The Rise and Fall of Napster

It's 1998 inside a dorm room at Northeastern University in Boston.

18-year-old Sean Fanning taps away feverishly at his PC keyboard, his pale face illuminated by a glowing screen.

Sean, an amateur computer programmer, is working on something that's been taking up more and more of his time lately, an idea for a new piece of software that allows users to share digital music files for free.

Sean takes a slurp from his soda cup.

His dorm is cluttered with stacks of unread books and piles of dirty clothes.

Ever since he started building the software, Sean's studies, as well as his personal hygiene, have fallen by the wayside.

Deciding to take a break from coding, Sean instead logs into an internet chat room.

This is where Sean feels most comfortable, among his fellow computer wizards.

He types out a message outlining his idea for the music sharing platform.

He explains that right now, pulling MP3 files off the internet is time-consuming and unreliable.

If people could share their digital music libraries, users would have immediate access to millions of songs without having to buy CDs.

But to Sean's disappointment, nobody in the chat room seems to share his vision, except for one individual.

A message appears on Sean's screen.

It's from 19-year-old Sean Parker, a precocious young tech entrepreneur from California.

Parker likes Sean's idea, and the two teenagers make plans to collaborate.

By the time Sean logs out of the chat room, it's nearly 2 a.m.

He yawns, then takes another sip of soda and gets back to writing code.

In the late 1990s, the music business is booming.

Profits from CD sales are stratospheric, and industry executives are expecting billions more to come.

But when recent high school graduates Sean Fanning and Sean Parker introduced Napster, everything will change.

Within a year, the platform will have tens of millions of users, and the traditional music industry will be left reeling, as fans are suddenly able to digitally access nearly every song ever recorded free of charge.

But the record companies will soon hit back, accusing Napster of violating copyright laws and dragging the platform's founders through a protracted legal battle that will ultimately lead to Napster's court-mandated closure on July 11, 2001.

From Noiser and Airship, I'm Lindsay Graham, and this is History Daily.

History is made every day.

On this podcast, every day, we tell the true stories of the people and events that shaped our world.

Today is July 11th, 2001, the rise and fall of Napster.

It's early 2000 in San Mateo, California, over a year before Napster will be shut down.

Inside a small office above a bank, Sean Fanning and Sean Parker, the founders of Napster Incorporated, stare at a whiteboard, considering the dizzying figures scrawled across it.

These numbers represent how many people in the last six months have installed Napster, a peer-to-peer file sharing platform, and are currently using it to download music from other people's computers.

Today, that number is around 80 million.

Sean Fanning scratches his shaved head, his eyes wide with incredulity.

Napster was his brainchild, an idea he came up with in his college dorm.

Now, it's reshaping the music industry, fundamentally changing the way people consume songs.

Sean didn't expect his creation to make such an immediate impact, though he's not surprised by Napster's popularity.

The average college student can't afford to pay $17 for a CD to listen to their favorite artist's new album.

Napster cuts the recording companies and artists out completely by allowing people to download songs for free.

After launching Napster last June, Sean dropped out of college and moved to California, where Parker was raising seed capital from investors.

The pair hired friends from the internet as staff and opened Napster headquarters here in the San Francisco Bay Area in the heart of Silicon Valley.

These past few months have been difficult, but thrilling.

The young team of programmers often work through the night, sleeping under their desks if they have to, just to keep the servers running.

Waste paper baskets overflow with Red Bull cans, and a boombox blares hip hop to ensure the team remains alert.

With 80 million users already, Napster is fast becoming one of the most successful web applications ever invented, and the greatest threat the record industry has ever known.

In the 12 months since Napster's launch, the big record labels recorded their first profit decline in decades.

At the whiteboard, Sean looks over at Parker, who grins back at him with a twinkle in his eye.

After marveling at their initial success, the pair discuss next steps.

They both agree that while disrupting the music industry is entertaining, it could get them into trouble.

As soon as they wake up to the dangers of digital distribution, record label bosses will start looking for ways to shut Napster down.

They want to survive, Sean and Parker will need to find a way to collaborate with labels and artists.

So the two founders appeal to their first CEO, venture capitalist, Eileen Richardson.

During a meeting that afternoon, Eileen makes a suggestion.

What if they agreed to charge a rate of $1 per song, offering the record labels a cut of the proceeds?

This would allow customers to pick and choose individual songs they like without having to purchase an entire album.

And without any of the overheads involved in manufacturing CDs, the record labels would quickly turn a profit.

Sean likes the idea and points out that this business model would allow smaller, less well-known artists to make money from digital downloads.

That's what Napster is all about, bringing artists and fans closer together by making the music industry more accessible.

But after reaching out to the record companies, the Napster board receives a string of rebuffs.

Industry executives fear that Napster's digital distribution model will destroy the CD business.

And because artists' royalties come exclusively through CD sales, the labels would have to rewrite all existing contracts, a process that could take years.

But the Napster team doesn't have time to dwell on the record company's reservations.

They're too busy growing their platform, gaining more subscribers, building their database of songs, and turning Napster into a cultural phenomenon.

Music journalists across the world soon proclaim the arrival of a new digital revolution, with Sean featuring on the cover of Time Magazine beneath the headline, What's Next for Napster?

It's a question that Sean and his team are asking themselves daily, because amidst all the excitement, dark clouds are gathering overhead.

Powerful figures in the music industry are decrying Napster's founders as crooks, robbing the music industry and violating copyright law in the process.

One representative from a major label will declare Napster the most insidious website I've ever seen.

For though many will see Napster as a force for good, others will see it as a vehicle for piracy, facilitating the distribution of songs without the artist's permission.

And these critics won't rest until this revolutionary new platform is taken down.

It's January 2000 inside a conference room in the south of France, just over a year before Napster's downfall.

Alison Wenham, head of the Association of Independent Music, is attending an annual trade fair for the recording industry.

She sips bottled water as major label bosses discuss how digital music distribution is threatening the future of their business.

As she listens, it dawns on Alison that unless they get with the times, the record company she represents could find themselves left behind by history, because ever since Napster was launched six months ago, the platform success has plunged the recording industry into a tailspin of panic.

With profits falling for the first time in decades, it's no surprise that at this year's trade fair, the majority of the conversations Alison's had revolve around Napster.

But what has become clear is that most senior executives don't understand the significance of this new technology and how it represents the future of music.

All they want to do is shut it down.

The trouble is nobody seems to know how.

At the trade fair, one major label boss jumps to his feet, his face flushed with indignation.

He announces that he's come up with a solution.

They should ban the internet.

By the time Alison leaves the conference, her head is swimming.

She knows the Recording Industry Association of America has already sued Napster, claiming the platform has allowed users to violate copyright law.

But Alison, who represents several smaller, independent record labels, doesn't think fighting Napster is the right approach.

In her mind, Napster has started something that cannot be undone.

Either the record companies ride the wave of advancing technology or get washed away in the flood.

In the coming months, Alison and her colleagues at the Association of Independent Music try to negotiate a deal with Napster.

Napster's representatives explain the new business model they're working on, charging users a flat rate subscription fee, a cut of which they would offer to labels and artists.

Alison outlines what they would expect in advances and royalties, and the two parties eventually reach an agreement.

By the time Alison leaves the final meeting, she feels pleased to have joined the digital revolution.

But while some in the industry try to make deals with Napster, others are continuing to attack.

Until now, Napster's founders have managed to keep their legal struggles out of the mainstream media.

But all that changes in the spring of 2000, when Lars Ulrich, the drummer for popular heavy metal group Metallica, receives a call from his band manager.

As Lars listens, his expression changes from one of mild confusion to one of fury.

Apparently, while listening to the radio that afternoon, the manager heard a song he recognized.

It was a single recently recorded by Metallica, only it hasn't been released yet.

Someone had leaked it, and now it's playing on radio stations across the country.

Metallica's lawyer does some digging and traces the leaked song back to the music sharing platform, Napster.

The more Lars and his bandmates learn about Napster, the more furious they become.

By allowing users to share and download songs for free without the artist's express permission or any compensation, Napster is effectively trafficking stolen goods.

So in April, Metallica sues.

Lars and his bandmates publish a press release stating, It is sickening to know that our art is being traded like a commodity rather than the art that it is.

From a business standpoint, this is about piracy, taking something that doesn't belong to you.

Metallica's court case rumbles on for months, and soon the band is joined in their lawsuit by another aggrieved artist, the rapper Dr.

Dre, whose songs are also being downloaded by thousands of Napster users.

With such high-profile musicians openly criticizing the platform, Napster faces a deluge of negative press.

The case against them becomes an ideological struggle about music in the digital age.

To many, it isn't clear who holds the moral high ground.

Napster's lawyers argue that the platform is only trying to make music freely accessible to those who can't afford it, while the legal teams representing Metallica and Dr.

Dre argue that their clients' copyrights have been violated, and they deserve compensation.

Ultimately, a district judge in San Francisco will side with the artists, finding Napster guilty.

Napster will be ordered to remove all songs by Metallica and Dr.

Dre from their service.

But then another lawsuit brought against Napster by the Recording Industry Association of America will conclude in February 2001, with Napster required to implement more stringent measures to crack down on copyright infringement or face permanent closure.

But Napster will appeal the verdict, leading to one final confrontation in court where Napster's fate and that of music streaming in the digital age will be decided.

It's July 11th, 2001.

Hank Barry, Napster's CEO, sits stiffly inside a crowded courtroom in San Francisco, looking down on him as Judge Marilyn Patel, her brow furrowed with disapproval.

As the Prosecution's Council reads their statement, Hank slumps lower in his seat, fearing that this trial is not going his way.

Napster has been embroiled in legal struggles since the start.

The first challenge was brought by the Recording Industry Association of America, who represented 18 different record companies accusing Napster of copyright infringement.

Meanwhile, a joint lawsuit filed by Metallica and Dr.

Dre was closed earlier this year, and Napster was forced to remove those artists' songs from their site.

But ultimately, it's the ongoing court battle with Recording Industry Association that has come back to haunt Napster most.

Back in February, Judge Patel ordered Napster to shut down or implement more stringent measures to crack down on copyright infringement.

Since then, Napster has temporarily suspended its servers while programmers have been developing new filtering technology.

But Napster also returned to court to appeal the verdict.

Now in the courtroom, it's Hank's time to speak, and he explains to Judge Patel that Napster's innovative filtering technology is 99.4% reliable at cracking down on the distribution of copyrighted material.

But the judge's frown only deepens.

She says that unless they can promise 100% reliability, her verdict is the same.

Napster will have to cease operations.

Hank explains they cannot guarantee complete reliability, it just isn't possible.

And immediately murmurs of vindication rise from the prosecution's bench.

They know they've won.

Sure enough, Judge Patel rules in favor of the recording industry yet again, ordering Napster to shut down its entire network immediately.

Napster is also forced to pay the record company's $26 million for the use of copyrighted material and within a year, Napster will file for bankruptcy.

Sean Fanning and Sean Parker, Napster's co-founders, will leave the failed project disheartened but not discouraged.

Both will go on to have successful careers as tech entrepreneurs, with Parker becoming an early investor in a new music streaming site called Spotify, one which will go on to enjoy success that Napster could never achieve.

Following Napster's demise, many commentators will argue that the innovative file-sharing platform simply came too early, that the world wasn't yet ready for the service it offered.

Because unable to keep up with advancing technology in the digital age, the record companies decided to take Napster down rather than move with the times.

These days, the controversy over free music streaming rumbles on.

Multiple artists have boycotted digital streaming platforms over how little they pay, no doubt pining for an earlier era where record sales kept the music industry booming.

But that era is over despite the efforts of the recording industry, who only succeeded in delaying the inevitable when Napster was ordered to shut down on July 11, 2001.

Next, on History Daily, July 12, 1984, US.

Democratic presidential candidate Walter F.

Mondale puts forward Geraldine Ferraro as his running mate, making her the nation's first woman to run on a major party national ticket.

From Noiser and Airship, this is History Daily, hosted, edited and executive produced by me, Lindsay Graham.

Audio editing by Emily Burke.

Sound design by Misha Stanton.

Music by Lindsay Graham.

This episode is written and researched by Joe Viner.

Executive producers are Alexandra Curry-Buckner for Airship and Pascal Hughes for Noiser.