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Hey! Today’s episode is a deep dive into one of the most influential platforms in the history of music, Napster. The file sharing platform earned more media attention than it ever deserved, and got a lot of lawyers paid in the process.
I’m joined by friend of the pod, Tati Cirisano from MIDiA Research. We dive deep into the company, its founders, and how it shaped the next few decades. You can listen to the full episode here. Here are a few highlights from our chat.
The company without a real business
Napster never had a business model. The only revenue that Shawn Fanning and Sean Parker’s company made from 1999 to 2001 was from t-shirt sales. The peer-to-peer mp3 file-sharing platform had no defensibility. Once Napster shut its doors, several copycats took its spot with even less of a business (and even more viruses!)
But even if Napster charged the $15 per month that many of its users claimed they were willing to pay and had the music industry’s blessing, it likely would have failed.
The late 90s were the peak of the dot-com bubble. The era is known for epic failures like Webvan and Pets.com, but Napster suffered, too. Despite the rising interest rates and global recession, these companies were ahead of their time.
Remember how long it took to download a song? Now, imagine buying groceries online in 1999. Broadband access and mobile connectivity were years away. The target consumer was still on a dial-up internet connection, and AOL was still sending them endless CDs for 30 free hours of a free trial.
Napster inspired a revolution, but the real impact was still on its way.
bigger factors that led to the industry’s decline
The decline of CD sales was inevitable, even without Napster.
A large portion of those peak CDs were reissued albums. People bought CDs of what they already owned in cassette and vinyl. But there’s only one chance to reissue a classic as “the first time ever on compact disc!” The industry ran out of albums to reissue as CDs, and the biggest retailers started to push back on price.
Napster peaked at 80 million registered users, but how many were active? Even if most of them were, it pales compared to the nearly 1 billion CDs shipped in 2000 in the U.S. alone.
By 2003, Apple launched the iPod and iTunes. Steve Jobs’ company had put a business model around Napster’s concept and even hired a few Napster workers to the team. As broadband expansion continued and Apple’s products expanded to Windows computers, the company benefitted from the adoption curve.
As a well-known label head told me a few months ago, “We let Apple bounce back thanks to music, and we should have had a stake in it.”
As Apple thrived, Napster’s copycats benefitted from faster downloads. It was easier than ever to download an mp3, legally or illegally. The fragmentation of the full album CD was inevitable.
The permission vs forgiveness conundrum
Founders are taught to move fast and break things. Founders are taught to ask for forgiveness, not permission. Ever since Napster, the music industry has had its guard up about new companies that may use its back catalog without a licensing agreement.
But I’ve spoken to startups that tried to go about things correctly. They tried to get early buy-in and support from the industry’s powers that be. However, the startup founders claim that industry leaders pushed them aside because the startup was small enough to be ignored. Unless the record label had a stake in the company, it was a no-go.
This dynamic incentivizes startups to get big enough, make moves, and ask for forgiveness after said moves are made. It’s unhealthy for business development, but that’s where we are today. Let’s hope that AI music developments can improve on this trend!
Before we close this memo, let’s end with a relevant quote from Newbury Comics CEO Mike Dreese June 2000 in a Washington Post interview:
“The hard thing in the music world is finding Madonna, not developing online technology that lets you play a song by Madonna. The labels have Madonna. They’ll eventually get to the technology.”
This sentiment captures a lot of the thoughts across the industry. But when TikTok and DSPs algorithms have more power than ever, and pop stars have a tougher time than ever breaking out, the technology becomes more and more important every day.
If you liked these highlights, you’ll love the rest of the episode:
– Napster’s influence on social media and Web 2.0
– how artists picked sides on the Napster debate
– Napster’s role today as a web3 company
Dan Runcie [00:03:48]:
Do you remember using Napster?
Tati Cirisano [00:03:50]:
I was more of a LimeWire child actually. I kind of just missed being able to use was I was too young to actually use it. But I remember it sort of being in the news and all I could understand I think was just that there was a lot of scandal associated with it. And I was kind of like a goody two shoes as a kid. Like one of those kids that is terrified of breaking any rules. So I think it made an impression on me just because I was like, oh the FBI are breaking down people’s like because they’re downloading music. And I just remember the news about it more than anything.
Dan Runcie [00:04:26]:
Yeah, the news was crazy around this time. It hit me right at the perfect time. This was around the time because I was in middle school at that point and there was this technology stack as I’m looking back that kids had. You had AOL Instant Messenger, you had your own GeoCities website and then you were downloading songs off of Napster. And at this point this is a safe space. I’m sure that many of the people listening to this podcast that are probably running a lot of these labels now probably were Napster users and Livewire and any of the other peer to peer file sharing iterations that we’ll get into. But it was a wild time. So I think for me I wasn’t as early as 99, but I think it was probably around 2000. That was the first time figuring it out. And then by the time it got shut down, which we’ll talk to, there were plenty of other things that did pop up.
Tati Cirisano [00:05:21]:
Do you remember what you were listening to? What did you search?
Dan Runcie [00:05:25]:
Nelly Country Grammar was probably one of the early ones I would say, because that album came out, I want to say spring or summer 2000. And that album, I mean, has since went diamond. But it was so popular that year. That one. I remember. Cisco unleashed the Dragon was really popular. But around the same time I felt that I was still buying and getting regular CDs as well. Like being dropped off at the mall, getting albums that I really did like. But it wasn’t until I got a CD burner at home, my parents had bought one of those desktop computers from Comp USA or somewhere like that. And then that was the one thing I said, can we get a CD burner? Can we actually get this in here? And then at the time it was still pretty early. I don’t think it was quite a ubiquitous thing. And I think we’ll talk about the timing elements with some of this. But doing the whole research for this brought me back. It was quite a time.
Tati Cirisano [00:06:18]:
Definitely. Yeah. And I kind of had a similar tech stack and it was like Aim Messenger. I had itunes, I was sometimes buying tracks and this was when I was in middle school and then LimeWire, and I remember using LimeWire mostly for actually things that you couldn’t buy elsewhere, like live recordings. And I grew up in Miami during the kind of EDM boom of 2008 2010, and there was all these artists that I was, or these DJs that didn’t really have their music up, and I was downloading all these remixes and mashups. And I remember kind of going back into the research, seeing how a lot of people use napster for a similar purpose, where it was like, yes, there was a ton of music that know you could buy the CD. Obviously being shared, but a lot of it was also kind of live recordings and bootlegs and all these other things that you couldn’t actually find elsewhere.
Dan Runcie [00:07:12]:
Which is interesting. Yeah, it was really big for instrumentals, acapellas, things like that that are now commonplace. I remember seeing stuff to be like, oh, interesting. Didn’t even know this existed. Another thing that I remember too about the Nasty era was finding out the real names for songs when I didn’t necessarily know that they may have existed. Like for instance, I’m embarrassed to say this, but Mo Money, Mo Problems was one of my favorite songs growing up late 90s. But I didn’t know that’s what it was called. I thought it was a Puff Daddy song. And the most common words I heard on the song were I’m coming out. So that’s literally what I typed into the Napster search engine. It’s one of the first songs I can remember. Puff Daddy, I’m coming out. But you know what, the song came up because a lot of people were in the same boat as me and this was before Genius and all of these lyrics websites really broke out. So there are so many unique things about internet culture from back then.
Tati Cirisano [00:08:04]:
And the stuff that came up, it wasn’t like it was cleanly labeled like no money, more problems like album title, year, whatever. It was like some random file name that had maybe numbers in it and things misspelled. I feel like it was also just the file names themselves were like a whole other side to this.
Dan Runcie [00:08:23]:
Yeah, it was very much encapsulated the Wild wild west, which I think is a good place to start with this story and where things were and where music was before this era. So of course we know that the CD era was booming and you saw it in the record labels in terms of how much money they were putting into music videos. You saw it with the numbers that went up and up and it was the perfect environment for them because CDs were the cheapest physical format that the industry could have made at that time and they were selling them for more money than they had ever sold a product before. At that point it wasn’t uncommon to spend 1620 $25 for one CD. So the margins were crazy. But at this point the internet was just starting to grow and people were starting to figure out okay, what are the different things I can get into? I think around 1995 was the first time that someone bought a movie ticket online and you’re starting to see more of those.com things growing. But you also had this internet community of people that were talking and meeting each other. And I think this is an interesting place to dive into because where the two co founders of Napster met, sean Fanning and Sean Parker, they met on IRC which was an earlier version of one of these communication platforms and they were able to meet and connect there because they were similarly people that were interested in programming. You have Sean Fanning on one side who he grew up right outside of the Boston area in Massachusetts and Brockton didn’t really have the most resources. He was someone that was in different foster homes and things like that. But he saw the internet as a way to neutralize a lot of his experience. He was able to have the types of conversations and connect with people and talk about things as a teenager in a way that he didn’t necessarily feel like was his own. So then he’s able to find his like minded people. He then connects with Sean Parker who is a couple years older than him and then they’re talking know all these different ideas. So that whole aspect of what we kind of see now happen in places like Twitter or Reddit where people feel like they could anonymously get known for their knowledge and their insights and what they’re sharing and everything else is neutralized. So much of that stuff was happening in the 90s as well and these two were ahead of the curve on that.
Tati Cirisano [00:10:49]:
Yeah. And I know we both watched the documentary about Napster called Downloaded and there was a part in it where they talked about how when Sean Fanning first shared this idea on that website, everyone was like, no, nobody’s going to want to share MP3 s. Everyone’s like, no, it’s not going to work. Nobody’s going to care about that. And that was a fascinating tidbit to me because it just kind of shows how sometimes people don’t know what they want or you don’t know if an idea is going to take off until you try it. So fascinating. And that the name of it was his screen name, right. Going back to the chat room influence of all this, like Napster was literally his screen name.
Dan Runcie [00:11:29]:
Right. Give It to Him is a nickname because of his hair and him having what he considered to be an afro at the time, which that’s another thing.
Tati Cirisano [00:11:37]:
That is not talked about enough, the history of this name. Right, not talked about enough.
Dan Runcie [00:11:44]:
Right? That essentially yeah, it’s because a white man or a white teenager at the time was called Napster because he considered his hair or other people considered his hair to be something that is something. But it’s interesting too, because at this time Sean Parker was in a similar but different situation where he grows up in had with some of his family connections. His father is someone that was teaching him programming when he was seven years old and he’s getting really into it, someone that’s well read, a bit more self taught, and by the time he’s 16, he’s already hacking into different databases and things like that, whether it’s finding government contracts and military insights. And then FBI actually comes to his house, he gets in trouble for that. He ends up doing community service and he ends up meeting some girl and then they have a fling. But he describes it as, oh, the FBI came to my house and I was able to have this great experience meeting someone. So he connects this aspect of rebellion and risk taking with something good that happened to him. And I feel like that’s a narrative that if you know much about Sean Parker and the life that he’s continued to live has carried with him to some extent.
Tati Cirisano [00:13:02]:
Yeah, I think Too just an interesting character in all of this is like the culture of the Internet at the time because I think because it was early days of the Internet, all the ethos around it was like rebellion and freedom of information and this is going to change humanity and it absolutely did. But we hadn’t really seen the dark side of the internet as much yet. And I think so much of that colored the rise and fall of Napster and how both of the Seans were kind of seen as these martyrs for the cause of freedom of information and freedom of art.
Dan Runcie [00:13:43]:
Right. Because this was also an era talking about Internet culture, those things where if you watch the news, the worst thing in the world that you could possibly do was meet someone in a chat room and then meet them in the mall in public. Because if you do that, you’re going to get kidnapped. You know that, right? That’s what the news was telling you. And of course these things happened. They had the dateline stories to show that there was risk in that. And in the earlier stages, I am sure that a lot of that opportunity did attract a fair amount of seedy behavior. But that was the narrative that was going on at the time. So I do think that’s important context for a lot of the public narrative that ended up following Napster for a few years after that. And I think another thing too is important. You talked about the file sharing piece of this too. One of the challenges and frictions that Sean Fanning had started to experience. So unlike Sean Parker who ended up not going to college, sean Fanning did go to college. He started at Northeastern University, I think it was 1998. And that’s when he saw the issues with downloading songs on the internet. So the time you’re talking about MP3 files, but trying to download them from one person to another was the challenge. It just took way too long. And we’re talking back in the days of dial up internet, when being on AOL was the way that a lot of the countries saw to be connected. So file sharing and peer to peer file sharing was a way to connect all of that, right? How do you have the decentralized thing that can connect to all these other nodes? So if there are hundreds of thousands of other people that have that same song, how could you connect to all of those? And in a lot of ways that is the origin thought of what the internet allows and how you’re able to create it’s not just one to one, it’s many to many being able to benefit from that. And I feel like that carried through with a lot of the strategy not just for Napster itself, but for what we saw from other innovations coming after that.
Tati Cirisano [00:15:45]:
Too I think it also almost created this bond with the people that were using it. Because it was like you couldn’t get music unless somebody else had uploaded it. And you also couldn’t get it unless you also shared your own library. So everyone was kind of in this unspoken pact and it almost had this, what we would now call UGC ish vibe to it. We talked about the file names and uh, it felt very much like the Napster was the technology there, but everything else was kind of created by the users. So I think there was also a bit of that where people who use Napster felt like brought together by it and were very much that colored. Again, a lot of the public debate about it where all these college students using Napster were so vehemently pro Napster. And I think part of it was because they were embedded within it from the beginning.
Dan Runcie [00:16:38]:
Right, and I think that that piece too speaks a lot to where Napster was probably a little bit early on, which is user generated. You’re giving something to contribute. The more you contribute, the more you may likely get from the service and platform as well. And everything that we saw several years later from all of the Web 2.0 companies, whether it’s Facebook, we don’t own the content, but we create the opportunity for you to be able to share with others. Uber, Airbnb, we don’t own the underlying asset, but we are the platform to be able to make this happen. And even as you see with a company like Spotify today, they don’t own the music, but they were able to be that conduit to help make it happen. Napster was probably the earliest version of that. And like we know innovation took a lot of the blows for what people were later able to develop true businesses and business models around.
Tati Cirisano [00:17:33]:
Yeah, I also think that the element of convenience is really interesting here because obviously the fact that it was free was like the main reason people used it. Right, of course. But I also think to your point about it being really hard to download music from the internet, up until then, people also just liked that this was giving them an easy way to do that. It’s sort of like how, I don’t know, I could go and watch, this is a bad example, but I could go and watch illegal streaming movies online. Right, but I don’t want to do that because I’m going to have to deal with pop ups, I’m gonna have to deal with viruses. I don’t want to deal with that. So I’m like, I’ll just pay for Netflix. And I think that’s what’s interesting about Napster. I remember there was like, I don’t remember, but in my research, I saw this study that came out around the time where they interviewed college students and a lot of them said they’d be willing to pay $15 a month for Napster. And I think that speaks to people were using it because it was free. Yes, but also they were just using it because it was convenient. It just made it easier for them to do something that they wanted to do. So maybe they would have paid for it if that was an option.
Dan Runcie [00:18:45]:
Yeah, I agree. Several surveys around that time showed that. And then when you asked the flip side how many people weren’t willing to pay, it was a pretty small percentage. I can quote the exact source in the memo that we send out, but I want to say it was maybe five or 4% of people, it was that small of a number that said, oh, we wouldn’t be willing to pay. So there was interest, it just happened to be free. And I think that is one of the good things to talk about in terms of why this took off and why it took off the way it did. It was clearly timely with a lot of the trends that we talked about. This was also the time of search engines being able to show you where different things are. It wasn’t quite as developed as where Google became with their search engine, but Lycos and Alta Vista and Yahoo were showing what was possible. So okay, how do you apply that same search engine methodology to then search for what’s on other people’s hard drives and they were able to do it. And one of the things that I think after watching downloaded this was the documentary from 2013 about Napster’s rise and fall. They said that the service launched in June 1999. It was a slow pickup but things really started to take off. There was an article written about them on ZDNet. The title of the article was napster Plays Dodgeball with Music Biz. And that led to huge responses. So that started the narrative in the way for them of some media highlight or some media impression being Napster’s biggest PR. Anytime there was someone that was highlighting or talking about what they’re doing, that’s how they were able to get the word out. And they said that then spawned so many more downloads. And then I want to say by December 1999 they said they had 20 million registered users on the platform. So this is in less than six months time.
Tati Cirisano [00:20:43]:
And it was also, I know another thing that’s been pretty extensively covered was how much it spread on college campuses, which was another way that early social platforms like Facebook was spread. And how it makes sense when you think about, you had all these college students in the fall of 99 have access to high speed internet from their dorm room that they’re not really directly paying for. They don’t have to worry about hogging the phone line or anything like that at home and they have a lot of free time. And at that time of your life, music is a very key way of expressing your identity to people. And so it makes sense to me that Napster spread so quickly on college campuses and also I think became this symbol again of rebellion and almost like a punk attitude about the early internet.
Dan Runcie [00:21:34]:
Right. Because this also lines up with a lot of the height of the CD era too. Because even though the industry is doing well, there were even articles and things before Napster came through about people talking about, especially people that were college age talking about how expensive it was to buy albums and all of these challenges that they had. So you also have people especially in this demographic feeling like the CD business model and the music industry at large was bloated inefficient. And when you have that there is room for disruption and it was the perfect combination of all of the different things there.
Tati Cirisano [00:22:14]:
No, you’re right. I found so many articles from the time interviewing college students where they would say I don’t want to pay $20 for a CD when I’m listening to one song. And they would kind of refer to the rest of the music on there as filler. And it’s something that I know we’ve talked about in other podcasts where I talk often about how today’s music industry has leaned too much to being about songs and not artists and how that’s sort of been like to the detriment of the industry. But consumer behavior even at that time was we don’t want to buy albums, we were just trying to listen to that one song. So you’re right. I think that even before Napster that was already a trend that was happening where maybe the CD era was already kind of coming to its end.
Dan Runcie [00:23:02]:
Yeah, and that was one of the things I did want to talk about. But we could chat a little about it now because of the timing of Napster. I do think Napster became a scapegoat for a lot of the challenges that happened in the CD era. Because if you look at the stats, a lot of the revenue that came from CD sales weren’t necessarily new releases, they were reissues. And one of the things that the music industry has been able to do is monetize its classic, its back catalog and being able to now after let’s say 2025 years earlier you bought everything in cassette, now they’reissuing it for CD. So now all the people that have whatever in cassette, now they can buy it in CD. Or maybe you missed the cassette era, you want to get it in vinyl or you missed the cassette era, now you want to replace your vinyl. You can do that too. So there was only so many more of those that could be bought. And I think sometimes that context gets lost. So that’s one thing. And then two thing. And then the second thing too is that even though the music industry’s overall revenue did peak in 2000, and there clearly is correlation with Napster at its peak in terms of usage and all of that CD sales themselves. If you break it down, CD sales full albums, not CD singles actually did continue to have stronger sales a couple years after Napster. If anything, it was more so cassettes and CD singles themselves that were largely disrupted. But by that point those are much smaller revenue streams for the industry. So that’s one of those things where once you comb the layers of the details, things we’ll talk to, I think there are a few things collectively Napster may have started things, but there may be a few things that we can talk about that I think may have played a bigger factor in the decline.
Tati Cirisano [00:24:49]:
That’s a really good point though that people were kind of replacing their collections like they were replacing their vinyl with CDs or their cassettes. That’s a really good point that I think does just totally get lost.
Dan Runcie [00:25:01]:
Yeah. Another thing that happened around this time. So we’re in 2000. This is when the lawsuits really start to take off. And this is where you start to hear the artists themselves picking sides. Some artists are becoming quite vocal about it. Some artists are becoming not too vocal. Well, let me rephrase that. Artists are becoming vocal, but it’s proponents one way or another. So on one hand you have artists like Chuck D that are very much like, hey, this is a digital revolution. I’ve always been about independent music. I’m with this. If anything, I think this can help expand things and help grow. And there is some data out there that we can talk about that does proof to that. But it wasn’t just Chuck D. Chuck D wyclef david Bowie seal billy Corrigan from Smashing Pumpkins limb Biscuit the Offspring courtney Love Radiohead. Those are just a few of the artists that were saying, hey, I’m all for this, let’s do this.
Tati Cirisano [00:25:58]:
Dan Runcie [00:25:59]:
Yeah. On the flip side though, there were the Detractors. And the Detractors got a lot more press and a lot more publicity than everyone else. A few of them, most famously Lars Ulrich, one of the co founders and lead drummer from Metallica, snoop Dogg, Eminem, Dr. Dre, the Beatles, and a few others as well.
Tati Cirisano [00:26:22]:
Can we just also, with the Lars thing, just pause for a second and imagine because the whole thing with Metallica started. My understanding is they had this song that was going to come out on the Mission Impossible Two soundtrack, and Lars Ulrich heard an unreleased, unfinished version of it on the radio because it had made it to Napster and somehow made it there. Can you just imagine being at that time being a band like Metallica and just hearing this massive song that you have that’s totally unfinished.
Dan Runcie [00:26:52]:
Totally unfinished. I mean, on the radio, that is the one thing where a lot of and we can talk about how Lars and Metallica handled this. But that is a big shock at that point because this was before leaks became common and all that stuff. You have this unreleased song and it’s not like it’s some demo that got missed. This is for what people expected to be one of the biggest movies of that year. And then you just see that it’s there. And then that sends Metallica down this whole rabbit hole where they then do the research and they find that there are 335,000 users, registered users on Napster that have access or quote unquote, have a Metallica song on their hard drive. So what does Metallica do? They print out the names of all of these people and they travel over to San Mateo, to the Naster office and hold a press conference. And they are in there. I. Don’t want to say in their glory because obviously they were the plaintiffs and trying to sue this company, but they definitely leaned into the public persona. And I do think that Lars Ulrich became a full on wrestling heel in a lot of ways with how this whole narrative was.
Tati Cirisano [00:28:04]:
And there was a lot of that sort of public trolling going on. In addition to Lars Ulrich show up at the offices with this massive stack of names, you had Sean Fanning showing up to the MTV Awards in a Metallica T shirt. Like, there was all of this trolling that was going on that I think just kind of fanned the flames of this whole thing and even further painted this picture of Internet heroes versus corporate greed. That was just a very vast oversimplification of what was going on. And it’s so interesting, too, looking at the arguments from the time, because so much of what Lars Ulrich was saying is what artists are saying today about streaming. Like, so many of the same arguments about the commodification of music and this worry about the money making it back to the artists, it’s actually almost bewildering to go back and look at all the coverage at the time and how much people were really mad at Metallica for the way that the reaction that they had, right?
Dan Runcie [00:29:01]:
Like, rival bands called them out. I think one of them I forget the name of the band called Metallic Greed was, like, one of the things that they had said just because they felt like they were being greedy. And some people did feel like Lars was using this as a publicity stunt to prove whatever they wanted to do. And while, yeah, I know that even in this conversation, I did point cheekly at some of his antics, but he has a case to make. This was his music. And he’s like, what the hell just happened here? We’re going to release this thing. So I get that. One of the things that you brought up to me. So there’s two things. One, you sent me the clip. I think this was also from the 2000 VMAs where Lars Ulbrick is doing that spoof with one of the Wayans brothers.
Tati Cirisano [00:29:44]:
Yeah, the setup is like, he comes into their dorm room and he starts putting Napster stickers on everything and is like, it’s only fun to steal things when it’s not your stuff. And he’s, like, wearing a Napster T shirt and comes out with this guy’s girlfriend and puts a Napster sticker on her butt. It was the most ridiculous sketch ever.
Dan Runcie [00:30:08]:
You had that. And then you also had a lot of the popular rappers at the time, especially the whole Aftermath, shady Crew with Eminem, Dr. Dre and Snoop Dogg. And I can’t count the amount of times that you saw Dr. Dre holding up his middle finger saying, Fuck Napster, right? And then Eminem and Snoop Dogg largely doing the same thing. Metallica and Dr. Dre uncoincidentally also had the same lawyer, which I do think likely played into a lot of this. But you brought up an interesting question to me, which I do know was brought up in that downloaded documentary as well. The genres where it has been known for people to be rebellious or pushing back, especially among the Gen Xers, were the ones that were now much more conservative with regards to this argument. Can you talk a little about that and what your thoughts were? Because I’ve been thinking about it ever since.
Tati Cirisano [00:31:04]:
Yeah, I just found that really striking. I mean, I guess there were metal artists and hip hop artists on both sides, but it was interesting to me that the two most memorable public cases with Dr. Dre and Metallica were from genres that, like you said, usually are kind of more of like an f the system mentality. So it was almost surprising to me that they were more conservative. And I don’t know, I’ve thought about a couple of reasons why, but haven’t really landed on an answer. I know for metal specifically, physical is more important than most genres, but at the same time, at the time, physical was important to every genre. So it wasn’t like that was necessarily a differentiator but maybe they were more worried about losing CDs than other genres were. I think hip hop artists also historically have tended to be a bit more like business minded, business savvy, and maybe it was more clear to them that there was no business model here at all. The other thought I had was maybe with these being genres that labels haven’t historically treated that well. So many of the early deals for hip hop artists were extremely predatory. Maybe they just learned to fight for their own interests and felt like they had to go after this themselves. But I don’t know. At the end of the day, equally interesting to me is the artists that were vehemently pro Naster. And I wonder what you think about why artists chose certain sides. But I also feel like at the time there was a lot of public conversation about just like bad deals that artists had gotten in. Like there was that VH one behind the music series and there were often artists on it that were like, I haven’t seen a penny and I’m a hit artist. And maybe artists were kind of just wanting to shake up the system and disrupt things any way they could and Napster felt like a disruption that was necessary. I don’t know. But the sides that artists took is one of the most interesting parts to me of this whole thing.
Dan Runcie [00:33:16]:
Yeah, it’s something I’ve thought of too, and I’ve tried to think through the combinations, but it’s tough to find the correlations because there are other hip hop artists that were pro Napster. There are other rock bands that were pro Napster. No different than 20 years later when spotify took off. There were several of the biggest pop stars in the world that were saying, and sometimes still may say things along the lines of I don’t want to put my music all on Spotify like that, I want you to be able to pay for it. Eventually a lot of them did come around, but then there were other pop stars from the 2010s that leaned in and didn’t necessarily have the same vocal points. So it is tough to find the connection. The shared lawyer was the closest thing that I saw with Metallica and Dr. Dre, but it was interesting. But I do think that they were able to help capture a lot of the public narrative around this point. And at that point we’re still talking about a service that was being used at this point by at least what they said was 26 million users by the end of 1999. The tough thing with that stat is that registered users, as we know, is not the same as monthly active users or one of those stats. That gives us a bit more of an understanding because by an absurd’s peak, they said they had around 80 million users. You look at certain stats, they say that there was maybe closer to 26 million that were active. But if you look at those stats and then you look at how in the US alone in 2000, there were nearly a billion CDs that were shipped and sold, how many of the people that were using Napster were also buying CDs? I have to imagine that it’s a pretty small percentage. Just when you compare those numbers, even if you think the average person is maybe buying a handful of CDs and then when you just think about where Internet adoption was, where broadband technology was, and some of the things coming later that we’ll talk to. That’s always been one of the things that has stuck with me because as much as I brought up the point about CDs in general and the industry in general, having a bit of a correction from just seeing some of the boom that was largely inevitable to drip off. There are just so many things that, because of where the data was, it’s a little bit harder to make some of those strong correlations because there’s some studies out there. The RIAA did have some studies where they showed that there is a direct correlation between Napster and other services. I believe one of their studies had shown that there was a 13% drop in stores near colleges, but again, that’s near colleges, right? There was another stat out there that said there was a 36% drop in CD singles, but again that’s CD singles, very small portion of broader full CD albums, which we talked about before, were a bit less or a bit more resistant, I should say, to Napster and everything that came with. So as we see now, there’s data that you could pull from either source to prove one thing or I mean.
Tati Cirisano [00:36:28]:
The RIAA were one of the main plaintiffs, right. So of course they’re going to want to present the data in a way that looks like Napster is killing the music industry. Not to say that they misrepresented data, but you’re always going to present things in a way that benefits you if you’re in that position. So yeah, it is hard to go back and kind of find those exact correlations.
Dan Runcie [00:36:54]:
Right, and then along this time too from a business perspective. And I think we can start talking about some of the reasons that Napster failed. They tried to make a business around something that really wasn’t a business. One of the things that they had famously said in the documentary and in other things, which was the only revenue that Napster actually made was from merchandise sales. That was it. They tried to experiment with different things but it just didn’t quite click. Although this wasn’t a sale, but I think they did sponsor, they actually sponsored a Limb Bizkit concert or Limb Bizkit tour in 2000. So that was something that they paid for essentially. But still they just didn’t quite have enough there. They had raised money, they had raised tens of millions of dollars. And even leading up to its closing days in 2001, they tried to as well. But I think some of the damning things for Napster was there was all this debate about whether it was legal, whether it wasn’t legal. And in the Sean’s defense there really wasn’t as much legal definitions to clearly talk about this instance the way that it was in the Digital Millennium Copyright Act, the DMCA, which is referred to commonly. But on the other hand there were emails that they were able to find from Sean Parker that does acknowledge that he at least questioned the legality of what they’re doing or acknowledging some of the questions about it. And that then did become one of the damning things of evidence to then say, okay, so they did know this, so they did know this happened. So the trial ended up going to district courts. Of course there’s two lawsuits going on. The most prominent ones you had, Metallica versus Napster, which I think probably got more media press than relative to the influence. But the bigger one was A and M records versus Napster. And that’s the one where even though Napster tried, they just weren’t able to make it happen. And they even up to those days in 2001, new CEO, new leadership, new tens of millions of dollars in funding, they just weren’t able to cut it. And I think with that it could be interesting to talk about just some of the broader reasons why it didn’t work. Are there any that come to mind for you as we’re thinking about things about yeah, this is one of the reasons why Napster, at least first iteration of Napster to be clear, failed.
Tati Cirisano [00:39:15]:
Yeah, I mean like you noted, they did not have a business model from the start. And I mean a lot of startups I think kind of launch with a free product and then they get investment and they gradually create a business model. But I don’t think they ever really had any inkling of what that would look like or any idea that it would blow up as big as it did. And part of me feels like part of the reason it never was able to get legitimized is because both sides were spending so much time and energy and money on the lawsuits. Because there was know, reportedly there was. An interest from the napster side in creating something legitimate. In the end, almost we’ll probably get to this, but they were almost acquired by Bertelsmen and so there was an interest there. But I almost feel like there was too much energy spent trying to shut down Napster which in the end wouldn’t have made a difference. Didn’t make a difference and not enough energy spent trying to turn this into something.
Dan Runcie [00:40:18]:
Right, right. And they were interesting to read some of the articles around this time because another thing that I think hurt Napster was the timing. I think it was a little too early if we’re just thinking about the broad things of where they are. Granted Napster had no moat as we saw. There are plenty of other companies that came and popped up that replaced what Napster was doing right after the industry won its battles against them. But the late ninety s and part of the challenge with the.com bubble in general is that all these businesses were too early. Whether it was Pets.com or any of this other stuff where people saw what was possible with the internet. But so many of that stuff crashed and burned because everyone is still on a dial up connection and only a fraction of people in the world had access to it. This is something that I think has been a technology challenge in general where the people that are in a certain culture think that the thing is ubiquitous and it’s going to take off sooner than it does and you just struggle to be able to get enough users because of it and your funding runs out. But that’s exactly what happened in this era. And it wasn’t just internet companies. You saw it in video games as well. I think back to a product like the Sega Dreamcast that comes out around the same time that Napster launches September 1999. It has internet capabilities, four controllers like everything else and that was one of the big selling points. But in 1999 again everyone had a broadband internet connection. It really wasn’t until Xbox 360 and some of the video game consoles you had in the 2000s where playing people online and doing Call of Duty and stuff like that was a commonplace. And I think similarly with music. It wasn’t until 2006 that Spotify launches and it isn’t until 2011 that it launches in the US. So these things do take some time to get there. And the fact that Napster was launching in an era where most of the country is still being inundated with free AOL CDs didn’t work in its favor.
Tati Cirisano [00:42:23]:
And the law wasn’t really ready for this either. We’re still looking to the DMCA in all the cases and new emerging technology with the music industry today and it still doesn’t really make sense for the way that the internet is used today. So I think that’s a theme that always comes up is the law is too slow for how quickly technology develops.
Dan Runcie [00:42:50]:
Right, yeah. The fact that is still being used today is bizarre.
Tati Cirisano [00:42:55]:
Yeah. And we’re still having the same arguments which I know we’ll probably get to later, so I won’t get into it now. But yeah, so much of this is still talked about.
Dan Runcie [00:43:03]:
And with that Napster officially shuts its doors summer 2001. And as Sean Parker has said, they never officially went to having a trial by jury and they felt like they run out of money because of that. And it would have been interesting to see if a jury’s decision would be different than the judge’s decision that they eventually had in the district courts. But either way they had their moment. And we saw a few things happen in the wake of Napster where the music industry may have won the battle, but there was a broader thing that was happening. Of course the things that we were already talking about earlier. Such as there were inevitable challenges with CDs as a sole business unit that the industry eventually struggled with. But where Napster struggled, we saw Apple as a company succeed. Because not too long after Napster ends up closing its doors, steve Jobs announces the ipod in summer, not summer September 2001. And then with that initially launches itunes. But things really open up in 2003 when itunes and the itunes store becomes available for non Mac users. That single thing there, especially with that timing too. We’re talking post bubble, post AOL time, merger issues and all of that that hits internet culture, broadband access where people are and the aspect of people being able to buy singles for $0.99 in my opinion, is the thing that really accelerated the decline of revenue for the music industry.
Tati Cirisano [00:44:45]:
Yeah, and I have thoughts on that. But first I just want to say it was funny in my mind because of the legacy that Napster had and all its sort of iconicness, it was kind of striking to me to be reminded that this played out over two years. In my mind it was like five years or something like that. There was so much that happened but it was really a spectacularly fast rise and decline and I almost was just shocked to be reminded of that. But to the itunes store. I think part of that also speaks to the convenience point that I brought up earlier where people were willing to pay $0.99 for a song because they could download it pretty easily and the quality would be good and they could find it quickly and it was convenient. And I think that that also led to less pirating music over the years, in part just because it was easier and it was at a price that people felt was agreeable.
Dan Runcie [00:45:46]:
Yeah, it made a big difference because it put a business model around what napster had done. I believe that itunes also went and hired some of the napster people as well to help build what they were able to build. And we saw the success of that. And each year napster just grew and grew and especially in the 2000s did become a home for a lot of media and content in general. People would buy movies off of itunes, people would listen to podcasts off of itunes. They had this lead in digital technology transfer and distribution in all of these areas that worked to its favor. Obviously it ended up getting disrupted in a number of ways because people ended up wanting access. They didn’t necessarily need to own these things. But it was the first step that brought people there. And I know that at the tail end of Napster, they had tried to do certain things, whether it was putting a business model around it, only having non copyright infringement use music, but it was too much, too late. And apple, and thinking back to where Apple was at this time, company was in a much weaker position overall than it was anywhere near today. But music is what helped save that company and we saw it continue on for the rest of the 21st century.
Tati Cirisano [00:47:11]:
Did you do in your research come across that company, snow Cap, that Sean Fanning kind of tried to launch? Because that was really interesting to me too. Yeah. How they were trying to create this registry where you could claim the songs that you had copyrights to and then decide the terms that those files could be traded on. So if you were metallica, you could say, I own enter sandman and you have to pay $20 to buy the album or to trade the album. Or you could say you can listen to the song five times free and then pay for it, or maybe it’s $0.99, you could just decide. And I feel like deploying something like that in practice, I can’t even sounds like a nightmare. But it was interesting to me because it’s sort of like the fast forward to today and it’s sort of the arguments that a lot of labels are making when they’re saying, oh, not everything should cost the same on streaming. And snowcap was kind of letting rights holders set the terms of how much they thought their music was worth. And then my understanding was that Snowcap actually did have a lot of talks happening with the major labels, but then itunes launched and it just kind of got lost in the shuffle. But yeah, that whole part of this was interesting to me as well.
Dan Runcie [00:48:32]:
Yeah, that’s a great point, because Sean Fanning and I know Sean Parker said this as well the labels may say things differently, but they claim that they were trying to play ball with the record labels or sean Parker said a few times, I didn’t know anyone that worked in the music industry, so I wasn’t able to make those connections. I do think that they suffered. What I do feel like a lot of startups have told me about their experiences with trying to navigate certain things where if they’re trying to partner with the industry and they’re too small, the industry may say, okay, yeah, let us know once you get bigger. So that’s them asking for permission, right, but then they’re like, okay, well let me get bigger then. And then once they get too big that they need to be focused on and they’re trying to ask for forgiveness later, the industry may get a bit more upset and say, oh well, why don’t you ask us for permission? Right? So it kind of becomes this chicken and egg thing, which I do think is interesting thinking about Snowcap as well because obviously itunes did take a lot of the attention there, but they clearly struggled with a bit of that dynamic too. And I think at this point, especially around the time you’re talking, this is around 2003, maybe we’re getting into 2004 time frame as well, and you’re seeing a few things happening. One, the continued rise of broadband interest, so more people are just having more access to be able to download because I still think it was only a fraction of people that were really actively participating in that game in 1999 through 2001, through Napster’s early run. But with the growth of itunes and then all of the Napster copycats, which I want to talk about for a bit, the usage rates for those were even higher because, well, before you had just Napster, now you had bear share. You had LimeWire, you had Kazai, you had Nutella, you had all of these companies that many of them largely, were just giving people access to the same users. It’s not like people needed to be independent from using one or the other, but that’s how they were able to work it. And I know at that stage some people were still using a few of them, some people weren’t using as many. I think the one advantage that itunes did give you that we didn’t talk about as much was the fact that the songs themselves were less likely to be not less likely if you’re buying a song from itunes. It wasn’t going to be infected with the virus, it wasn’t going to mess up your computer, it wasn’t going to have all of these things that became inevitable challenges. So it did fix things there, but still, even after Napster, because again, it wasn’t really a business, there was no moat, anyone could replicate it. Things really became the wild, wild west and became a bit difficult for the music industry to navigate.
Tati Cirisano [00:51:18]:
And that’s another reason why, like I was saying earlier, I feel like almost too much attention was spent just trying to shut it down when it was inevitable that all these copycats were going to pop up anyway. Shutting down Napster didn’t really make that much of a difference. Agreed.
Dan Runcie [00:51:36]:
And you spoke earlier about using LimeWire back then. Was it mostly for you with music or were there other multimedia files?
Tati Cirisano [00:51:46]:
It was just for music. For me, yeah. It was, like I said, a lot of bootlegs recordings that other people had put up. Stuff that was actually even really hard to find on the LimeWire platform. You had to really know what to search for. Which is also another interesting thing about all of this because now the experience on streaming is you don’t have to search for anything at all. Napster and its copycats were very like you had to know what you were looking for, you had to actively participate. So very different. But yeah, I was only using it for music.
Dan Runcie [00:52:19]:
Yeah, similarly was only using it for music. But it was interesting because I think you spoke about this before, where there were other forms of pirated multimedia that were available on these platforms, whether it was a full length movie, a TV show, and you saw this continue with BitTorrents and things like that. So although those types of things were challenges for the movie and the film industry and TVs, it wasn’t as big of a challenge because the file size was so much larger and there were more barriers both from the audio and the visual aspect to be able to experience it. That? Yeah. Even if you downloaded an HD quality version of whatever the popular 2005 or 2007 movie was, there was a bigger variance between that versus paying to go see that movie in theaters compared to getting and downloading a song from the Internet. And then what that song would look like if you were to buy the album and listen to that track. Or if you were to buy it off of itunes.
Tati Cirisano [00:53:24]:
Do you remember those commercials that were like you wouldn’t steal a car?
Dan Runcie [00:53:28]:
Tati Cirisano [00:53:32]:
Those were like burned into my brain as a child. But you’re right, there was more of a barrier, like a convenience barrier for film because it took so much longer. You might finally download this version of a movie and it comes out and it’s blurry and it’s dubbed in Chinese. You just never knew what you were getting. So much more difficult to run away with with piracy.
Dan Runcie [00:54:00]:
Right. And I think too, even though music piracy had its issues. As I mentioned, you would find random versions of songs. Sometimes people were talking over the track. I remember with a few songs in the 2000s because AOL was trying to do things in music. Certain songs had AOL music first listen as a tagline before you played the song. I don’t know if you’ve ever hear that, but why? I’ve heard that yes, so many random things. And then in hip hop too, because it was popular with mixtapes. And that’s another thing I should mention. There were a lot of things with the expansion of Dat piff and mixtape culture in the blog era that did stem from Napster in that whole aspect where I think the blog era really kicks off, especially for hip hop in 2006. So people are saying, okay, well instead of just distributing this music, let’s put some culture and insights around it where we can use this. And then they were eventually breaking artists and doing things like that. And I know the guys that made the podcast, it’s the real had this whole breakdown on the blog era that I thought was really interesting if you’re interested in this topic. But yeah, there’s so many things that sparked from this and especially at a time in the 2000s when record labels were in the industry were still trying to figure things out. You had the blog era and you had artists and mixtape coordinators and producers that were leaning into things like DJ Drama and Caseway and folks like that. So it was a fascinating time and I think Napster sparked a lot of that. Another thing too, and this was something that I found in research, but another thing that people felt correlated with this was the technology and how the music industry did or didn’t invest in technology and what some of the thoughts were at the time. And I want to read this quote to you because it’s something that I think speaks a lot to how the music industry thought of things at the time. It is a quote about Madonna. So this is from Mike Dries who is at the time he was CEO of Newberry Comics, a New England record store chain. I’d actually been to a few of those just growing up in the area. But he said that quote the hard thing in the music world is finding Madonna, not developing online technology that lets you play a song by Madonna. The labels have Madonna, they’ll eventually get to the quote. And that’s something that I completely understand the point that’s trying to make. And I think there is truth to it. It’s similar to that logic of, okay, you want to be in the business of having the coke formula as opposed to doing coke bottling or analogies like that. But we saw this same type of mentality is what hurt the music industry because you’re so focused on having the Madonna or having the sole artist that you didn’t realize. How many digital revolutions and how things were changing and there were opportunities to invest in that new technology. But even as early as the 1970s, the music industry was divesting a lot of its technology. This was from some of the research that I had seen in other areas. And anytime that there was a new type of format that came up, there was some resistance to it in some ways. For instance, when cassettes caught on, this is from Washington Post article that brought this up. But I thought it was fascinating. When cassettes caught on in the 1970s, the labels were complaining about how taping devices would crush album sales and instead we saw that they were able to make tons of money from them. And you also saw this as well, even dating back to that earlier where people were having complaints about vinyl sales because people felt that this is back in the 40s when people felt that vinyls would ruin the live concert business. So there were all of these things that people felt that could be a potential blocker or could be a potential challenge, but actually ended up helping the industry. And I feel like Napster again was one of those iterations. Again, as I know there are several people that claim one way or another whether it could have hurt or whether it could have helped the industry. But I feel like there’s so many things that stem back to that Madonna logic. And just hearing that quote I’m like, oh, that is a quote that I feel like you could still hear today with some of the issues that we currently hear.
Tati Cirisano [00:58:34]:
There were so many quotes, honestly, that I came across in the research for this that I was like, this is straight out of a press release today that’s so interesting. I think a lot of the music industry’s relationship with technology over the years has been less about money and less about opportunities and more about like I feel like usually when we see these types of conversations happening, it’s because something has come up, whether it’s Napster or MTV or TikTok, that is crucial to the industry, but that the industry doesn’t control. And it’s a way of trying to grab that control back. And that’s the only thing that’s focused on. And I know to your point that this has been going on since before Napster, but I also wonder if one of the things I was thinking about with this is if that had somehow happened differently, if the industry wasn’t, as many put it at the time, ambushed by the launch of Napster. If it would have done anything to change the way that the music industry deals with new technology. Because I do think a lot of the things that happened after that were the industry reacting to what happened with Napster. I wonder if things hadn’t been off on such the wrong foot, if it would have colored the industry’s relationship today to be more positive with technology. But I don’t know.
Dan Runcie [01:00:09]:
Right. Because this is the question you’d pose to me, right. Imagine if Napster didn’t exist, right? Like how different would things look or how could the industry have handled this differently. And the industry handling it differently would probably cause some type of thought transfer or not thought transfer, but mentality shift in terms of what is the core thing that you do want to have. What is the core thing that you do want to focus on? Because even if it wasn’t Napster as we saw, another company would have taken the place. If it wasn’t Sean Fanning and Sean Parker, it would have been one of these other people that were building and creating things off of it. So it’s tough. I’ve often thought back to say, okay, how could this have been handled differently? And of course there is this pie in the sky of if they played ball with Napster, look at what could have been created. All of the things that you see now if the record label wanted to invest in Napster, I’m sure they probably would have taken the money just getting an ethos for how those guys thought at the time and then what that could have been or what that could have been. Like that said, I do wonder if some of the success that we’ve seen of companies like whether it’s MTV or TikTok or Spotify, how much of that is because they are a separate entity and don’t just become engulfed into the broader brand itself. So how much of that natural tension is just a nature of the business model succeeding and needing to have suppliers that do have some type of suppliers and distributors that have some type of conflict with each other for things to work. No different than Walmart and Procter Gamble having a natural conflict in terms of negotiating over shelf space or wholesale prices or things like that. But their negotiations help both businesses succeed because they know they both depend on each other. And as you can see, this is probably a question I asked myself about some of these Spotify, and I don’t want to just say Spotify, but some of these DSP versus record label negotiations as well.
Tati Cirisano [01:02:18]:
Yeah, I mean if Napster didn’t exist, I agree with you, something else would have taken its place. And I think that in the end it would have been something that forced the music industry’s hand rather than the industry proactively trying to move to digital. So I sort of feel like things would have played out pretty similarly. I don’t know if there was ever an alternate reality that could have happened with this.
Dan Runcie [01:02:42]:
Right. And I think with that, I know this is a similar question, but knowing what the industry likely could or could it have done, where do you think they missed the mark with this? What are the things that you think they actually could or should have done differently.
Tati Cirisano [01:02:57]:
I think the main thing is what I said earlier about spend less time trying to shut it down, spend more time actually trying to build a business model around it. But sort of to that point, look at what this is telling you about consumer behavior and what people are liking and then maybe try to build something around that. I think there’s so much that was actually really positive about Napster in terms of the way that people were sharing music with each other, how it was built around a community rather than just the kind of passive streaming that we have today. You needed to actively search for things. It was very much like it revolved around fandom in a way that I guess I just think the industry could have looked at it and said, okay, what does this say about how people are engaging with music and what they want and how can we make this legitimate? But both sides spent too much time in this fight of just Napster and I think that time could have been spent just making this actually work.
Dan Runcie [01:04:03]:
Yeah, I agree with that. I think that was a big missed opportunity. Another one that I think was missed was the industry suing the fans.
Tati Cirisano [01:04:13]:
Oh my God. Yeah.
Dan Runcie [01:04:15]:
I believe the average lawsuit ended up being around $4,000. But some people paid a lot more, some people paid a lot less. And it makes me think that there was a bit of the forest missing the trees from just the broader thing and the trees being the industry focusing on you illegally downloaded X number of songs and we’re going to price it at this. And therefore now you’re in a lawsuit. But the forest being you are a customer who is a fan of music, how can we prolong this relationship so that you can do this moving forward? And it makes me think of how other companies handle things like this. One of the classic cases like this is a company like Nordstrom where some of Nordstrom’s most loyal customers and the ones that spend the most at Nordstrom are also the ones that will buy an outfit, hide the tag in the outfit, wear it out to the event that they’re going to, and then go return it back. Is that wrong? Of course it’s wrong. And that is not something that you should do. But if Nordstrom goes and reprimands each of the customers that do that, they would then lose some of their most loyal customers. And that reminded me of this because when you think about some of the public narrative that the industry can fall into where anytime there’s some dispute between an artist and a record label, a group and a record label or a publishing or whatever it is. People are often almost willing to take the side of the artist, regardless of the circumstances, regardless of what was signed, anything like that. And I know that a lot of this likely existed before. People are naturally going to feel more connected to the musicians than they are a larger corporation. But how does that relationship and those things work from that perspective? So that’s something that I thought about too, where there could have been a missed opportunity in how that piece was handled.
Tati Cirisano [01:06:21]:
You know what else? This reminded me of the situation with Twitch like two summers ago where there were all these users like these game streamers using copyrighted music in their streams and the music industry went really hard after them with these takedown. Requests, which they are well within their right to do. But it kind of just angered the users. And I think the idea was to do that and then they would make twitch. They’d have to deal with these disgruntled users and they’d have to do something. But it kind of reminded me of that in that the music industry tends to play this kind of Whack a mole game of trying to go after these individual users and it’s like you said, like the forest and the trees.
Dan Runcie [01:07:07]:
Yeah, unfortunate with that. Do you think that there’s anyone that won from this whole Napster music industry dynamic looking back?
Tati Cirisano [01:07:19]:
Dan Runcie [01:07:20]:
Yep, itunes won. Itunes won big for sure.
Tati Cirisano [01:07:24]:
Itunes, I guess the people, I guess the mean, they got all this music for free and it ended know, even though Nasar got shut down cheapening the cost when itunes came along and people were able to buy individual songs instead.
Dan Runcie [01:07:41]:
Of the full album yep, they definitely won. The lawyers that represented each party made out whether you’re Metallica and Dr. Dre’s lawyer or you’re a lawyer, repping the RIAA, A M Records, any of these folks, this was a gold mine opportunity.
Tati Cirisano [01:08:00]:
And honestly, the sean’s. Sean Parker and Sean Fanning who both made out pretty well and ended up working at or, founding and selling other multi million dollar companies. So they ended up doing yeah, it’s.
Dan Runcie [01:08:16]:
One of those ironic things, right, where both of them made nothing and were both saddled legal debt by the time Naster shuts its doors. But it’s not too surprising that Sean Parker ends up becoming a billionaire himself. And Sean Fanning is also an exited founder of a business that sold for tens of millions of dollars. And just to highlight some of the interesting things there, I think that Sean Parker’s story is probably a bit more famous where he leaves Napster and then after that he’s thinking through different options of what makes sense. He ends up, I believe it was Plexo was the company that he was with. It was funded by Sequoia and it was focused on trying to provide some type of internet security information but it ended up not working out. And there are questions about his reliability as well of not showing up to meetings and things like that. So he eventually gets ousted and then he then goes and sees what Zuckerberg is working on because at the time he had connected with the person that was running friendster saw that there was an opportunity there. So this was still early 2000s, around like 2002, but Fredster had its challenges because I think again that was too early. But then he sees what Zuckerberg is doing, links up, becomes the president of Facebook, and in many ways believes in the idea more than Mark Zuckerberg did at the time, is going with him to pitch meetings and things like that. And one of the things that he helped negotiate for Zuckerberg was having absolute control of the company, having multiple board seats, having the power. And something that I still think has benefited Mark Zuckerberg to this day, whether it’s some of the famous infightings that he had had with the instagram co founders after that acquisition and that famous business card I’m CEO bitch that Mark Zuckerberg had had, and even down to some of the controversies with whether it’s Cambridge analytica or people’s data sharing. I think Zuckerberg has clearly done a lot for this company succeed in the nearly 20 years it’s been around. But I do think that his complete control has likely been one of the reasons that he’s still in that seat. And a lot of that came from the work that Sean Parker had done. And then Sean Parker ends know, lining up as well with Daniel Eck from Spotify and a lot of the insights from Napster helped shape the product that we now and still see today with Spotify.
Tati Cirisano [01:10:51]:
Like I said, the legacy for a.
Dan Runcie [01:10:53]:
Company that was around for two years. It’s wild. It’s wild. And that similarly Sean Fanning probably hasn’t been as high profile, but he started a gaming company and sold that as well for tens of millions of dollars. And yeah, it’s one of these things where I think some of these people that end up being in the right positions in the right time. And it makes me think of some other things you’ve heard or seen in books as well. Whether Malcolm Gladwell talking about the 10,000 hours thing and how someone like Bill Gates or Mark Zuckerberg had access to computers at an early age and things like that. And how that likened their propensity to be able to be in certain positions. And how someone like both Sean Parker and Sean Fanning had access to technology and computers and things like that. Probably Sean Parker a bit more so, and how yeah, even though Napster didn’t work out, so many of them still ended up succeeding. And it wasn’t even just them. I think a lot of the people that worked at Napster went on to run companies like Sporkle, that online trivia game, it’s a bootstrap company, but does pretty well. And that was started by someone that came from Napster. So they had their own little PayPal mafia over there.
Tati Cirisano [01:12:06]:
For real, I did not know that one about Sporkle.
Dan Runcie [01:12:09]:
Yeah. And that was a business where some of the numbers became a bit more public, too, right around the pandemic, because they had this whole in real life version of the business where they were doing trivia license to bars and stuff like that, but they moved a lot of it to Zoom. And yeah, at least last I checked, they were at least cumbie. I was bringing in $10 million of revenue that was fully bootstrapped. So pretty interesting to see all the different ways that this has carried through. Is there anyone that we haven’t talked about that you think either won or lost that we should chat through? Maybe lost is interesting. I know we talked about the industry but is there anyone else you think that is lost from mean I think.
Tati Cirisano [01:12:51]:
In the industry side of things I feel like it’s more the artists that have lost than anything because labels made out fine with streaming in the end which is kind of the logical endpoint to what Napster started. And so I feel like the artists, I think Lars Ulrich was kind of right, so I don’t still I do know still not enough of the revenue actually makes it down to the artists and songwriters but it’s hard to actually point blame for such a complicated issue. So I don’t know.
Dan Runcie [01:13:28]:
Right. I think if anything the songwriters is probably the side of the business that I do think took probably the biggest hit and even now I feel like we’re still playing a bit of catch up because for so many years in the music industry the overwhelming thought was that the songwriting is the hard piece of the business. Anyone can do a cover or record a version of the song but the songwriting and the publishing was huge and when someone buys a CD there was a much higher share of the songwriting of the portion of the sale that went to the songwriters. But then once everything shifted to digital or you saw the downloads and things like that, it was time to rework a lot of these things. And that’s where in the 21st century we saw a lot more consolidation between the publishing companies and the record labels and it was often the publishing that sat under the record labels and not vice versa. And because of that you started to see a lot of that shift where now you’re just seeing a bit more of that catch up where songwriters are getting a bigger share. But a lot of it is from deep public advocacy and a lot of this didn’t really start happening until the past couple of years. And with that I think it’s probably good to start to close things off but talk about Napster itself and its journey from the end of 2001. So this is a company that has taken a few different iterations so I guess to talk about where Napster is today, this currently is still a company, but it’s shifted a different hands in it. A company that is operating in the Web Three space. And at least from more public reports that we’ve seen, the company had filed in the London Stock Exchange back in 2021, that it was doing $8 billion in revenue per month and did have a sizable number of users. Granted this was at the height of 2021 where a lot of the focus on Web Three had a lot more command and interest than it did currently. But this is where things are. So in some ways it is symbolic and there’s a lot of connective tissue of okay, yeah, a lot of what the origins of Dapster do make sense with a lot of the origins of what Web Three’s promise is. I’m not quite sure how that is right now in summer 2023 given where things are, but I do see that connection there.
Tati Cirisano [01:16:02]:
Yeah, I do too. And I also see it in the sense that Napster was kind of started by the early adopters of the internet. Right. And then the new Napster is kind of going to the early adopters of Web Three, so it does still have this kind of like early adopter technology, internet sense to it that the early Napster did. And I think it’s like a brand that people do have a good association with and a nostalgia for. So I think that makes sense. I also think it makes sense in the context of some of the things I’ve been saying about how Napster’s roots were really about sharing music with other people and it being something that you’re expressing yourself with almost. And I think that also seems to be where Napster is going a bit with making a platform that’s a bit more fan focused. So I think all those moves make.
Dan Runcie [01:16:55]:
Yeah. Yeah. That was one thing I was going to ask you about the brand itself and if there were challenges with disassociating the brand from the free Democratized mentality that so many people had with it in the late ninety s. And early 2000s that even if there is a fundamentally sound business, I wonder if part of that can still be a bit of a challenge in how that is reintroduced or how that is repushed. Because we’ve seen a few iterations of this and just to talk about a few of them. So after Napster went bankrupt, summer 2001, this company called Roxio ended up acquiring it in an auction they rebranded to press Play and that was supposed to be Napster 2.0. Didn’t quite take off. Then 2008, Napster then ends up getting acquired by Best Buy physical electronics distributor. Then they start changing hands a few times they merge with Rhapsody, then it becomes a part of Melody Play VR, which is this virtual reality concerts company. They then rebrand as well. And I believe there may have been another changing of hands in 2022. And yeah, this isn’t like a record label or a back catalog that changes assets in this way. It’s this thing that people believe has value, but no one’s quite been able to figure it out. And I know it’s not just napster. I know recently this was in the pandemic, but LimeWire as well had a bit of resurgence where I think that was turned into some type of NFT platform or something like that. So I haven’t heard much of LimeWire since that announcement of its rebrand as well. But I do think that some of these brands that didn’t necessarily have or were associated with having a business around them can have some difficulty with where they are. But again, I mean, I haven’t seen the numbers, I can’t speak to that, but that’s me more so speaking to the journey that the brand has had over the 20 plus years, not necessarily where it is or isn’t today.
Tati Cirisano [01:19:07]:
Yeah, and I would assume that also, maybe even the bigger challenge is that Gen Z doesn’t know what Master is. I would assume that it’s maybe not something that a lot of people are even aware of or know the backstory of or so maybe they don’t have that brand association at all.
Dan Runcie [01:19:29]:
Yeah, because I think when I think about it, it reminds me of a time of if I go back to what I said in the beginning, this tech stack that I had in middle school of things that are no longer part of the Internet, right. I’m no longer logging onto Aim, I’m not using a desktop computer that my parents bought at Cop USA, I’m not using a CD burner, I’m not doing any of those, so and I know a lot of stuff has changed since then that may not apply. Of course I was watching MTV back then, but I mean, that’s a whole nother thing. I know we recently did an episode on that, but yeah, I think it’s tough and that’s for me as someone that grew up with it. So if I have that association to your point, I can’t even imagine what someone that’s Gen Z is doing now. Right. Because that’s the whole thing with streaming. How do you get Gen Z to use the DSPs more and stuff like that? And is it more likely to be one of the other platforms that are out there as opposed to bringing back a brand and a platform that was started by some Gen X hackers and programmers? And with that I feel like we covered the bases there. Are there any other connections between yesterday’s industry of where Napster was and today that we haven’t talked about, that we should chat about?
Tati Cirisano [01:20:51]:
It’s a good question. I feel like we’ve pretty much covered all the bases. I guess the only other thing I would say that hasn’t changed and probably never will is that you can’t go against consumer behavior. And I think the music industry is starting to really adjust the way that it approaches emerging technology because of that, because you can’t go against what people are doing. In a way, Napster was just creating a platform for something people were already trying to do, which was illegally download music from the internet. So I think that’s a big lesson that’s still very true today.
Dan Runcie [01:21:26]:
Yeah, I would agree with that. And I think too, something you said earlier in this conversation, something that Sean Parker said several times in the conversations is betting on convenience. People will always pay for something that does offer them more of that. And this was one of the biggest things that we saw. It was very fascinating to see how so much of what we saw early days of Napster set the path for so many things, with how the internet evolved so many things, with how broader communications, social networks, other companies that likely were able to learn from a lot of the things that they did. And yeah, the founders were clearly able to win a lot. And I’m sure that everyone involved has had some type of benefit, even whether it’s Dr. Dre or Metallica, they’ve always continued to have some success there. So that’s the one thing I think it’s probably a good bellwether to keep in mind. If this new innovation, especially if you’re trying to disrupt or look into new models, especially with how people listen to and experience music, if it’s more convenient than what people currently have, then you may be onto something.
Tati Cirisano [01:22:33]:
I think there’s just so much reading of the tea leaves that you can do with Napster, which is why it’s still something that we’re making podcast episodes about and writing about and making documentaries about.
Dan Runcie [01:22:46]:
Yeah, indeed. Well, Tati, this was great. Appreciate you coming on and yeah, glad that neither of us have to download a bootleg song ever again and pray that it doesn’t mess up our computers. If you enjoyed this episode, please share it with a friend. Send it to one or two people you think would really get value out of listening to this episode. And while you’re at it, if you could rate and review the show that would be great. Rate the podcast on Apple podcasts, rate the podcast on Spotify, rate the podcast wherever you listen to podcasts. That helps make sure that the word gets out about capital and what we’re building here. Thanks again for listening. Talk to you next time.