding of kind of the

of what was going on than others, but day to day, it was very hard to

comprehend.

It was one of the first times in history where you had this sort of pure youth

revolution.

Young, inexperienced...

relatively unsophisticated but smart kid could create something entirely out of

nowhere and revolutionize an industry that they frankly knew nothing about and

had no relationships in.

And it's all happened, I think, probably six months past before

we ever had a conversation with anyone from the music industry.

And it wasn't because we didn't want to have a conversation with anyone in the

music industry.

We just didn't know anyone in the music industry.

I mean, we're pretty confident that there are so many wins with digital

distribution that ultimately, you know, once we have the opportunity to work

with artists and work with the labels to discuss, you know, what models are

viable and what are not, we can come to a conclusion and find a good model that

works. There was this moment in time when you had someone like Sean Fanning,

had the idea, was...

smart enough to build it, but didn't know enough about the industry to know

it was just an impossibility, right? Just not something that was ever going

fly.

But then at a time when you can get tens of millions of dollars in venture

capital to back something which is clearly copyright infringement.

Right? That was the amazing thing. I remember being in IRC with Sean once

time and him telling me, you know, we're raising $70 million.

And my response when I couldn't type it fast enough was, don't take the money.

You don't have a business.

You know, this is, you cannot build a business on copyright infringement.

Napster was operating in a legal gray area.

And this very important law, the DMCA, which was an amendment to the Copyright

Act.

set up a series of safe harbors for different technology providers and

telecommunication providers to immunize them against lawsuits from the

continent. I believed pretty firmly, and still believe to this day, had Napster

been fully legislated at that moment, that we would have qualified for, I

it was Safe Harbor, I want to say it was Safe Harbor D, which provided

protection. for indexes like yahoo and altavit from the very beginning um

like anyone who looked at napster you were concerned about the rights issues

i knew jeff berg at icn at the time it's one of the biggest agencies in home and

i called up and said hey jeff there's an awesome company up here

it's quite disruptive can you go gather up some of the music lawyers

So we went down and had this meeting. I remember Mo Austin was there, or Mo

Austin's lawyer, and a couple of other people.

So we ran in there and said, hey, we need to come to an agreement here. It

should be easy because you're not going to stop technology.

And tell us what you want us to do.

We want to cooperate.

And guess what?

Nobody really cooperated, and it never got resolved.

It's still not resolved.

It's 12 years later, and that's pretty pathetic.

Ultimately, we were going to have to figure out a revenue model.

And by the time we started talking to the labels, we were more than happy to

turn the whole thing over to the labels and basically become their digital music

distribution service. We always wanted that. I recall we contacted them and

started having conversations, and we had serious conversations in about

September. of 1999, explaining that there was a problem here and they needed

licenses, but it would be great for them to be talking with the companies about

licenses and so on and so forth.

And when it became clear that they were just stringing us along and they really

had no intention of actually negotiating licenses, we filed a lawsuit in

December. We were being charged with contributory and vicarious infringement

something to that effect.

Basically saying, since you know about it, you guys should be held liable.

We're claiming that we did, but we can't really discuss it. That's cool. And

yeah, did we know?

Yeah, we knew.

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

were going to have to change, and the way in which the world worked was going

have to change.

And we were just a catalyst in that.

When Indiana University banned Napster, student Chad Paulson put up a website in

protest. Within weeks, over 13 ,000 students had joined Paulson in his

free Napster. It's not really necessarily Napster itself.

It's the software and the ideals behind the program.

It's like going to a rock concert, you know, just listening to new bands,

listening to up -and -coming music, and Indiana University is just shutting it

down. IU and many universities nationwide maintain that they banned

because it put an enormous strain on their internet connection.

What's up, man? I'm with MTV News. I was wondering if you had any MP3s on your

computer. Yeah. So, uh, how many MP3s do you have on your computer? About 600.

Maybe like 100 or something?

Uh, 6 or 7 ,000.

Come again?

6 or 7 ,000.

For real? Yeah.

They're all legit. Uh, how many MP3s do you have on your computer?

Uh, probably like 300.

For real? Where'd you get them from?

Uh, truthfully, most of them from Napster. Are you a pirate?

Well, I don't know. My roommate does the whole computer thing.

Margaret, are you a pirate?

What we had was basically a nuts and bolts capacity issue. Our Internet

connection to the outside world was being taken up nearly 61 percent by

Napster on campus.

So we had to decrease that significantly or we had to ban it.

It very much felt like now.

Everyone was coming to grips with the fact that this is something that they're

going to have to deal with. I think at first they were trying to, you know,

were really trying to be like, no, this just is not going to happen. But now

it's obviously so big it's out of their control.

For the first time, the audience has gotten to the technology before the

industry, before the music business.

Record companies are afraid because they'll be forced to share.

File sharing and this whole new notion of people getting music through the

internet through downloadable distribution, to me, I look at it as a

I mean, we care very much about artists, and so we think that there is a

solution to...

There's a way that the technology can be adapted to benefit all of the parties

involved, the artists, the industry, and the users.

We think right now it's definitely a valuable system for all three, and we

it can be modified and can be improved to be even more valuable.

There were these iconic artists who we'd grown up idolizing, some of whom

wanted to kill us, and some of whom thought we were the answer.

I'm all for technology, and it's interesting with the exchange of music,

way that it's set up right now, that's basically pure and simple. I'm bootleg

proof, you dig? I got people that, you know, go around the world, you know,

smashing on stuff like that. You heard about the I Love You virus?

My people have something to do with that. I mean, I can just do that to them

I want to. I think this aspect of technology is really going to bring...

a lot of different angles of life and commerciality out of the corporate world

and give it back to the individual you just give the fans the music you know

what i'm saying um the internet is just a way for you to just go right into it

and you give it to the fans it's great isn't it isn't that good isn't it

is is bull is that that internet site that's where there's the the trading the

free trading of music we don't we don't really know enough about that so we

can't really not really in computers it's bringing true democracy back into

music business and it's it's forcing the artist to change the way that we relate

to the consumer a musician goes out there and works hard and pays their dues

would you expect them to work for free there's no doubt in my mind that the the

future of music is free You're not going to be able to stop fans from trading

music on the Internet. Even if it's not through a company or a website, fans are

going to trade music on their own. There's no stopping it.

This revolution has already taken place.

It's now. This is now. And we accept it, and we get it, and we're going to grow

with it. And it's just another addition to technology, and I'm a technology

freak. What do you say to the artists that are so, you know, just so loving

the new guys, like the Fred Durst of the world, who just think it's the greatest

thing for music?

Well, he's a moron to start with. Okay.

All right. More needs to be said about that. Nothing else, I guess.

We get a lot of bands who send us email and say, you know, we put our music up

on Napster, we started sharing it, and now, you know, we see a hundred other

people that have it, they're listening to it.

And eventually that translates into more people at their shows selling more CDs.

There were so many success stories.

Dispatch was a great one because they were, you know, a band. They were

and their CDs weren't for sale in some of these places they were playing for

first time.

I think the first time I ever heard, yeah, the name Napster was backstage

a college gig where we'd played Boston and New York, I bet for five or six

years, just over and over and over again.

Had finally built up our fan base to like 500 people a night or 700 people a

night. And then we flew a red eye to play a college gig in California. A

Halloween gig or something. It had never been West ever. And then there were

more fans there and they knew all the lyrics. It was... Yeah.

And there was no radio and no press and no one knew,

except everyone knew.

It's kind of like instant distribution, you know, without the big wigs on top,

figuring out it's like this.

But it's not like we don't like big wigs, because I've seen you wear big

I'm wearing a big wig at the moment. It's a huge wig.

So for an independent band with no...

to get to that scale just by free sharing, it was pretty clear that it was

pretty powerful. And they were really open about the gratitude for that.

Napster was absolutely the most well -known and most chatted about

company in the tech world by far.

It was pretty cool working at Napster. Like, if you showed up, you were kind of

the star of the party.

All you needed was a Napster sticker, and you were probably going to either

a free drink or get laid, one of the two. So it was actually a pretty awesome

time to be associated with Napster. Ron has a party on a Friday night. We

learned that day that Hummer Wimblad had invested.

We had a large gathering for our limited partners in the Angel Investor LP Fund.

You had Warren Buffett, Dana Carvey, Marc Andreessen, Schwarzenegger's

You had Sean Fanning, Sean Parker, Larry and Sergey of Google fame.

Not then, but now Google fame.

And I can remember how taken the Google guys were by the Napster

guys, so to speak. And I can remember thinking to myself, good luck with that

search engine thing. I hope that works out for you.

They actually said at one point, like, something to the effect of how they were

envious of the Napster brand and how it's so cool.

And I'm like, but you guys are doing great.

And they said, no, but it's nothing like Napster. And I'm thinking in my head,

like, you have no idea.

You have no idea.

We actually didn't imagine that.

that what they would do is total shutdown.

We figured, like, we as naive technology guys went, this is really cool.

So the music business is going to try to find some sort of business model around

this, right?

Wow! Downloading music for free is awesome!

What the hell is that?

I don't know. Let me check.

Freeze, FBI!

Down on the ground! Down on the ground!

Hands! Let me see those hands!

My initial resistance...

to the new services created online was based on the debate having been framed

terms of piracy.

Being labeled as such by the record companies, it understandably sent a

effect of panic throughout the artistic community.

For quite a while, they thought we just had some big hard drive full of music,

and we were just, you know, pirating everything.

Like, as if we'd gone, as if we'd sat there and put CDs and ripped them for

months and months and months and months and months, and then...

Lo and behold, we had the entire library of all recorded music, and we were

giving it away. Our users are exchanging content, and we at Napster never come

in contact with any of the music that people are distributing.

And not only that, but we're also fully compliant with what's called the Digital

Millennium Copyright Act, which requires us to remove infringing links from the

recording process.

We were used to piracy, but there was a quick remedy.

The RIAA, Recording Industry Association of America, would get in touch with the

FBI. They'd do a raid. They'd take it. And then four blocks later, they'd go

up again. So we dealt with piracy. But it was piracy in the hundreds or the

thousands. It wasn't piracy in the millions and tens of millions and

billions.

That's scary.

This is a company that is building a business.

You know, they've got venture capital money. They're out on Wall Street

for financing.

This isn't, you know, just a sweet young guy who's looking for some fun in his

college dorm room. They're building a business by facilitating the stealing of

artist's music.

A lot of the uncertainty, I think, I'm sure plenty of lawyers and others all

kind of put the...

the industry in a place where it felt like it needed some protection or some

control, to at least exert control long enough to figure out what to make of

this and play it safe.

And I think, unfortunately, that led to them missing a really big opportunity.

I can get that the labels were afraid. It was so new, so fast, and they have

control issues.

They control things with legal agreements, and this thing was like a

There are no nation -state boundaries on the Internet.

Laws don't really apply to them unless you can find them.

For me it was not about piracy and consumers stealing intellectual property

rights. For me it was like how great must music be that these people are

together and sharing their taste of music.

And the press about Napster was controversial and misleading.

It was all about control.

power and how can we protect our existing business model i think napster

million customers at one time or people you know which were getting their music

through napster and um that seemed like an incredible opportunity but because

the major rape record labels were unable to come to any terms with them they

essentially burnt it burnt it down i think like any anything in the world

big innovations rarely come from the big companies that are already dominating

that game because it's not in their interest to completely reinvent what

doing there so they become actually very complacent the music business is a

great great example of of that of just complacency being a total

death sentence the five global heads of the companies at the time

most likely couldn't agree that Today was Wednesday.

And for different reasons. People had different ideas. People had different

visions.

And no one was used to this. And the word ambush happened a lot of times

in the conversations that we have with everybody.

The record business was kind of ambushed, however we want to look at it.

you've got to deal with an ambush. You dealt with Pearl Harbor. You've got to

deal with it, right?

There was no awareness that something like this was coming.

Even though a lot of the technology of the Internet is actually based on peer

-to -peer functionality, it had never been used in this way. This was

entirely different. This was all the content in one place. It was an

amazing experience, and everything was up there, everything.

But things change, and you've got to change with it.

And to stick your feet in the mud when the world is tearing by you like a

train, it's just laughable.

And you get real old real fast.

And you go into kind of the bin in about one year. You're like yesterday's news

because you didn't keep up.

Some of those labels got caught out there. Some of the artists got caught

there because they have an older school look at the music industry.

From the moment that Hank came in, He was looking at

making deals, and he did everything but turn cartwheels on Hollywood Boulevard

in order to get them.

I think it was, you know, we will not negotiate with terrorists.

You know, and I think, you know, that's literally how they perceived Napster.

And I think, you know, in most things, you know, you need a hero and you need a

villain. And before you can find, you know, that hero, you need to clearly

identify the villain. And we were that.

All of a sudden one day I got a call from Cliff Bernstein saying they're

I Disappear on 30 radio stations. I go, how can that be possible? We haven't

even finished it yet.

And then we sort of, you know, looked into it and traced it back to some

called Napster. And we were like, huh?

This is all very bizarre. And then it went straight downhill from there, boys

and girls.

The moment, the quintessential moment where I knew it was out of control.

was when Metallica delivered Napster usernames for us to block.

The heavy metal band Metallica has been most vocal in its opposition to Napster,

and drummer Lars Ulrich even plans on delivering a truckload of paper to the

company, listing people who use its software to share unauthorized MP3s,

kicking off Metallica's much -typed, monsters -of -minutia -filled legal

tour. We couldn't believe how crazy this was.

You know, Metallica was coming to our office to deliver boxes full of, I think

it was like 260 ,000 names of infringing users who were violating Metallica's

copyright.

They could have put it, hell, they probably could have put it on an old

and a half inch floppy disk.

But no.

Nope. They printed them all out on paper and long.

What Metallica has done is harvest usernames from the Internet and from the

Napster site. Now, anybody can get that. It doesn't necessarily correlate to

actual legal names of Napster users.

They've simply downloaded anyone who has a Metallica song available on the

Napster site. There you go.

Now, once again, we're not going after these people specifically.

What we're merely doing is giving NAFTA the information that they thought that

we couldn't get them, which is basically real people downloading Metallica

master song, not bootleg live recording.

What will they do? I think maybe if we could get the NAFTA people out there,

they could take that question.

We're basically told do not go anywhere near the front of the office because

it's going to be, you know, it's going to be mayhem.

We were, like, opening the windows, trying to look out to see what was going

Finally, Sean and Sean were like, this is dumb.

And Fanny and I decided at one point, just prior to Lars arriving, that we

sneak out the back door of the office and run across the street and watch.

Just watch this whole spectacle.

And we were, like, just laughing hysterically.

There's a podium set up on the sidewalk. I mean...

25 mics from news organizations to get the pearls of wisdom and views of Lars

Ulrich, who then takes a few questions. But, you know, he's got to actually

deliver the names. And so there we are, Bonnie and Clyde, in the elevator, where

if you had a shot of it, the door is closed, and it's Howard King and Lars

Ulrich and a couple other thugs.

And the door is closed, and Lars turns to us and says, hey, guys, nothing

personal. At which point the door was open to be like, well, why didn't we

to each other about this?

We're going to deliver him. I'm sure it's not the end of the story. Well, I

think he probably assumed that he'd walk into a dark, expansive room and you'd

be, you know, sitting in a chair with, like, a cat.

Do you know what I mean? With, like, TV monitors in the back. I mean, the

reality was, you know, that this was a really low -rent, shitty office building

with a bunch of kids running around in it. And I'm sure he was blown away.

But I will tell you that a few minutes ago when I dropped off...

All the names that they asked for.

I met two really nice guys up there.

I put a human face to this whole thing after.

And we had a very civil, very cordial conversation, 10, 15 minutes. They said

their side. I said my side.

And it's sort of like the ultimate thing in just American society, agreeing to

disagree, coming from two different points of view.

But, you know, what to me Napster keep trying to do is trying to sort of, you

know, drag it out and make it about Metallica and their fans or make it, you

know, why didn't Lars call us personally? I mean, come on. Let's stop

bullshitting each other here.

I think it's about the most unhip thing that I've ever seen a big rock star do.

Someone had to do it. I would imagine that Celine Dion or something might be

first one out there.

But nobody that uses Napster, I don't think there's probably any Celine Dion

songs being shared. So that's probably...

probably wears that. There's one picture of this guy with a Metallica t -shirt

and standing right next to a guy with an Astra t -shirt. It's like, this is,

this is, oh my God, this is out of control. Like, this is the vortex of

crazy tornado hurricane that we're in the center of.

Do you agree with these guys?

It depends on which guys you're talking about. I agree with Metallica.

That's cool.

And it was true. For some reason, Metallica had decided that they were

be the lightning rod for all these other artists who were not quite sure what

they thought of the thing.

But they were angry.

Metal was supposed to be about being renegade and being anti -establishment

sticking it to the man.

So it was kind of ironic that this metal band was suing us.

It was like metal and gangsta rap.

Like the two least likely people to go after us were the ones who were suing

Napster is stealing from us straight up, and I'm going to fight them to the

death.

Anytime things go to Capitol Hill, you know that it's really in the band. You

know what I mean? Like that's, you know, then it actually means something.

It started to be talked about in all those broader terms. So it went beyond

rights, and it became the way that we exchange information, period.

When those concepts started to be introduced, I kind of realized that

no going back at that point. This was the future.

In case you missed it, there has been an upheaval of sorts concerning how music

is copied over the Internet.

What Newsweek magazine dubbed the noisy war over Napster...

involves more parties and has much broader implications than that moniker

implies. Just like a carpenter who crafts a table gets to decide whether he

wants to keep it, sell it, or give it away, shouldn't we have the same

We should decide what happens to our music. Not a company with no rights in

recordings, which has never invested a penny in our music or anything to do

its creation.

The choice has been taken away from us. I became a royalty artist when I signed

a contract with Columbia Records with a group called The Birds.

And we recorded 15 albums or so during that period.

And aside from modest advances for each of these albums, I never saw any

royalties. Even though we've had number one hits with Mr. Tambourine Man and

Turn, Turn, Turn, I saw nothing but The Advance, which was divided five ways. It

was only a few thousand dollars apiece.

And with the advent of mp3 .com, I'm getting 50 % of the CDs that

come out now. I think it's a wonderful thing.

Thank you, Mr. McGuinn. That's a complaint I've heard from a number of

Mr. Berry.

Napster simply facilitates communication among people interested in music.

It's a return to the original information -sharing approach of the

it allows for a depth and a scale of information that is truly revolutionary.

Napster's helping and not hurting the recording industry and artists.

A chorus of studies show that Napster users buy more records as a result of

using Napster, and that sampling music before buying is the most important

reason that people use Napster. One of the Senate hearings, they had a bunch of

key personalities that were invited, and Hank Barry was there on our side, and

Hank's a lawyer, he's our CEO, so very thoughtful, you know, well -prepared,

articulate argument.

you know having to be defensive at times at the end of the day is kind of

playing fairly and then there was gene khan from nutella my name is gene khan

i'm a nutella developer one of many i'm not the inventor of nutella but i'm

simply one of the people who happily talks about it and gene's a pretty mild

and he's a nice guy he's kind of thoughtful a little bit introverted but

role for whatever reason he decided to just absolutely run with it and so he

just played the

crazy anarchist destroy the system role in that hearing. I remember being so

entertained by all the fallout from that.

Really, the Internet is the holy grail of distribution channels. It is a zero

marginal cost distribution channel.

That means that it costs the same to transfer one copy of the intellectual

property as it costs to transmit 10 ,000 copies or 1 million copies or 10

million copies. The bad news is that the old world tactics may no longer work on

the Internet. This is the new economy.

Can we stem the tide of new technologies? Highly unlikely.

So what does the future hold? Great things if profiteers adapt, if

property profiteers adapt.

There's room only for the leaders. The Internet is ignominiously inhospitable

middlemen and followers.

Technology moves forward and leads. the stragglers behind the adopters always

win and the stalwarts always lose mechanized farming is a good example you

see anyone out there with a horse and plow these days very intelligent

except i don't think we infringed when we downloaded because it was for

educational and governmental purposes so it's very useful and since we since we

define what that is you know we went to the fat hearings expecting you

know to be i mean it was It was established as an information -gathering

session, so we expected it to be us giving them lots of information and

to explain to them how things work. But surprisingly, they really understood,

and they were very supportive. They did not want to kill the technology. They

understood it was adopted by 20 million people, and that was really powerful to

them. And so they were all about trying to structure things so that it would be

worked out between all the people who had issues.

And I suppose that...

that maybe, you know, I got my hopes up that, you know, everyone would sort of

understand things as well as they did.

Napster.

The first version of the product was pretty much the same set of features,

it was sort of a very simple application.

But once we were sued...

We couldn't really do much with it. So to have something growing that quickly,

to have so much attention and have so many great ideas and so much passion

the team members and desire to make it work, make it last, to not be able to

actually change the product, make it better, to not be able to really pursue

lot of the great ideas for how to make it a viable business, I think it was

actually incredibly frustrating.

There was all this focus on the recording industry.

and the legal battle, which absolutely deserved focus from a business

perspective, but almost no focus whatsoever on the value of the business,

was this platform and its capabilities and what it could do.

The legal issues around product and the interface between the legal team, which

was becoming an increasingly large and influential part of the company, and the

product and engineering team, which was becoming an increasingly small and

marginalized part of the company.

Eventually, the lawyers took over.

The first mutiny was when we moved into that office in Redwood City, and it was

a giant cubicle farm.

And as soon as Jordan and I thought, we looked at each other, and we didn't have

to say anything to each other. We were like, this is... We knew it was bad.

The layout of the office, so we'd gone from having funky desks, and I would

them door desks, like we would literally buy doors that have the knob hole

there. That would be where all your wires went.

to cubicles with walls we wanted to all sit together and and you know we've

gotten used to that right and that's how we work management offices were

literally up a floor looking down on the floors you can imagine it used to be a

factory work floor horrible metaphor you know sitting in cubicles shut up right

and you know you're expendable oh these people need to be ice

Isolated and that noise is gonna bother these other noise the fuck are you

assholes?

Seriously, do you have any idea what creativity is about?

That was a fucking super buzzkill And and you know, we want a few like minor

battles, but the war was completely lost I had the advantage and Sean Parker

didn't enjoy this luxury But I had the advantage of being able to kind of stick

my head in the sand in terms of being able to just work on the product so I

this attitude of

If things got crazy or people seemed to be acting irrationally or we were

nervous, I could just work harder on the product, write more code, put my hand

down. So that got me through a lot of the time. First of all, what is your

and what do you do here?

I'm Sean Fanning. I started the company and I'm currently an engineer at

Napster.

How about you? I'm Sean Parker. I am also a founder and I do a variety of

things. working with the legal team to business -related strategy.

Do you have a nickname like Napster?

No. No? No. So on Fanning and I, we literally went from being high school

leading relatively normal mundane lives to

12 months later nearly bringing one of the largest

U .S. industries to its knees and basically fighting what is...

in terms of potential assessed damages, the largest corporate lawsuit in the

history of the world.

The music -swapping website Napster, which for almost a year now has provided

millions of music fans worldwide with an unprecedented opportunity to copy and

trade music on the Internet, was dealt a serious blow on Wednesday when federal

court judge Marilyn Patel issued a temporary injunction against Napster

the outcome of a trial which will ultimately determine the future of the

software. When I had the idea of building an Internet community to help

fans find MP3s, I didn't think it would be embroiled in a legal battle.

But we are, and as you know, the recording industry has filed a suit to

Napster down, to shut you down.

Today there was an important hearing in court, and the judge ruled against us.

Hank Barry, Napster's CEO, is here to tell you what happened today.

On the 27th of July, we all gathered in Judge Patel's courtroom, and we had a

hearing. And it was supposed to be something relatively low -key, you know.

was a hearing on a preliminary injunction motion that the labels

Moving. And the judge came in and right from the outset didn't look good. This

is a preliminary injunction.

It's been entered without the basis of any evidentiary hearing. We asked for an

evidentiary hearing. We asked to have an opportunity to come in, cross -examine

their witnesses, to have this decided not on the basis of 15 minutes for me

15 minutes for a Dan Johnson argument, but on the basis of...

actual evidence.

We asked to have this decided at trial.

The court decided to do it on the basis the court decided to do it. David Boies

was a lot of hype.

He had just won the Microsoft thing and he had to have that big Aetna thing that

he had won, et cetera, et cetera.

So it was like, we got the big name. But fundamentally, he did not understand

what was going on at a technical level.

The legal arguments he was making didn't fit with what was actually going on.

And it was a complete and utter disaster.

I felt like we had developed a better understanding of the impact of the DMCA

and all of the complexity around trying to make the case work to watch it be

handled the way it was. And with Patel, it was actually very disheartening.

And then, you know, Sean's email came out.

There were these early memos that were discovered.

where I made reference to the fact that we were well aware of the fact that our

users were pirating music.

And given that our users were pirating music, it might behoove us to protect

their anonymity so that our users weren't sued.

And the documents that Judge Patel relied on is the following.

Users will understand that they are improving their experience by providing

information about their tastes without linking that information.

to name or address or other sensitive data that might endanger them,

since they are exchanging pirated music.

That is the co -founder of Napster writing what the system is intended to

and it is exactly what the system has done.

And this was at a time when we believed that what we were doing, basically just

facilitating relationships between users so that they could share music, was

totally legal in the DMCA. It was essentially a brainstorming document.

But there was this one sentence where I used the word piracy, which was a taboo

word.

You're not allowed to talk about piracy. You're only allowed to talk about

scaring.

The focus then became the email when, in fact,

there were all these other issues.

So Sean became a scapegoat.

I was sort of on this fourth vacation in North Carolina. The lawsuit was

happening.

On the other side of the world, I was sitting in this beach house, and I got

call from Alicia, who was Hank's assistant, and was running the

And she said, Sean, it doesn't look good.

Your memo is blown up in a 4 ,000 -point type on a huge screen in the courtroom,

and they're calling you a music pirate, and they're calling us all music

pirates, and the judge doesn't like it.

They needed a nail, they found the nail, and they put it straight into that

coffin, and that was it.

Now it was easy for the business guy to say, look, this guy not only doesn't add

any value in our opinion, but he also wrote this email, and it's all his

There wasn't a whole lot I could do about it. It sort of was what it was.

company needed to make a clean break from its past and try to move forward.

And so I sort of realized that that was the end. So I had this one meeting with

Hanky, and he walked me through it, and that was it.

I vividly remember the conversation of him asking me to come to his aid and

him preserve his role at the company.

And after we talked for a while about what that would be, I just told him that

thought he was lucky to be able to get out of this thing and go work on

something else because it had felt like it had been.

Nothing like the first, you know, the first phase that we had gone through and

enjoyed.

I don't know if that really contributed to it, that email, but I do know that it

had a huge effect on the judge's perception of our intent.

We are pleased with the court's decision.

We think the decision will pave the way for the future of online music.

This once again establishes that the rules of the road are the same online as

they are offline and sends a strong message to others that they cannot build

business based on others' copyrighted works without permission.

I have not. But I'm sure that they are very pleased, and I'm sure that they and

Dr. Dre take great comfort in the court's decision today.

Until Napster gets its day in court, if this injunction is not stayed, it will

obviously have a very severe effect on Napster's service. So you will seek a

stay? Yes, absolutely.

It's definitely been difficult, certainly a bit shocking.

Some things happened this week.

Certainly not expecting to have to deal with.

That's your fights for survival.

Our page of CNN.

The Ninth Circuit issued an order. It was only like two sentences. And it

this is a case of first impression. This is the first time we've ever seen a

case like this.

And we're going to stay the enforcement of the judge's injunction until such

time as we, the Ninth Circuit, have had a chance to look at the case.

Lawyers representing Napster and the recording industry squared off before a

three -judge panel at the Ninth Circuit Court of Appeals in San Francisco. What

the Supreme Court was saying is you can't take a snapshot and say, how is it

being used today?

But you've got to ask.

is what is it capable of being used for, because otherwise you're going to

deprive the public of something that can be used for non -infringing uses.

They designed it to be a pirate system.

Oh, they designed it for fair use.

No, sir. Or they designed it for concert work, that the authors really don't

care about a copyright, even though they have it out on a recording.

That's what they tell us.

No, that isn't what they... I've read their brief carefully.

That may be what they tell you now, Your Honor, but what they tell you...

Anything on an MP3 file go through the Napster system?

Or does it go user -to -user on a direct basis?

It doesn't go through the Napster system. They don't even have their

fingerprints. You can't find them on those things, can you?

The fingerprints you can't find because Napster doesn't want you... They don't

touch them.

They never have anything to do with it.

My fellow in New Jersey and my fellow in Guam will have a direct connection on

the Internet, right? And that's how the music is transmitted. It is transmitted

on the Internet, and we are not trying to stop the Internet, certainly.

All right.

That hearing ended about a half an hour ago here in San Francisco. No ruling

from the court is expected at least for another month, but after that ruling

does come down, many observers believe that the final word on Napster will

eventually and ultimately end up coming from the U .S. Supreme Court.

I've worked on several presidential campaigns, and I would say that the

that Sean and Hank had on them was...

just as much as it would be on a presidential candidate, with the

being that they weren't asking for it, either one of them.

Ladies and gentlemen, this is a very exciting day today for Napster. One of

elements of this alliance is that Napster will develop something like a

membership -based service.

Middlehop was a very genuine guy.

He had great energy and he really believed in it and was trying to do the

thing. He took a big risk in getting involved, especially given the

that Bertelsmann had with BMG.

That being said, it was an incredibly complex deal with a ton of money.

None of them, really none of them, did get the conviction or, let me say, did

learn that the business model and still existing business model of the music

industry isn't working anymore.

And I think this was clear in 2000, 2001, when you saw how people did use

Netflix. I think this would have changed the world much more than Facebook is

doing today.

Just the fact that this huge German media conglomerate was coming in and

to be throwing some money on it, you know, meant that I might be working for

few more months, so I felt okay about that.

I think that that mindset was the company's mindset.

It was a survival game at that point. It seemed wrong. Everything seemed wrong.

There was a line crossed where they were no longer actually trying to make a

cool product. We were just trying to survive, period. Whatever it was, we

just trying to find a way to survive.

We developed a new business model for membership -based service going forward

and future.

And we give money to NEPS to develop that model, to implement it, and then

going to join them. And we all hope that we're going to work jointly on this to

make that happen as soon as possible. That's why Sean has to get back to

California to get his cap on and start decoding again.

Couldn't you preclude a search under certain song names? And if you can do

and you're not doing that, doesn't that suggest that your efforts to stop the

trading of...

Copyright of music is disingenuous? No, because we have not been able ever to

work anything out with the plaintiffs. They have simply refused to talk,

to cooperate in any effort to solve this problem.

How do we do that? No, because you're never going to come up with a search

that's going to satisfy them.

We had an entire row of computers dedicated to attempts who just sat

coming up with variations on artist names that needed to be blocked.

So Madonna was one end.

So it was basically this whack -a -mole game.

Blockage is bad!

Motherfucking alias names like Limp Hash Brown, InSuck, Flu Fighters, Papa

Crotch, Dick Seed Chicks, and Crotch Box 20.

When the effort went from, you know, trying to make it a successful service

make the product better to trying to, uh...

by this being a whack -a -mole. It was kind of, you know, foreshadowing of what

was to come. That was the beginning of the end. Yeah.

Hopefully we'll be able to show to them that we do support Napster, we do

believe in their cause, and that basically the music's out there. I mean,

can't erase all the MP3s that I have and all the MP3s that tons and millions and

millions of people have.

Dedicated online music fans may be planning to spend a hard day's night at

computers downloading free songs through the popular Napster website.

A San Francisco federal court made it clear today the times they are changing.

It's been a somber week for fans of copyright infringement. As a federal

judge ordered popular file -sharing service Napster to remove millions of

that are owned by the major record labels.

Record companies fought tooth and nail over the issue.

And the courts agreed it's the record companies who hold the patent on

musicians out of money.

American intellectual property is our nation's greatest trade asset.

We cannot stand idly by as our nation's assets are in jeopardy or dismissed by

those who would use them for their own enrichment.

That's why today's decision is so especially important.

Now Napster can take a nap.

I'd like to add a word or two about the future of Napster.

As many of you know, we've been developing a Napster service that offers

additional benefits to members of the community and importantly makes payments

to artists.

I'm focused on building this better service and I still hope to have it in

this year.

The new technologies we are developing are amazing.

I hope that by further review or by agreement with the record companies, we

find a way to share them with the community.

I would also like to thank everyone for being so supportive.

Napster works because people who love music share and participate.

Along the way, many people have said it would never work.

We've heard that we couldn't survive before when we had 700 ,000 members and

when we had 17 million members.

Today we have more than 50 million members, and we'll find a way to keep

community growing.

If we work together, I know this will succeed.

Thanks.

The tipping point for my romance was after we were injuncted and then

and then reinjuncted.

That was it.

It was like being broken up with your favorite girlfriend and getting

heartbroken and then her coming back to you and your heart just like, okay,

maybe I can look past the wound.

And nope, we reject you again. I'm out. Peace.

It's like, ah, this sucks.

That was the point at which I realized that the cool of

what we had done was pretty much over.

You know, Ritter left because of all this, and Parker was shown the door, and

Sean Fanning slowly became detached.

He would just sit at his

desk. and strum his guitar and if you went up to him to ask him a question or

talk to him he would just keep strumming his guitar and he'd look at you

he'd look at you with like some curiosity as if you're like an alien

but he would just keep strumming his guitar and i

think that

That was his way of dealing with this. At that sort of pivotal, pivotal sort of

moment where it looked like things weren't going well, Fanning was on the

of Time magazine, which is an American culture like the peak of public

recognition. And it all felt sort of false.

I think Fanning probably felt the same way. It's like he was going through the

motions and doing what he had to do.

and doing a huge amount of press, but you could tell that the company was

in glued.

Right, well, what's interesting is... Should I just start?

I'm so sorry. Okay, okay.

What's interesting is that that's not going to change. We're going to maintain

Napster in its current form. I mean, well, can I start over again? I'm sorry.

keep mixing up my words.

Those days in San Mateo...

That was our youth. We had a lot of energy.

We were excited. We were like a little kid running around.

And then we became teenagers.

And then the lawsuit happened and we start going into

adulthood.

And we get these adult figures coming in.

And we start to get older.

And by the time...

By the time it had gotten close to the end, it was like, we're old, we're

fragile. It's the end of days, so we're just letting the time pass.

That's what it was like.

And I can remember right up until the day that I was fired thinking, there

be a shot, there must, there's just no way all this can just go away.

And then I remember being out the other end of the company and still talking to

the folks that were there. And you'd keep hearing about, you know, the next

Bertelsmann loan, the next label deal discussions, and, you know, not once

you're removed from it, you're just like, oh, you poor thing. Like, this is

going to happen.

But still, maybe they're right. And I don't, that, it's amazing to me now how

there was not a chance in hell.

that any agreement was going to be come to. There was a very long, slow decline

of Napster at the end and ultimately getting shut down when the filtering was

ineffective because the technology wasn't there yet.

98 -point -something percent wasn't good enough.

I called Ali Aydar and I said, you know, we need to turn off the file sharing

here.

we've never talked about this, but can you do it? And he said, yeah, I can do

it. And he left the room and he came back in a couple hours and said, I

everything off, but it's still working.

And we found out that there were a bunch of OpenNAP servers out there that were

not controlled by the company that other people had implemented and were around

the world. So the software client was still working, but the company had

to do with it.

Today,

Napster filed for bankruptcy.

Oh man, we had to have raised north of $100 million.

I don't think any of us know where that went.

It's such a common question from people, which is sort of how do you make money

in investment versus actually making money from the service. But the idea is

that we're not going to generate any revenue until we can actually pay

And it's hard to actually think of a startup that's ever raised.

that amount of money that went away as quickly.

Like, usually if you raise $100 million in a startup, like, you've got about

five years of runway.

Like, you've got a ton of runway.

The thing is, $80 million of it came from Bertelsmann.

Yeah.

$30 million probably went back to Bertelsmann using all their other

right? Yeah. The B was $15.

We gave $1 million to Dr. Dre and $1 million to Metallica.

I have no... I mean, it's just mind -boggling to me. I mean, in any

calculation, you'd say the paid -in capital is, let's say, $115 million, and

then the company did so badly that it went to zero, and so the money lost was

$115 million.

But wait, there's more.

In Napster's case, you'd have to now tally the settlement dollars that have

flowed out of Bertelsmann and everyone else and Hummer.

You're talking about a $500 million sinkhole.

perhaps more, that went on for years after the asset was sold out of Chapter

bankruptcy. We went to the... Good job.

Yeah, so thank you.

Wow, man. I promised I wouldn't, but yeah, and that's Sean's fault for the

record. No.

Kind of crazy.

But we went to, we took this awkward drive like a year, I think, down to the

airport. Oh.

Oh.

All right.

We thought about going to the Supreme Court. We got advice from the lawyers

the timing wasn't right, that we should wait until there was more decision in

the trial.

Do you regret that?

I regret it now, yeah.

I would have liked to have taken the Supreme Court. I would have liked to

had a jury trial. You know, we never had a jury trial.

What happened yesterday is the effective shutdown of Napster.

And what that's going to do is give birth to a thousand of Napster spawn.

And these children are going to be much better bred.

So once the record companies went after Napster, did that end this kind of

illegal music sharing, this pirated music sharing on the Internet?

Actually, not at all. There's a theory out there that...

Piracy will be eradicated and no one will ever share a music file.

But that's really a pipe dream for really getting everything, getting the

Internet under control. And what we've seen from piracy is that after Napster,

people went to other music sharing software such as LimeWire or Morpheus,

Nutella or Music City, things like that.

A bomb went off and nobody knew what the hell was happening.

The cat wasn't going back in the bag.

I don't care how many people we sued.

I don't care how effective or ineffective the RIAA was with certain

it. It wasn't going back.

People are going to still download for free. It's free.

It's free.

It's free. It's wrong, but it's free. If there's an undernet.

of piracy. That's something that our industry has always had to live with.

idea is to keep commercial pirates out of the marketplace so that legitimate

commerce can flourish.

They were saying it's just a matter of copyright is going to be fixed and

maintained by some combination of enforcement and education.

And I said, well, this sounds a lot like the war on some drugs, guys. I mean, I

don't think this is going to work.

That certainly didn't. File sharing services allow for the illegal

of copyrighted works, which can get you into trouble in a hurry. Many parents

may be surprised to learn those consequences can include lawsuits with

and legal fees costing thousands of dollars.

Downloading or sharing music without permission is not okay. I don't think

people are stealing music.

I think the record companies are not adjusting to technology.

But rather than adjust and figure out how to work with it and use it, they

fought it.

And they started to sue their customers and everything. And I think that

alienated them from both the public and the artist.

Can you explain again, either you or Russell, what, if anything, you're doing

catch thieves?

Well, we have tried to be, and I think have succeeded in being, as responsible

in this space towards individual users as anyone could hope to expect from the

music industry. We have historically been very...

tolerant of downloaders, but very aggressive against the uploaders. We

tried to be focused on distribution sites with significant amounts of music.

don't think this is about punishing individuals.

Well, they did. They sued over 18 ,000 regular old normal people, and average

settlement size was about $4 ,000 for people who could hardly afford $4 ,000.

I don't think that was a good move.

particularly from a public relations perspective.

You don't get your market to like you by suing the shit out of them.

I mean, what they've done is to turn an entire generation of kids into

electronic Hezbollah who hate them for ideological reasons.

I mean, I know a lot of people that won't buy music, period, because they

want to enrich those people.

And they didn't have to have it like that.

Good, hardworking people all of a sudden got laid off as major music industries,

entire floors were turning their lights off. I remember, you know, people have

been working so hard doing such great work. There's no longer need for them

because the market shrinking because these people kind of caved in on their

greed. Their bosses, their CEOs, their rock star A &R people all of a sudden

realize they've been shoveling a bunch of mediocre crap to a bunch of people

they devalued. But now the people have a choice.

they can cherry -pick the records.

They now can not have to take it from you for $22 for a CD. They can now spend

three bucks on the three songs that got made into videos.

And everything came loose.

Well, it's a perfect storm again. It's three sides, really, when you really

think about it. Free is a pretty big component.

The corporatization of America and the world in creative companies,

right?

and the downsizing of the structure of the music company.

The whole crux of the argument, I guess, is that there's great things about

modern technology and music, and there's things that shit, and there's great

things about some of the pathways that had to go because the people demanded

Therein lies the problem.

I think we dropped the ball, you know.

But I don't see why we can't, you know, recapture it to some degree. But

it'll never be like it was where we controlled everything.

Napster ended up, unfortunately, in this Chapter 11, later on Chapter 7 process.

And then people like Steve Jobs, they were so smart and business smart that

said, where is talent? Okay, we hire the Napster people.

iTunes in the U .S. has an 84 % market share last month for all legally

downloaded music.

It's amazing.

I don't think you can point to any digital music service that exists now

doesn't tip its hat in some way to Napster. And I can tell you that the

version of iTunes that was released had shocking similarity to the UI that

Napster was using. And I don't think that was accidental.

When we finally, we made no money at Napster.

I was left in a pretty significant legal debt,

which was, to the extent that Napster was like Napster University, was

not that different from the college debt that most kids would have at that age,

sort of comparable in scale.

But I had this legal debt, and Fanning wasn't that much better off. After

Napster was shut down, Sean Fanning and I co -founded a company called Snowcap,

which was Sean's attempt to rectify the rights issues.

Having been a bit disillusioned with how the case had gone and the way that the

conversation or the debate had operated at such a superficial level, I had

jumped into this idea of wanting to create an independent...

copyright database where any rights holder, independent or otherwise, could

register their work. And then the idea was that everything that was unclaimed

would be freely shareable until somebody came in and said, this is mine.

The goal being to try to work back towards a world where all this

diverse... music would be available.

And it was nice and made sense in my head, but the actual act of trying to

everyone to buy into something like this as an intermediary was an incredibly

challenging task.

What happened was there was a lot of excitement and there was a lot of

in Snowcap until Steve Jobs came up with his deals in the

iTunes store.

Not because no cap wasn't a great idea, but because the industry was not

prepared. They felt much safer with one retailer.

And once that happened, you could just see the air go out of the tires.

I was so burnt out. Actually, that was one of the hardest times for me.

And then, you know, I just got involved in gaming because I enjoyed it and

eventually started a company related to gaming and sold it to EA.

I'm very fond of both of them personally, and I think Sean Fanning is

coming through it reasonably well.

I think Sean Parker is having a difficult time in ways that, you know, I

too. I mean, first of all, he was crushed, and then he came up with

else that was great, which was Plaxo, and he never had the opportunity to

demonstrate that greatness, and he was crushed again.

And then he attached himself to Facebook and has made an absurd amount of money.

He actually came up with, I think, some of the most important ideas that drove

the success of Facebook. I mean, while he was living in my apartment. I was

there. I watched it happen.

And now he's genuinely trying to reinvent the music business with

Spotify.

It seems incredibly archaic that we've come this far and we've finally started

to figure out that there's models like Spotify, models like iTunes, that work,

that are beginning to restore growth to this industry.

And even as all of this is starting to click, you still have these reactionary

lawmakers who think they can legislate the problem away, that they can pass a

law that's somehow going to solve piracy. But haven't they learned

watching the last 10 years of...

peer -to -peer distribution that's not connected to any particular IP address.

It's totally decentralized.

I think that what we've seen in the last decade is that this war, which has

basically criminalized a whole generation, is culture's Vietnam.

It's been a complete disaster.

It has not achieved its objective, which should be to pay artists.

The only people who have gotten paid in this war are the lawyers who have been

waging ever -expanding legal actions against people using culture the way

technology seems to encourage them to use it. There's always this idea that

format and the style of the way people access culture is going to destroy

industry. So people tend to get psychologically bugged out, completely

aware that the change underneath their feet is the way we live. All right, here

we go.

We live in a very new world. You know, technology in the last 10 years has

turned the world on its head.

Art and artists are going to start revolutions in countries. We've already

it in the year of 2011.

Art and artists are going to change governments.

They're going to change the direction of rivers.

And it's going to be done through...

Flash mobs file sharing. People voulé -vouing halfway across the world in a

microsecond on their handheld device.

Trading music, trading files.

This spread of information and music, it makes me hopeful and it makes me sleep

well at night. And that the more the music flows, the more the information

flows, the more Wiki keeps leaking, the more governments are going to be hard

-pressed to be more transparent.

Thank you very much.

The main thing here is for people to recognize that

what we're doing is creating the foundations of the future in a very

way. I mean, we're building the future that we all might want

or might not want, depending on our current vested interests.

And I think that it takes a really crummy ancestor to want to maintain his

current business model at the expense of his descendants' ability to

understand the world around them.

And if you really want to figure out which side you're on here, ask yourself,

you know, what's going to make you a better ancestor?

The journey was like a theme park ride or something. It was like Pirates of the

Caribbean. People just like, you know, weird, scary people popping up at you.

And then you're kind of moving through this thing. You're not really in

It's like we're in like a little car with no engine at the top of a giant

We got all the momentum and inertia at the start, and the rest of it was just

trying to survive the downhill slope.

Which analogy do you like better, the drunk skiing or the Pirates of the

Caribbean?

I don't know. If we found a good analogy for that experience, I'd be impressed.

It's sort of... I get to be Johnny Depp.

All right.

Who else was in that movie?

You know, I had something I really wanted to say.

I just fucked that all up. No, but I don't even know if it was important.

If I'd known what it was actually going to take to solve those problems back

then, I probably never would have done it.

It took that naivete that maybe these were problems we were capable of solving

at that time to even get up in the morning and go to work.

You're born into the world thinking that you're entering an industry that

people understand or you're entering a world that's been seen before.

And seldom do you sort of wake up to the realization that you're

the...

that you're the explorer.

In most cases, you assume that there is some history to what you're doing,

especially when you're young. When you're that age and you find yourself in

new industry that's new to you, you assume there must be someone out there

has the answers. And then you wake up and realize the answers are being

You are the precedent.

Even if Napster shut down, the idea itself is out there. People understand

People enjoy it.

So to me, I mean, that was absolutely worth all of the trouble along the way.

think the technology itself is pretty powerful, and people have shown that

love it.

So I think it will always exist, regardless of how it evolves or how it

Set the world on fire.

I just want to start a

flame in your heart.

In my heart I have but one desire.

And that one is you, no other will do.

I've lost all ambition for worldly acclaim.

I just want to be the one you love.

And with your admission that you feel the same.

I'll have reached the goal I'm dreaming of. Believe me, I

don't want to set the world on fire.

I just want to start a flame

in you.

I love you too much.

I just want to start a great big flame down in

your heart.

You see, I just want to start

a flame in your heart.

Bye.

Bye.

What the fu -