If you’re in your early twenties or younger,
Napster probably looks just like another music app - another competitor for Spotify or Apple Music.
And if you're in your early thirties, or older, you probably didn't know that
Napster still existed. But of course, it is nothing like it was back in 1999.
Back then, Napster was wild and it blew the horns of change for the music industry.
With the Internet opening up to the world in the nineties, it was bound to happen.
Music was just another industry that was getting completely disrupted by the dot
com craziness. We have a video on that by the way.
And Napster was revolutionary in its very essence. It was the first time that the concept
of Peer-to-Peer networking, or P2P, was used massively. P2P computing is the infrastructure
used today in things like blockchain, and cryptocurrency - but let's not get sidetracked.
Let's keep the nostalgic vibe and remember Napster,
the app that changed music distribution for good. Maybe some of you will learn
something about why listening to music today is so easy. Others will remember the times
of rocking a Discman with a collection of custom MP3 CDs, with 200 tracks on each.
Let's talk about Napster in this Company Forensics.
The nineties was a booming time for the music record labels—the golden era of single hits
and CDs. Music record sales were at an all-time high in 1999, back when you had to buy a full
album just to get that one catchy song that was everywhere, and you needed to have it.
You would have to go out to the store, browse shelves with hundreds of CDs, pick up the one
with the hit you wanted, pay around fifteen bucks for it, and take it back home to your CD player.
The other ten songs on the album, who knows, you may or may not have liked them.
You could store the music on your computer by uploading the CD to your hard drive,
but audio files weren't easy to share or do anything else with other than listening to them.
That was until some good folks from the Fraunhofer Society in Germany developed a new
digital file format for optimized compression, allowing more data to be transferred easier.
That new file format was called MP3. It reduced the number of components on music files that were
beyond most humans' hearing capabilities. By doing so, MP3 made music files lighter,
and easier to upload and download, giving music fans an unprecedented superpower.
This new way of efficiently transferring music files,
combined with the booming Internet technology connecting the world, was the perfect storm.
It was all that a couple of entrepreneurs named Sean/Shawn needed to create Napster.
Napster came out in 1999, and in a matter of weeks,
it amassed tens of millions of passionate users.
People got obsessed with it, and music flowed freely through the web like water through a river.
For them, distributing music in physical devices, keeping it in warehouses, and selling it in brick
and mortar stores was all becoming obsolete. And they were right. So, they stored music on
computers and figured out how to simplify the transfer of files across the Internet.
Napster was revolutionary because it allowed users to connect directly
and share their music without a middle man. And most importantly, it was free.
It was the first time that a Peer-to-Peer network was used massively to connect
millions of users that were all stoked to share their music.
In a P2P network, peers make a portion of their resources - like their computer processing power,
bandwidth, or disk storage - directly available to other network participants.
Cryptocurrencies and the blockchain technology that is disrupting the world today are
P2P-based. And it was Napster that brought this revolution to the world of music first.
Users essentially made part of the hard disk in their computers available to
Napster to allow the app to extract and install music files between users. So,
you could make your music library available on Napster for others to download and vice-versa.
People had never been able to share music like that. They no longer depended on the radio
or the label companies to discover and get new music. It became a symbol of digital freedom
that eventually got to other media industries like books and movies.
Instead of paying $15 for an album to get about ten songs,
people now could download hundreds of them for free in a short time. It was mind-blowing.
Did you ever put together a collection of MP3’s
and burn them on a CD so you could listen to them on your Discman?
Let us know in the comments. Go on. Tell us that you're old without telling us that you're old.
Oh yea, Napster turned us all into pirates and got us all thinking that music was meant to be
free. But, of course, it wasn't. As CD sales started falling, the industry took notice.
All stories have two sides, and not everyone loved Napster back then.
The big record labels definitely didn't love it. Sony, Warner, Universal,
and others were contemplating how the music from their records was flowing freely on the Internet.
They didn't care about understanding the new technology or the social phenomenon behind
it. The only thing they cared about was their sales, and they were declining significantly
thanks to Napster. And lower CD sales also affected artists, big names like Metallica,
Britney Spears, Dr. Dre, and many more. So, they all went to war with Napster.
Only a few months after being released, and turning into a cultural revolution,
Napster was going through deadly legal battles against enormous industry forces.
Metallica was among the firsts to sue them when they found out that some of
their unreleased music had leaked on Napster and was already on the radio.
Many followed suit, and soon an army of artists, and recording companies,
filed lawsuits against Napster through the Recording Industry Association of America
(RIAA) on the grounds of copyright infringement.
But the public felt like they were just greedy and
didn't understand the new era of music distribution. And, in a way,
it was true. Record labels and artists were fighting a losing battle against the new ways.
Still, they won that first legal fight, and by mid-2001,
Napster was forced to shut down its entire network. The company agreed to pay music creators
and copyright owners a $26 million settlement for unauthorized music uses. The end was near.
By 2002, Napster filed for Chapter 11 bankruptcy and was liquidated.
But the revolution was already underway, and music fans were not going back to the old ways.
Many Napster clones started popping up. Morpheus, Kazaa,
BearShare, Limewire, as well as torrent sites. Torrents are another form of P2P networking.
So, the witch hunt was far from over. Record labels campaigned against piracy on all
fronts possible. They went as far as chasing individuals who had downloaded music illegally.
Yeah, they filed thousands of lawsuits against teenagers,
grandmas, and just regular people, suing them for thousands of dollars.
All this just made people hate them even more,
and it was evident that the music records industry was going downhill. They eventually
realized they were going against the current and started getting into the digital world,
coming up with their digital music stores. But people didn't want anything from them.
And there was also friction between the tech world and the music industry. Ones blamed
for facilitating piracy, and the others accused of denying new business models.
One person came up with the solution, a household name that everyone knows - Steve Jobs. And he did
it the right way. In late 2002, he went to the RIAA and pitched them the iTunes store,
a digital music store like never seen before.
Of course, the iTunes store was a success. For the first time, people could pay $0.99 for a song
instead of buying an entire album or downloading it illegally. For the record labels, it was
better than piracy but still meant significant losses. But they had no choice at that point.
Online music stores were some in-between stage before streaming services came up and proved to
be the best solution for everyone. The first music streaming service that broke through was Spotify,
released in 2008. It started a new era of media distribution.
Soon, companies like Netflix, in another industry that was
being hit hard by piracy - the movie industry, replicated the streaming model.
Record companies and music stars had to come to terms with earning much less money from music
sales. Royalties in the streaming business are counted by pennies and divided into many parts.
Unlike in the nineties, artists today don't make most of their money with music sales.
They have to create a whole business ecosystem around their work. That means tours, merchandise,
advertising, sponsorships, and anything else they can come up with to monetize their work.
And what about Napster? After it was liquidated, its logo and brand were sold and went from
one company to another, going through some transformations but keeping its iconic name.
Back in 2008, Best Buy had purchased Napster.
After that, it was merged with Rhapsody, an online music store and subscription service.
Finally, it was sold to a virtual reality concerts company called MelodyVR not long ago in 2020.
But it was never the same. The real Napster had a rather short life,
but it was enough to light a revolution in the music industry. It empowered music
fans and made music available in ways that was never imagined before 1999. Somehow,
Napster sacrificed itself for a new era of consuming music.
Did you ever use Napster? What were you listening to back in the 2000s? We'd love to hear from you;
let us know down below in the comments. Like our videos? Hit that subscribe button
and feed the mighty YouTube algorithm and we will see you next time on Company Forensics.