"♪" "[digital beeping, electronic tones]" "[static hum] [keyboard clacking]" "I released an early Beta version during the summer and it spread quickly by word of mouth." "[John Stewart] Napster users can download musical selections in - in MP3 format." "MP3 is what's called a variable loss compression algorithm." "Here's how it works." "Napster and downloading distribution is the biggest excitement since Disco, Rap and the Beatles." "Its like new radio." "The majority of usage of the MP3 format, um, is for unauthorized [WORD]." "Yeah, I would like a CD player, but I can't spend $16 on a CD." "Napster is an evil, evil, evil, evil place to go." "...standing by live in San Mateo with more details on this story." "This last fall semester wore on hundreds quickly turned to millions." "With the program spreading across college campuses like wildfire." "I have never seen the industry under siege like this in the 30 years I've been in this business." "It's very important that the internet go the legitimate route instead of becoming a haven for pirates." "You don't think this is stealing?" "Not at all." "'Cause you're just getting a few songs that you find interesting." "The "N" word you know, appeared." "And we had to defend ourselves." "[Don Henley] Whether we like it or not," "Napster has changed everything." "And the record companies are sadly behind the curve." "At its peak, nearly 60 million people used the site to swap music files from each other's computers for free." "The whole Internet could be re-architected by Napster-like technology." "Now sure is the tip of the iceberg." "I think you're talking about the proverbial finger in the dyke." "Fuck Napster!" "30 years ago, the San Francisco Symphony released its music on LPs." "Then came cassettes." "And now of course, CDs." "But in the very near future, you may be able to download their music from the internet." "We met over the internet and we knew each other for like three or four years or something." "before we ever met in person." "Mm-hmm." "We met the first time as a result of Napster." "Shawn flew down from Boston to Virginia to meet with some investors that I set up a meeting with." "The doorbell rang, I was nervous for a brief second." "Kind of like going on a, like a first date." "Uh, with someone you're starting a company with." "And uh, and the door opened, it was Fanning." "He looked at me and he said, 'you look exactly like I thought you'd look'." "And I said, 'you look exactly like I thought you'd look'." "And he said, 'okay great, let's go over the presentation'." "So we jumped into the Powerpoint and went through all the slides, and then got in my parents' minivan and my dad drove us to our first investor pitch." "I take issue with people who say," "'Ah, the moment I saw it," "I knew it was gonna be fucking huge and take over the universe'." "They're all lying." "There's no possible way." "No one had that conceptualization in the beginning." "I don't even believe Fanning did." "You're saying that people are gonna download a client, put a client on their computers and they're going to allow stuff on their hard drive" "to be shared." "Most of the development of the web, up until Napster, was basically about information storage and information retrieval." "It wasn't about connecting people to people." "We're gonna, like, download stuff from each other?" "Like, I was like, nobody's gonna open up their hard drive like that." "Nobody's gonna allow their bandwidth to be used." "This sort of comes onto my radar." "And its really interesting." "No one is going to share an MP3." "That, that was my quote." "No one's gonna share an MP3." "And..." "Boy was I wrong." "I was so wrong." "Our system has been bilked, this time sharing system for, for about six months now." "Its been working and in that time, we've gone from getting one console to getting about six working now with six more due the rest of spring." "What is internet anyway?" "Internet is uh, that massive computer network." "The one that's becoming really big now." "[off-camera] It's a giant computer network made up, made up of uh, started it from..." "Oh I thought you were gonna tell us what this was?" "It's like a computer billboard." "[off-camera] It's not, it's not a, it's, it's a computer billboard, but its nation-wide and it's it's several uh, universities and everything all joined together..." "And others can access it?" "[off-camera] And it's getting bigger and bigger all the time." "I wrote a piece back in 1990, that, that it would shortly be the case that, that everybody under 20, at that point, would become native to a place where everybody over 20 at that point," "would always be an immigrant." "So I was a young teenager and I ran," "I was running a uh, Running a BBS, which was um, somewhat sophomorically titled," "'Realm of Darkness'." "But online in the BBS era, meant connected to potentially one, maybe a hundred other people." "Maximum." "And that, that's what was so profoundly different about the explosion of the internet." "Was that it was one network." "So suddenly, you could be connected to everyone." "There are now, a very large number of people that are online, that are young." "And you know, they have a completely different sense of how the world works." "And what power is and what, what authority ought to be." "I mean its a profound shift." "It's the difference between vertical authority, you know," "God-given physically enforceable authority and horizontal authority." "I've joked in the past, and Fanning and I would be like, where did you guys meet?" "And we were, we were part of the, you know," "Fanning and I were part of the same underground network of elite cyber criminals." "And it, it's basically true." "We met through IRC, um, as we both got drawn into IRC, we became more and more addicted to it and more and more fascinated by it." "Which made us fight much harder to retain access to it and then, you know, over time, it became our lives." "It took over our lives." "You're talking about revolutionizing the way we use computers." "And how we use the internet." "Oh absolutely." "Absolute..." "I mean it, this is, this is the, what's most interesting about it, is you're interacting with peers." "You're exchanging information with you know, the person down the street." "And we're just beginning?" "Oh, absolutely." "Sean Fanning's one of the smartest people" "I've ever met." "He was teaching himself how to program and he saw this really simple way to find music that he could listen to on the internet." "Here was a guy with no clout, no connections, 19 years old and he really changed the way we think about the internet." "It's hard to explain where things were at back then." "I mean I was 18, I didn't really," "I hadn't really seen much of the world." "You know, I didn't really..." "Um, I think it was, I mean the best way to say it is it kind of came from a very pure place." "[music]" "I was excited 'cause he was my first." "So I thought, you know," "I really did think he was gonna conquer the world." "Everybody does with their first kid, right?" "I was born in Brockton and uh... didn't have the most stable family." "Uh, you know, they made their best effort, but I grew up with a stepdad and we ended up in foster care a couple times." "Brockton was just a, uh, Brockton was just no good ." "[laughs]" "But uh, huh, yeah." "I mean, I don't want to," "I don't want to talk to much about like money situation, but like you know, we, we grew up like, not too well off you know." "And my mom and dad, there's five kids and my dad was a delivery driver, you know and they did the best they could, but..." "That's when, he got into sports when we moved down to the Cape." "Being into sports, I think it got his mind" "Um, so that life was a little easier for him." "I think music helped him too, like sports." "Every time he was on the computer, he had the radio there." "See what I mean, like he was always listening to music." "So uh, there's really no surprise there that he-he-he ended up, in, you know, thinking of something that made sense to him as far as um, the music and the computer combined." "I was fortunate to have an uncle who was into technology and gave me my first computer." "There's a, there's a lot of insecurity that comes around being uh, dependent on others." "You know, to get by and so as a kid, it sort of influenced my social uh, confidence at school." "We moved around a lot." "Um, there was also kind of a," "I didn't feel as connected to my family, intellectually." "And so, um, I didn't really have many others at school either on that front." "So I was sort of, feeling a little bit uh, lost." "And displaced at times." "Going online and finding people who had the same interests or I could learn from and where there was no, your reputation was your own." "It was not about like, you know the, how well off your family was, or how well you dressed." "Um, or how well you spoke or body language." "It was about the merit of what you were saying and I think that... for me, was just intoxicating." "In the early days of the web, you know the first time I ever saw music that was down-loadable was a song that I put up on my homepage on campus internet." "It was an MP2 file." "I guess that would have been '93, around that time." "And there were very few people out there" "Because you're changing it into another file format or have a special card t o play it." "For anyone who had been downloading stuff it was such a colossal pain in the ass." "It's not funny." "Uh, even for technical people, it was uh, a process." "And, and a constant, like trying to get bits and pieces of files and reconnect them all together." "And that was kind of a pain in the ass." "You know, 1998, was when it really felt like okay, this is real." "This is the way I'm going to listen to music." "It became clear that the computer was going to be the place that we would store our music." "Then you started looking for tools to get the music into the computer, tools to play it back, tools to manage it." "I remember the first MP3 I ever downloaded." "I remember the first time I ever, you know... basically, ever played a track from the internet." "And I remember just thinking, even though it's just information it's just audio, there's such a crazy amount of emotion." "The fact that you could kind of share emotion over the internet, was so, it was really wild to think that..." "Something so important to you, you could just trade so freely." "So I think it was um... you know, its, its hard to quantify how important it was." "I was a freshman at Northeastern University in Boston." "One of my roommates was into MP3s." "Yeah, he would skip class and sit home and download music and he was always complaining about how unreliable the technology was." "Where was his, what were his favorite bands?" "I don't know." "He listened to a lot of really weird stuff." "I had very incompatible tastes with him." "But, um..." "Like every roommate in college." "Yeah, which, it, that's why it was a struggle." "I didn't want to make it any easier for him to find that music." "But no and he, you know, he was complaining a lot and that sort of signaled me that there was a potential uh, there's a problem that could be solved and I just looked into it and um, came up with the solution," "which ultimately became Napster." "It felt like, you know, this way of sharing media between people could be used for sharing anything." "We started with music, but it made sense that it could work for anything else." "It also felt like..." "This whole model f or sharing media was superior to like, going and buying an album." "Being able to uh, both...um..." "Buy tracks as singles or share them with your friends and find stuff your friends like, uh, and then being able to uh, you know..." "Basically, to have access to the entire universe of recorded music." "Where independent creators could publish directly." "It just seemed from every, in every way, it seemed like a better system." "So, I would spend a weekend working on it" "You know, every time I had to go back to school," "I'd kind of drag myself back." "Two days would become three days." "I'd miss a day of classes," "I'd miss two days of classes." "It was just becoming more and more difficult for me to get myself back to school with any enthusiasm." "My cousin was actually driving me back to school and when I got there, I thought about it and finally realized just what a sense of relief I had when I thought about the idea of just, just leaving." "And that was the last time I really ever came close to the campus." "Didn't pick up any of my stuff." "Didn't tell my, my roommates." "Just, just went back and I remember just feeling so excited." "He came in and he was just like," "I need to talk to you guys, its really important." "And I go, okay, Shawn and so he came in and uh, he says, uh..." "You're not going to be happy about this." "And he was looking at me and I'm like what?" "And he was like, ' I'm gonna drop out of school'." "And I said, 'oh no!" "'" "Why would you do that?" "And he's, you don't understand." "I have this idea, I have to go with it now." "I have to do it now." "It's now or never." "I feel like this is the time for me to do it." "And I don't think you'll be disappointed." "I actually spent time working in Hole, Massachusetts, which is about 45 minutes south of Boston." "Um, just, this converted restaurant." "Like three desks in the place." "I just sat there and worked on it." "Ummm..." "For a few months until it was actually building a user base." "I remember I got to go up and hang out with him and he'd be like pizza was everywhere, and ... he was just jamming out to Led Zeppelin." "He'd like sleep at the office, on the floor." "He'd like, he never left his computer, you know." "Its not hyperbole, it was an actual closet." "I think he might have some pride or just want something more, but for me, it was, I was having so much fun building it," "I just didn't care." "You know, I get occasionally a little bit uncomfortable when people would show up and you'd be crawling out of, you know, your sleeping bag." "So Fanning had written his version one and being not professionally trained, uh, not trained at all..." "Uh, and just, just having his ideas and ah, here's a computer and this wonder for learning and for for absorbing, uh, we'll just go and try and make it work." "And it didn't work." "Like every, everyone's first hello world program." "His was file sharing stuff." "Didn't work, so listen to the group for help." "And I was there." "At the start was pretty much myself and a lot of people online that were helping out just to make it work." "Helping fix problems, stuff like that." "He sort of asked, hey, how," "This thing keeps crashing." "What do you think?" "But unlike anyone else, he wouldn't let us see the source code." "I was like, oh really?" "Well that sounds like it's probably a - a buffer overrun or an unchecked battery condition." "Or something like that." "And show, show us the code and we'll fix it for you." "And he was like, no." "Okay." "This was kind of cool because it came out as a challenge." "It's like, I'm not going to tell you, but I'm going to keep soliciting for help." "So, we're all hackers." "This is what we do." "We, you know, [stammers] establish Commercial Vendor X does not want to share anything with us." "Yet, we are going to find a way in." "Just the idea that we were gonna build the first decentralized file system." "I think the patent, actually, the Napster patent uses this terminology." "You talk about a distributed file system." "Since 1998." "We've been discussing it with various different people in our community and we've been told by a lot of, you know, pretty experienced technical minds that the technical challenge associated with a decentralized file system was actually too difficult." "It was believed that this wouldn't scale." "He would load up this app and it would basically connect to one of our servers and ask for a Napster server that would be accessible in like the lowest possible load." "Allowing you to search the uh... file names to find, you know, what, whatever you know, noncommercial uh, legal, legal music... uh, was available." "But you would basically have a, a chance to kind of search all, some of all those files that were out there, that once you've decided you wanted one, it would actually, um, facilitate the connection," "would happen directly to that, 'that um, that source." "It's funny that a lot of the file sharing technologies are stressed when people talk about Napster." "But as I said, I mean Sean and I met through IRC, which is like a chat community, you know, a chat based community." "And that's a huge part of like why we created it as well." "You know, just wanted to create a way to meet people through music." "Sometimes that's overlooked and yeah," "I think that you know, what we're providing is just a way for people to share their personal material and meet people with similar interests and communicate with them." "That's exactly how people discover music in the first place." "You know, you find out about music from your friends who maybe listen to something similar to what you listen to." "And they turn you on to something completely new." "You go out and buy the CD." "That's how people experience music and that's a big part of the experience." "But this was the first time I know of, in mainstream history, where people had a social life online." "And then after Napster went down a few years later, started hearing about Friendster." "Myspace and then of course, Facebook and all that." "But, but um, everyone just thinks of it as being the file sharing technology, but I really think that it was the seed of that stuff too." "We were basically, you know, trying to create a platform that would allow music to be shared more widely uh, on a larger scale than ever before." "That would um..." "That would galvanize enormous excitement." "Would, it would re-energize, re-energize the conversation about music and, and ultimately that would lead to a golden age of music." "We knew it was a long way off from all the music being available digitally." "I mean you opened up Napster and there it was." "Its difficult to describe to people who weren't experiencing at that time, how much material was suddenly available." "I mean there has never been a time before or since that you could, you could get as many different things online." "And experiences, many different kinds of music." "And of course, what people forget is, what was interesting was not t hat they could get the latest Madonna album for free." "It's that they could get all different versions of recordings of particular music from all the way back to the beginning of recording available in this library-like forum." "The vast majority of which, was not accessible commercially at all." "And you know, I just felt like this was, this was one of the great moments in human history." "And I still do." "But of course, uh, great moments in human history usually have uh an opposition and it is exactly uh, proportional to their greatness." "So it was in LA, it was the Four Seasons Hotel." "It was all of t he top label heads." "And a lot of them knew that we'd filed a lawsuit against this kind of rogue website, but not too many of them were paying attention to what it was." "So I set up a computer and I said, 'okay, you know, Tommy what's your, you know, give me your latest single, or Michelle, what's your latest single, you know." "Richard, give me your latest single." "Literally, it, we played like stump the Napster." "And it was, [stammers]" "It was quite a sight." "All the heads of all these record labels freaking out that a lot of pre-releases even, were, were on there." "Um, I would say, that was a pretty big aha moment." "We saw the clicks of the numbers and that's what they were downloading at that particular time." "That was shocking." "Not that it wasn't happening before, and not that we were naive." "But we actually saw it." "And that was startling." "For all of us that were at that meeting that day." "If some day soon you can store your whole music collection on your hard drive, instead of your shelves, what's going to happen to record stores?" "I thought that the way that people got music for the last 50 years worked." "You went to the record shop, you bought a record, you took it home and you played it." "You loved it." "You went and seen the guys live," "Everybody lived happily ever after." "There are no record stores anymore." "Or hardly any, you know." "Amoeba on the West Coast." "And there's a few, a few in England." "But it's gone." "I mean I, I never thought I'd live to see that." "Great stores like Tower Music are gone." "This business seems like it survives on a lot of older albums and reselling of that, so, this one, we definitely saw new CDs and new albums not being bought as much, but the bigger stores, it totally destroyed them." "'Cause no one wanted to go to the store anymore." "They can just get it on their computer." "Or punch in whatever thing they want." "I mean even iTunes now is destroying the music industry." "'Cause of that, people can buy the song they want and listen to it for one time and that's it." "It is now the number one record in America..." "[ 'Why Do Fools Fall in Love']" "The fifties was a singles business." "The sixties, mid-sixties is when the albums really started to be important." "And before that..." "A, a hit single, to an artist was free promotion." "They did, it wasn't, it wasn't a source of revenue." "The source of revenue came from the fact that if they had a hit, the could get a couple of thousand dollars a night, more." "Good morning, this is Ron Lundy, how you doing on a Friday morning in the greatest city in the world." "[jazz music]" "Little Manischewitz." "From my perspective, uh," "I believe that the point of labels is to, in a sense, act as a filter." "In that regard, if Blue Note had signed an artist, you would feel, well that was an artist worth listening to." "Because it was on Blue Note and they made great records." "All these major labels, the ones that existed and the ones that still exist, were started as phonograph companies." "RCA Victor was the Victor Talking Machine Company." "EMI was the gramophone company." "Columbia was the Columbia Phonograph Company." "And then when Rock-n-Roll and LPs spurred the sales of vinyl, they figured they didn't need to make furniture anymore." "Which was what they referred to it as." "Technology's been very beneficial to the record companies." "Before." "78s, when 78s became 33 and a thirds, you could sell all your music again." "When they became CDs, you could sell all your music again." "When the CD was first initiated, it was a true boom at that particular point." "The eighties were a very, very fertile period for giant music sales." "Not as much as when we got to the nineties, which it was commonplace to sell 10 or 15 or 20 million albums." "You know, the record companies, in the '80s had sort of uh, eliminated their technology departments." "Their engineers, and pretty much seeded it to the electronics industry." "All of a sudden, technology and how music was gonna be recorded went somewhere else." "It was sorta, kinda the beginning of the corporatization more of America." "AM was getting acquired, Island was getting acquired." "A lot of the great labels that were independently owned were falling away and getting put into the landscape of the corporations." "Once you had CDs came out, where then in a digital world where the copy is as good as the master." "And it's amazing that they didn't recognize that there was going to be a huge change." "I think it came back and hit them with a, with a wallop, you know." "Um, with the internet." "The MP3, digital music for the quick download is probably the most substantive change in music since maybe the advent of digitalized music or the compact disc, or maybe even the LP." "It has changed everything." "Music is nothing but algorithmic processes right now." "Every time you encode it, you put it through an algorithm, you put an envelope around it, you zip it up, and that's it." "This is the first time technology actually attacked the existing system and started to take it away." "The Music Industry was fairly constrained for you know, 75 to, you know, maybe even 100 years in terms of like, how music was found, sourced, developed, created, distributed, marketed, promoted." "Uh, and it was a fairly locked you know, paradigm and uh, Napster created an avenue for consumers to step out of that." "Which was superior in almost every way." "Um, you know, it offered, you know, greater convenience, obviously." "A much improved price, choice, you know." "All of these things really conspired to you know uh, produce an amazing consumer experience." "Welcome to Valley of the Dollars." "The valley and the entire Bay Area, in fact, are at the center of a revolution..." "This was the you know, uh, height of the bubble." "Uh, in the valley, you know, uh, in, in the Bay Area and in San Francisco, um, there was a euphoric amount of optimism." "Anywhere that you went, um, people were happy." "Because everybody thought that they were gonna be filthy rich." "Whether they were involved in a startup or not, um, it, there was, it was a magical time." "You thought you would be filthy rich." "I actually never did." "Oh come on." "Uh, I actually never did, but anyway..." "Okay, sorry." "It's your story." "So basically, you, you know... you would, you would uh, that really wrecked everything." "Sorry." "You can start over." "Yeah, let me start over." "So uh..." "Did you pass around fliers at, on campus, or...?" "No, it was completely word of mouth, it was..." "I think we spread it initially through IRC, which is Internet Relay Chat." "Its basically a network of people who just sort of congregate around different ideas and we started a little Napster community." "And they just sort of spread the idea." "It started spreading through you know, college, you know, universities and," "The first point at which it started to really take was, there was a, an article published." "It was one of these internet news sites, it might have been ZD Net." "And you know they touched on the legal issues, but we weren't sued at the time, we were still working in Massachusetts." "And uh, that spurred a huge response of downloads." "Before that, it was, getting a good response and it was spreading somewhat, but um, that kind of kicked off the whole you know, period of insanity." "With the, the business side of it, we eventually took money from John Fanning's friend, Yosiamo." "Sean Parker and I moved out to Northern California." "You know, we uh, hired some people and it became a company." "At the beginning, it was just like Parker and Shawn and he surrounded himself with a bunch of friends from Cape and they were all good at computers and they're just all you know, it was just like" "basically having a bunch of teenagers in one place." "It was pretty cool." "The first time that I typed a search term into Napster and saw the results came back," "I think it was The Rolling Stones." "Uh, and I kind of pushed back from the desk and I was just like, whoa, like what just happened?" "Back in '99, over dial up, shitty browsers, web pages taking seconds to load, here was a fucking fast ap." "That's what took me from typing to submit, to phhht!" "What happened after that?" "Web pages were not doing that at that time." "And you talk about my attraction to it and, and moving from Chicago to the Bay Area, kind of on a dime because you know, of what I saw in the technology," "I think you could probably, to a man, go through the early people that were there and they were drawn to it, almost like a tractor being... because it was this emotionally true thing." "So distracted, you had to leave." "Right, whatever you were doing right there, you just left." "I mean a lot of early employees were, it's like, you did, undid what and what and what?" "And changed all these things, in your life and..." "We lived together in San Mateo in a small apartment at first." "Like I said, he was bringing when they first got out there, they didn't have like apartment stuff, so it was just kind of like an Irish flop house, you know." "Like a bunch of people sleeping on, you know, blow up mattresses and things like that and you know." "Fanning and Parker were both trying to explain to me what Napster was." "I never used it, never downloaded." "And at the time, there were about" "30 to 40 thousand registered users, so it wasn't that big." "After asking a million questions, and, and hearing from both of them..." "Music will be ubiquitous you know, you'll be able to get it on your cell phone, you'll be able to get it on your stereo, you'll be able to get it on whatever the device of the future is." "And you'll be able to," "I think people are willing to pay for convenience." "I had the 'aha' moment." "And I knew at that moment, that it was gonna be." "It was gonna be huge." "There was no doubt in my mind." "And it was a matter of..." "Could we..." "And-and-and then I started to change the language I was using." "Could we, keep the servers up?" "Could, could we make this thing scale?" "The area where we were in desperate need of help, which was making the servers scale, to support all the people who wanted to use it." "Was his weak spot as well, so he and Jordan worked pretty closely together." "What I remember most about that time is sleeping under our desks." "The loud music." "It was all about making small, incremental wins." "With the code and with the technology." "It was..." "It was a rocky few months." "But every time we had a little win, it was a big party." "The night Ali and I figured out some seriously awesome stuff, uh, one of the capacity limits we had was the ability to index more than a million files per server." "So four to eight thousand users could go on the server, uh, before the operating system, which was Linux, at the time, would drop to its knees." "It was an amazing night because we got it working." "It was probably on the tail end of one of our two to three day stints." "Our, our binges, and maybe, it was, it must have been after midnight." "And Ali and I were just thrilled." "We put on shades, he put on his hat backwards and, and I was, I got up on the table and I'm like ooh-ooh-ooh and he was like this is this amazing celebratory moment." "And there was one picture in particular, where we labeled it one million files!" "Yeah, we had those kinds of moments all the time." "By, I would say, by December of '99, we, we kind of nailed it." "By then there was a bunch of really technical stuff that we did, that caused it to be able to scale." "And it was just a matter of adding as many machines as we could at that point." "Just in terms of the amount of awareness and exposure that the work we were associated with um, gained was meteoric." "So in like a four or five month span, it went from 30,000 registered users to over 20 million." "Total users count now," "I think we just recently passed 20 million users." "AOL has 23 million." "Even as it really blew up, I know on the, on the engineering side we're watching these numbers go up, the simultaneous users go up and up and up and then there's more and more press coverage" "but it's still a small company in a bank building and uh, I think some people had a better understanding of kind of, the significance of what was going on than others, but day to day it was very hard to comprehend." "It was one of the first times in history where you had this sort of pure youth revolution." "Young, inexperienced, relatively unsophisticated, but smart kids could create something entirely out of nowhere." "And revolutionize an industry that they frankly, knew nothing about." "And had no relationships in." "And this all happened, this you know," "I, I think probably six months passed, uh, before we ever had a conversation with anyone in the, from the music industry." "And it wasn't, it wasn't because we didn't want to have a conversation with anyone in the music industry, we just didn't know anyone in the music industry." "that there are so many wins with digital distribution that ultimately, you know, once we have the opportunity to work with artists and work with the labels to discuss, you know, what models are viable and what are not, we can come to a conclusion" "and find a good model that works." "There was this, this moment in time when you had someone like Shawn Fanning who had the idea, um, was smart enough to build it, but didn't know enough about the industry to know that it was just an impossibility." "Right, just not something that was ever gonna fly." "Um, but then at a time when you could get tens of millions of dollars in venture capital, to back something which is clearly copyright infringement." "Right?" "That was the amazing thing" "You know, I remember being in IRC with Shawn once upon a time and him telling me, you know, we're raising 70 million dollars." "And my response to him," "I couldn't type it fast enough, was don't take the money." "You don't have a business." "You know, this is, you cannot build a business on copyright infringement." "Napster was operating in a legal gray area." "And this very important law, the DMCA, which was an amendment to the copyright act, set up a series of safe harbors for uh, different technology providers and telecommunication providers to immunize them against lawsuits from the content industry." "I believed pretty firmly, and still believe to this day, had it, had, had Napster been fully legislated at that moment, that we would have qualified for I think it was Safe Harbor," "I want to sway it was Safe Harbor D, which provided protection for indexes." "Like Yahoo and Alta Vista." "From the very beginning uh, like anyone who looked at Napster, you were concerned about the rights issues." "And I knew Jeff Berg at ICM." "Which at the time was one of the biggest agencies in Hollywood." "[music]" "And I called up and said, hey Jeff, there's an awesome company up here, it's quite disruptive." "Can you go gather up some of the music lawyers?" "So we went down and had this meeting." "I remember Mo Ostin was there, or Mo Ostin's lawyer." "And a couple of other people." "So we ran in there and said, hey, we need to come to an agreement here." "It should be easy because you're not going to stop technology." "Um, and tell us what you want us to do." "We want to cooperate." "And um, and guess what?" "Nobody really cooperated." "And it never got resolved." "It's still not resolved, it's 12 years later." "And that's pretty pathetic." "Ultimately, we were gonna have to figure out a revenue model." "And when, by the time we started talking to the labels, we were more than happy to turn the whole thing over to the labels." "And basically, become their digital music distribution service." "We always wanted that." "I recall we contacted them and started having conversations and we had serious conversations in about September." "Of 1999." "Explaining that there was a problem here and they needed licenses, but it would, it would be great for them to be talking with the companies about licenses and so on and so forth." "And when it became clear that they were just stringing us along and they really had no intention of actually negotiating licenses, we filed a lawsuit in December." "We're being charged with con-con..." "Contributory..." "Contributory and vicarious infringement, or something to that effect." "Basically saying that since you know about it, you guys should be held liable." "They're claiming that we did, but we can't really discuss anything..." "And yeah, did we know?" "Yeah, we knew." "But..." "We also knew that..." "This thing called the internet existed." "and it was new." "And as it evolved, these things were going to start to happen and things were gonna have to change." "And the way in which the world worked was gonna have to change." "And we were just the catalysts in that." "When Indiana University banned Napster, student Chad Paulsen put up a website in protest." "Within weeks, over 13,000 students had joined Paulsen in his effort to free Napster." "It's not really necessarily Napster itself, it's the software and the ideals behind the program." "It's like going to a rock concert, you know, just listen to a new bands, listen to up and coming music and Indiana university is just shutting it down." "I U and many universities nation-wide, maintain that they banned Napster because it put an enormous strain on their internet connection." "What's up man, I'm with MTV News." "I was wondering if you had any MP3s on your computer?" "So uh, how many MP3s do you have on your computer?" "About 600." "Maybe like a hundred or something." "Uh, six or seven thousand." "Come again?" "Six or seven thousand." " For real?" " Yeah." "How many MP3s you have on your computer?" "Uh, probably like 300." "For real, where'd you get them from?" "Uh, truthfully, most of them from Napster." "Are you a pirate?" "Well, I don't know." "My roommate does the whole computer thing." "Margaret are you a pirate?" "What we had was basically a nuts and bolts capacity issue." "Our internet connection to the outside world was being taken up nearly 61% by users of Napsters on, Napster on campus." "So, we had to decrease that significantly, or we had to ban it." "It very much felt like now everyone was coming to grips with the fact that this is something that they're going to have to deal with." "I think at first, they were trying to..." "You know, they were really trying to be like no." "This is just not going to happen." "But now it's obviously so big, it's out of their control." "For the first time, the audience has gotten to the technology before the industry." "Before the music business." "Why are the record companies afraid?" "The record companies are afraid because they'll be forced to share." "File sharing and this whole new notion of people getting music through the internet, the downloadable distribution, to me, I look at it as the new radio." "I mean we care very much about artists and so we think that there is a solution to there's, you know, a way that the technology can be adapted to-to-to benefit you know, all of the, the parties" "involved." "The artists, the industry and the users." "We think right now, it's definitely a viable system for all three and we think it, you know, it can be modified and can be improved to be, you know, even more valuable." "You know, there were these, these iconic artists who we'd grown up idolizing." "Some of whom wanted to kill us and some of whom, thought we were the, the answer." "I'm all for technology and its interesting, the exchange of music, but the way that it's set up right now, it's theft, basically." "Pure and simple." "I'm bootleg proof, you dig." "I, I got people that you know, go around the world you know, smashing on stuff like that." "You heard about the I Love You virus?" "My peoples have something to do with that." "I mean I can just do that to 'em if I have to maybe." "I think this aspect of technology is really gonna bring uh, a lot of different angles of life and commerciality out of to the corporate world and give it back to the individual." "Just give the fans the music." "You know what I'm saying?" "Uh, the internet is just a way for you to just ..." "Go right into it and you give it to the fans." "It's great, isn't it?" "Isn't that good?" "Isn't it?" "Napster is, is bull[beep]." "Is that that internet site?" "That's where there's the, the... trading of music." "We don't, we don't really know enough about that, so we can't really, not really into computers." "It's bringing true democracy back into the music business." "And it's changed, it's forcing the artists to change the way that we relate to the consumer." "A musician goes out there and works hard and pays their dues." "Why would you expect them to work for free." "There's no doubt, uh, in my mind that the, the future of music is free." "to stop fans from trading music on the internet." "Even if it's not through a company or a website, fans are gonna trade music on their own." "There's no stopping it." "You know, that, this revolution is, is already taking place." "It's now, this is now and we accept it and we get it." "And we're gonna grow with it." "And it's just another addition to technology and I'm a technology freak." "What do you say to the artists that are so, you know, just so loving it the, the new guy, the, like the Fred Dursts of the world, who just they think it's the greatest thing for music?" "Um, well he's a moron to start with." "Okay, alright." "What more needs to be said about that?" "Nothing else, I guess." "We get a lot of bands who, who send us email and say, you know, we've been, we put our music up on Napster, we, we started sharing it and now you know, we, we see a hundred other people that" "have it, they're listening to it and eventually that translates into more people at their shows, selling more CDs." "There were so many success stories, dispatch was a great one because they were, you know, a band and they were touring and their CDs weren't for sale." "And some of these places they were playing for the first time." "[music]" "I think the first time I ever yeah, the name Napster was backstage after a college gig where we'd played Boston and New York" "I bet for five or six years." "Just over and over and over again." "Had finally built up our fan base to like 500 people a night or 700 people a night and then we flew a red eye to play a college gig in California." "Halloween gig, or something" "Had never been West, ever." "And then there were more fans there and they knew all the lyrics." " It was..." " Yeah." "And there was no, no radio." "And no press and no one knew except everyone." "Yeah, it's kind of like uh, instant distribution." "You know, without the, without the big wigs on top figuring out it's like this" "But its not like we don't like big wigs, 'cause I've seen you wear big wigs." "I'm wearing a big wig at the moment." "Its a huge wig." "So for an independent band, with no uh, ties to any label to get to that scale just by free sharing, it was pretty clear that it was um, pretty powerful and they were really open about" "the gratitude for that." "Napster was absolutely the, the most well known and most chatted-about company in the tech world by far." "It was pretty cool working at Napster" "Like if you showed up, you were kind of the star of the party." "All you need was a Napster you know, sticker and you were probably gonna either get a free drink or, or get laid." "Uh, one of the two, so it was actually a pretty awesome time to be associated" "Ron has a party on a Friday night." "We learned that day that Hummer Winblad had invested." "We had a large gathering for our limited partners in the Angel Investor LP funds." "You had Warren Buffett, Dana Carvey," "Mark Andriessen," "Schwarzenneger's, Schwarzenneger's Hummer." "Schwarzenneger's Hummer." "You had Shawn Fanning, Sean Parker" "Larry and Sergey of Google fame." "Not then, but now, Google fame." "And uh, I can remember you know, how, how taken the Google guys were by the Napster guys, so to speak." "And I can remember thinking you know, good luck with that search engine thing." "I hope that works out for you." "They actually said at one point like uh, something to the effect of how they were envious of the Napster brand and how it's so cool." "And I'm like, but you guys are you know, doing great and they said, 'no, but it's nothing like Napster.'" "And I'm thinking, in my head like uh, you have no idea." "You have no idea." "We actually didn't imagine that, that what they would do was total shutdown." "We figured, like we as naive technology guys went this is really cool." "So the music business is gonna try to find some sort of business model around this, right?" "Wow, downloading music for free is awesome!" "What the hell is that?" "I don't know, let me check [crash]" "Freeze, F-B-I!" "Down on the ground!" "Down on the ground!" "Hands, let me see those hands!" "My initial resistance to the new services created on line was based on the debate having been framed in terms of piracy." "Being labeled as such by the record companies, it understandably sent a ripple effect of panic throughout the artistic community." "they thought we just had some big hard drive full of music." "And we were just you know, pirating everything." "Like as if we'd gone and [stammers] as if we'd sat there and put CDs and ripped them for months and months and months and months and then lo and behold, we had the entire library of all" "recorded music and we were giving it away." "Our users are exchanging content um, and we we at Napster never come in contact with any of the music that people are, are, are distributing." "So..." "And not only that, but we're also fully compliant the Digital Millennium Copyright Act, which requires us to remove infringement links when recording to us." "We were used to piracy, but there was a quick remedy." "The R-I, double A" "Recording Industry Association of America would get in touch with the FBI, they'd do a raid, they'd take it and then four blocks later, they'd go set up again." "So we dealt with, with piracy." "But it was piracy in the hundreds or the thousands." "It wasn't piracy in the millions and tens of millions and ultimately, billions." "That's scary." "This is a company that is building a business" "You know, they've got venture capital money." "They're out on Wall Street, looking for financing." "This isn't, you know, just a, a sweet, young guy, who's looking for some fun in his college dorm room." "They're building a business." "By facilitating the stealing of artists' music." "A lot of the uncertainty, I think uh, the, I'm sure, plenty of lawyers and others, all kind of put the, the industry in a place where it felt like it needed some protection or some control," "to at least exert control long enough to figure out what to make of this and play it safe and I think unfortunately, that led to the missing of really big opportunity." "I can get that the labels were afraid, it was so new, it was so fast, that, and, and they have control issues." "with legal agreements and this thing was like a hacker." "It was, you, there are no nation state boundaries on the internet." "Right?" "You can't, laws don't really apply to them unless you can find them." "For me, it was not about piracy and consumers stealing intellectual property right." "For me, it was like how great must music be that these people are coming together and sharing their taste of music." "And the press about Napster was controversial and misleading." "It was all about control, power and how can we protect our existing business model." "I think Napster had 60 million customers" "Uh, or people you know, which were... getting their music through Napster." "And uh, that seemed like an incredible opportunity." "But because the major eight record labels were unable to come to any terms with them, they essentially burned it, burned it down." "I think like any, anything in the world, those big innovations rarely come from the big companies that are already dominating that game." "Because it's not in their interest to completely reinvent what they're doing there, so they become actually, very complacent." "The music business is a great, great example of, of that." "Of just complacency being a total uh, death sentence." "The five global heads of the companies at the time most likely, couldn't agree that today was Wednesday." "And for different reasons." "People had different ideas people had different visions and no one was used to this and the word ambush happened a lot of times in the conversations that we had with everybody." "The record business was kind of ambushed." "However we want to look at it." "And you gotta deal with an ambush." "You dealt with Pearl Harbor, you gotta deal with it, right?" "There was no awareness that something like this was coming." "Uh, even though uh, a lot of the technology of the internet is actually based on peer to peer functionality." "It had never been used in this way." "This was something entirely different." "This was all the content in one place." "It was an amazing experience and everything was up there." "Everything." "But things change." "And you gotta change with it." "And to stick your feet in the mud when the world is tearing by you like a bullet train, is just laughable." "And you get real old, real fast." "And you got into the, kind of the, the bin in about one, one year, you're like yesterday's news 'cause you didn't keep up." "Some of those labels got caught out there." "Some of the artists got caught out there." "'Cause they have an older school look at the music industry." "From the moment that Hank came in, he was looking at making deals and he did everything but turn cartwheels on" "Hollywood Boulevard in order to get them." "I think it was, you know, we will not negotiate with terrorists." "You know and I think, you know, that's literally how they perceived Napster and I think you know, in most things, um, you know, you need a hero" "And before you can find you know, that hero, you need to clearly identify the villain." "And we were that." "All of a sudden, one day" "I got a call from Cliff Bernstein saying, they're playing I Disappear on 30 radio stations." "I go, how can that be possible?" "We haven't even finished it yet?" "And then we sort of, you know, looked into it and traced it back to some company called Napster." "and we were like, huh?" "It went straight downhill from there, boys and girls." "[laughing]" "The moment, the quintessential moment where I knew it was out of control was uh, when Metallica delivered Napster user names for us to block." "The heavy metal band, Metallica has been most vocal in its opposition to Napster." "and drummer, Lars Ulrich even plans on delivering a truckload of paper to the company, listing people who use its software to share unauthorized MP3s." "Thus, kicking off Metallica's much-hyped," "Monsters of Miniae filled legal battles tour." "We could, we couldn't believe how, you know, what, what, how, how crazy this was." "You know, Metallica was coming to our office to deliver boxes full of," "I think it was like 260,000 names of infringing users." "Who were violating Metallica's copyright." "Uh, they could have put it, on, on a old three and a half inch floppy disc." "But no, nope." "They printed them all out on paper and not," "What Metallica has done is harvest user names from the internet." "And from the Napster site." "Now anybody can get that it doesn't necessary uh, correlate to uh, to actual legal names of Napster users." "They simply downloaded anyone who has a Metallica song available on the Napster site." "There you go." "Now, once again, we're not going after these people specifically." "What we're merely doing, is giving Napster the information that they thought that we couldn't gather." "Which is basically, real people downloading Metallica master songs." "Not bootleg live recordings." "What will they do?" "I think maybe if we could get the Napster people out there, they could take that question." "do not go anywhere near the front of the office." "Because it's gonna be, you know," "And uh, we were like opening the windows, trying to look out to see what was going on." "Finally, Shawn and Sean are like, this is done." "And Fanning and I decided at one point, just prior to Lars arriving, that we would sneak out the back door of the office and run across the street and watch." "Just watch this whole spectacle." "And we were like just laughing, hysterically." "There's a podium set up on the sidewalk." "I mean 25 mikes from news organizations to get the pearls of wisdom and views of Lars Ulrich, who then takes a few questions, but you know, he's got to actually deliver the names and so," "there we are, uh, Bonnie and Clyde, in the elevator, uh, where if you had a shot of it, the doors closed and it's Howard King and Lars Ulrich and a couple other thugs." "And the doors closed and Lars turns to us and says, 'hey guys, nothing personal'." "At which point, the door was open to be like, well why didn't we talk to each other about this?" "I'm sure it's not the end of the story," "Well I think he probably assumed that he'd walk into a dark, expansive room and you'd be, you know, sitting in a chair with like a, a cat." "Do you know what I mean?" "With like TV monitors in the back and I mean the reality was you know, that this was a really low rent, shitty office building with a bunch of kids running around in it." "And I'm sure he was blown away." "But I will tell you that a few minutes ago, when I dropped off all the names that they asked for uh, I met two really nice guys up there uh," "I put a human face to this whole thing Napster and we had a very civil, very cordial conversation for ten, 15 minutes.They said their side," "I said my side." "And its sort of like the ultimate thing in just American society, agree, disagree." "Coming from two different points of view." "But you know, what, to me, Napster keep trying to do, is try to sort of you know, drag it out and make it about Metallica and their fans or make it you know, why didn't Lars call us personally?" "Come on, you know, like let's stop bullshitting each other here." "I think it's about the most unhip thing that I've seen a big rock star do." "I would imagine a Celine Dion or something might be the first one out there, but uh, but nobody, uh, nobody that uses Napster," "I don't think there's probably any" "Celine Dion songs being shared." "So that's probably uh, that's probably where it's at." "There's one picture of this guy, uh, with a Metallica t-shirt and, and standing right next to a guy with an AFTRA t-shirt." "It's like this is, this is oh my god, this is out of control." "This is the vortex of this crazy tornado hurricane that we're, we're in the center of." "The center of the debate." "Do you agree with these guys?" "Uh, depends on which guys you're talking about," "I agree with Metallica." "That's cool." "And you know, it's true, for some reason Metallica had decided that they were going to be the lightening rod for all these other artists, who were like, you know, not quite sure what they thought of the thing." "Um, and, but they were you know, they were angry." "Like Metal was supposed to be about like being renegade and being like, anti-establishment and-and-and, you know, sticking it to the man." "So it was kind of ironic that this metal band was suing us." "It was like Metal and like Gangsta Rap." "Like the two least likely people to go after us were the ones who were suing us." "Napster is stealing from us." "Straight up." "And I'm gonna fight 'em to the death." "[loud boom]" "Any time things go to Capital Hill, you know that the, the shit's really hit the fan." "Like that's, you know, then, then it actually means something." "It started to be talked about in all those broader terms." "So it went beyond just rights and that issue." "It became the, the way that we exchange information period." "When those concepts started to be introduced," "I kind of realized that, there was no going back at that point." "That was," "This was the future." "there has been an upheaval of sorts concerning how music is copied over the internet." "What Newsweek Magazine dubbed," "The Noisy War Over Napster, involves more parties and has much broader implications than that moniker implies." "Just like a carpenter who crafts a table gets to decide whether he wants to keep it, sell it, or give it away, shouldn't we have the same options?" "We should decide what happens to our music not a company with no rights in our recordings," "Which has never invested a penny in our music or anything to do with its creation." "The choice has been taken away from us." "I became a royalty artist when I signed a contract with Columbia Records, with a group called The Byrds." "And we recorded um, 15 albums or so, during that period." "And aside from modest advances for each of these albums, I never saw any royalties." "Even though we've had number one hits with Mr. Tambourine Man, and Turn, Turn, Turn." "I saw nothing but the advance, which is uh, divided five ways." "It was only a few thousand dollars a piece." "And uh, [clears throat] with the advent of MP3 dot com," "I'm getting 50% of the, the CDs that come out now." "I think it's a wonderful thing." "Thank you, Mr. McGuinn, that's uh, that's uh, that's a complaint I've heard from a number of people." "Uh, Mr. Berry..." "Napster simply facilitates communication among people interested in music." "It's a return to the original information sharing approach of the internet and it allows for a depth and a scale of information." "that is truly revolutionary." "Napster's helping and not hurting the recording industry and artists." "A chorus of studies show that Napster users buy more records as a result of using Napster and that sampling music before buying, is the most important reason that people use Napster." "One of the Senate Hearings had a bunch of key personalities that were invited." "And Hank Berry was there on our side." "And Hank's a lawyer, he's our CEO." "So very thoughtful, you know, well prepared, articulate argument, you know, having to be defensive at times, but at the end of the day, he's playing fairly." "And then there was, Gene Kan from Gnutela." "My name is Gene Kan," "I'm a Gnutella developer, one of many." "I'm not the inventor of Gnutella, one of the people who happily talks about it." "And Gene's a pretty mild guy and he's a nice guy." "He's kind of thoughtful, a little bit introverted but in this role, he decided to just absolutely run with it." "and so he just played the crazy anarchist destroy the system role" "I remember being so entertained by by all the fallout from that." "is the holy grail of distribution channels." "It is the zero marginal cost distribution channel" "Uh, that means that it cost the same to transfer one copy of intellectual property as it cost to transmit 10,000 copies, or one million copies, or ten million copies." "old world tactics may no longer work on the internet." "This is the new economy." "Can we stem the tide of new technologies?" "Highly unlikely." "So what does the future hold?" "Great things if profiteers adapt." "If intellectual property profiteers adapt." "There's room only for the leaders." "The internet is, is ignanomously inhospitable to middlemen and followers." "Technology moves forward and leaves the stragglers behind." "The adopters always win and the stalwarts" "Mechanized farming is a good example." "You don't see anyone out there with a horse and plow these days." "Very intelligent statement, except that I don't think we infringe when we download because it's for educational and governmental purposes." "So it's very used." "And since we, since we define what that is... [laughter]" "You know, we went to the senate hearings, expecting you know, to be sort, I mean it was sort of established as an information gathering session, so we expected it to be us giving them lots of information." "And, and trying to explain to them, how things work." "But surprisingly, they really understood and they were very supportive." "You know, they did not want" "They understood it was adopted by you know, 20 million people and that was really powerful to them and so they were all about trying to structure things so that it would be worked out between all the people who had issues." "And um, you know, I, I suppose that, that maybe you know, I got my hopes up." "That you know, everyone would sort of understand things as well as they did." "Prize one, and the Webby award for music goes to..." "Napster." "[applause]" "The first version of the product, was pretty much the same set of features and it was sort of a very simple application." "But once we were sued, we couldn't really do much with it." "So to have something growing that quickly, to have so much attention and have so many great ideas and so much passion among the team members and desire to make it." "Make it work, make it last." "To uh, not be able to actually change the product and make it better, to not be able to really pursue a lot of the great ideas for how to make uh, it a viable business." "I think it was actually incredibly frustrating." "You know, there was all this focus on the recording industry uh, and the legal battle from a business perspective, uh, but almost no focus whatsoever on the value of the business." "which was this platform and its capabilities and what it could do." "The legal issues around the product, and the interface between the legal team, which was becoming an increasingly large and influential part of the company, and the product and engineering team, which was becoming increasingly small and marginalized part of the company." "Eventually the lawyers took over." "The first mutiny was when we moved into that office." "in Redwood City." "And it was a giant cubicle farm." "And as soon as Jordan and I saw it, we looked at each other and we didn't have to say anything to each other." "We were like, this is, we, we knew it was bad." "The layout of the office." "So we'd gone from having funky desks," "I, I would call door desks, like we would literally buy doors that have the knob hole there." "That would be where all your wires went, to cubicles with walls." "We wanted to all sit together and, you know we'd gotten used to that." "And that's how we work." "Management offices were literally up a floor looking down on the floor, if you can imagine, it used to be a factory work floor." "Horrible metaphor, you know, sit in your cubicle and shut up, right." "And you know, you're expendable." "Oh, these people need to be is..." "Isolated and that noise is gonna bother these other noise." "Who the fuck are you assholes?" "Do you have any idea what creativity is about?" "That was a fucking super buzzkill." "Uh, and, and you know, we, we won a few like minor battles, but the war was completely lost." "I had the advantage and uh, Sean Parker didn't enjoy this luxury." "But I had the advantage of kind of being able to kind of stick my head in the sand, in terms of being able to just work on the product." "So, I had this attitude of if things got crazy, or people seem to be acting irrationally, or uh, if we were nervous, I could just work harder on the product." "Write more code, put my head down." "So that got me through a lot of the time." "First of all, what is your, what is your name and what do you do here?" "I'm Shawn Fanning." "I uh, started the, the company and I'm currently an engineer at Napster." "How 'bout you?" "I'm Sean Parker, I am also a founder and um," "I do a variety of things." "Working with the legal team to uh, business related strategy." "Do you have a nickname, like Napster?" "Um, no." "Shawn Fanning and I, we literally went from being high school kids leading relatively normal mundane lives." "To 12 months later, nearly bringing one of the largest" "US industries to its knees and basically fighting what is uh, in terms of potential assessed damages, the largest corporate lawsuit in the history of the world." "The music swapping website, Napster, which for almost a year now, has provided millions of music fans world-wide with an unprecedented opportunity to copy and trade music on the internet, was dealt a serious blow on Wednesday," "when Federal Court Judge Marilyn Patel issued a temporary injunction against Napster, pending the outcome of a trial, which will ultimately determine the future of the software." "an internet community to help music fans find MP3s," "I didn't' think it would be embroiled in a legal battle." "But we are." "And as you know, the recording industry has filed a suit to shut Napster down." "To shut you down." "Today there as an important hearing in court." "and the judge ruled against us." "Hank Barry, Napster CEO, is here to tell you what happened today" "On the 27th of July, we all gathered in Judge Patel's courtroom and uh, we had a hearing and it was supposed to be something relatively low key, you know..." "It was a hearing on a preliminary injunction motion that the labels, uh, were moving and uh, the judge came in and uh, right from the outset didn't look good." "Uh, this is a preliminary injunction uh, it's been entered without the basis of any evidentiary hearing." "We asked for an evidentiary hearing." "We asked to have an opportunity to come in, cross-examine their witnesses, to have this decided not on the basis of uh, 15 minutes for me and 15 minutes for Dan Johnson argument." "But on the basis of actual evidence." "We asked to have this decided at trial." "Um, the Court decided to do it on the basis the Court decided to do it." "David Boies was a lot of hype." "He had just won the Microsoft thing and had had that big Aetna thing that he had won etcetera, etcetera." "So it was like, we got the big name." "But, fundamentally, he did not understand k what was going on." "At a technical level." "So the legal arguments he was making didn't fit with what was actually going on." "And it was a complete and utter disaster." "I felt like we had developed a better understanding of the impact of the TMCA and all the complexity around trying to make the case work." "To watch it be handled the way it was with Patel." "It was actually very disheartening." "And then you know, Shawn's email came out." "Uh, there were these early memos that were discovered, where um, I made reference to the fact that we were well aware of the fact that our users were pirating music." "Uh, and given that our users were pirating music, it might be, it might behoove us to protect their anonymity." "So that our users weren't sued." "And the documents that Judge Patel relied on is the following..." "Users will understand that they are improving their experience by providing information about their to name or address or other sensitive data." "That might endanger them." "Especially since they are exchanging pirated music." "That is the co-founder of Napster writing what the system is intended to do." "and it is exactly what the system has done." "And this was uh, at a time when uh, when we believed that what we were doing, basically, just facilitating relationships between users so that they could share music, was totally legal under the DMC." "It was like essentially a brainstorming document where I used the word piracy." "Which was a, which was a taboo word at Napster." "You're not allowed to talk about piracy, only allowed to talk about sharing." "The focus then became the email." "When in fact, there were all these other issues." "So Sean became the scapegoat." "I, I was sort of on this forced vacation in North Carolina the, the lawsuit was happening." "On the other side of the world," "I was sitting in this beach house and I got the call from Alicia, who was Hank's assistant." "And uh, and was writing the litigation and she said she said Sean it doesn't look good." "And your memo is up on it, it's blown up in a, you know, 4000 point type on a huge screen, in the courtroom." "And uh, you know, they're calling you a music pirate and they're calling us all music pirates and the judge doesn't like it." "They needed a nail." "They found the nail and they put it straight into that coffin and that was it." "Now, it was easy for the business guys to say, 'look this guy not only doesn't add any value in our opinion, but he also wrote this email." "and it's all his fault." "There wasn't a whole lot I could do about it." "it, it sort of, it sort of was what it was." "The company needed to make a clean break from its past and try to move forward." "Um, and so I sort of realized that that was the end." "So I had this one meeting with Hank, he walked me through uh, walked me through, then I and that was it." "I vividly remember the conversation of him asking me to come to his aid and help him preserve his role in the company." "And after we talked for a while about what that would be I just told him that I thought he was lucky." "To be able to get out of this thing and go work on something else." "Um, because it had felt like, you know, it had been uh, nothing like the first you know, the first phase that we had gone through and enjoyed." "I don't know uh, if that really contributed to it that email." "But I do know that it had a huge effect on the judge's perception of our intent." "We are pleased with the court's decision." "We think the decision will pave the way for the future of online music." "This once again establishes that the rules of the road are the same online as they are offline." "And sends a strong message to others that they cannot build a business based on other's copyrighted works without permission." "Have you heard from Metallica?" "[laughs]" "I have not." "But I"m sure that they are very pleased and I'm sure that they and Dr. Dre take great comfort in the court's decision today." "'Cause until Napster gets its day in court if this injunction is not stayed it will obviously have a very severe effect on Napster service." "So you will seek a stay?" "then obviously?" "I still find it difficult, certainly a bit shocking uh, some things happened this week that I was certainly not expecting to have to deal with." "Napster fights for survival." "Front page of CNN." "This is horrible." "The Ninth Circuit issued an order, it was only like two sentences and it said..." "This is a case of first impression," "It's the first time we've ever seen a case like this." "and we're gonna stay the enforcement 'til such time as we, the Ninth Circuit, have had a chance to look at the case." "Lawyers representing Napster and the recording industry squared off before a three judge panel." "At the Ninth Circuit Court of Appeals in San Francisco." "And what the Supreme Court was saying is you can't take a snapshot and say, how is it being used today?" "What you've gotta ask is what is what is it capable of being used for?" "Because otherwise, you're gonna deprive the public of something that can be used for non-infringing uses." "They designed it to be a pirate system." "No, they designed it for fair use." "Samples?" "No, no Sir." "Oh they designed it for concert work." "That the authors really don't care about a copyright." "Even though they have it out on a, on a, on a recording." "That's what they tell us." " No that isn't..." " I've read their brief" "That may be what they tell you now, your Honor, but they tell you..." "Anything on MP3 file goes through the Napster system or does it go user to user on a direct basis?" "It doesn't go through the Napster system..." "You know, their hand, their fingerprints, you can't find them on those things, can you?" "The fingerprints you can't find because Napster doesn't want you to." "They don't touch 'em.They never have anything to do with it." "My fellow in New Jersey, and my fellow in Guam will have a direct connection on the internet, right?" "And that's how the music is transmitted." "It is transmitted on the internet and we are not trying to stop the internet, certainly." "That hearing ended about a half an hour ago, here in San Francisco." "No ruling from the court is expected at lest for another month, but after that ruling does come down, many observers believe that the final word on Napster will eventually and ultimately end up coming from the US Supreme Court." "I worked on several presidential campaigns." "And I would say that the pressure that Shawn and Hank had on them was just as much as it would be on a presidential candidate." "With the difference being that they weren't asking for it." "Either one of them." "[music]" "Ladies and gentlemen, this is very exciting day" "An element of this alliance is that Napster today, for Napster, for Bertelsmann." "will develop something like [inaudible] services." "Middelhoff was a very genuine guy." "He had great energy and he really believed in it." "And was trying to do the right thing." "Took a big risk in getting involved, especially given the relationship that Bertelsmen had with BMG." "That being said, it was incredibly complex deal." "It was a ton of money." "None of them really, none of them did get the conviction or let me say, did learn that the business model and still existing business model of the music industry, isn't working anymore." "Yeah, and I think this was clear in 2000, 2001, when you saw how people did use Napster." "I think this would have changed the world much more than Facebook is doing today." "Just the fact that this huge German media conglomerate was coming in and gonna be throwing some money that I might be working for a few more months." "So I felt okay about that." "I think that that, that mindset was the company's mindset." "They were weird, it was a survival game at that point." "It was just, it, it seemed wrong." "Everything seemed wrong." "There was a line crossed where they were no longer actually trying to make a cool product." "We were just trying to survive." "Whatever it was, we were just trying to find a way to survive." "We developed a new business model for membership based service going forward in the future." "And uh, we give money to Napster to develop that model, to implement it, and then we're gonna join them and we all hope, and we're gonna work jointly on this, to make that happen as soon as possible." "That's why Shawn has to get back to California to get his cap on and start decoding again." "Couldn't you preclude a search under certain song names and if you can do that doesn't that suggest that your efforts to stop the trading of copyrighted music is disingenuous?" "No, because we have not been able, ever, to work anything out with the plaintiffs." "They simply refuse to talk, refuse to cooperate." "in any effort to solve this problem." "No, because, because you're never going to come up with a search that's gonna satisfy them." "[beeping]" "We had an entire row of computers dedicated to temps who just sat there, coming up with variations on artists names, that needed to be blocked so Madonna was one and you know, so it was basically this Whack The Mole game." "Blockage is bad." "Motherfucking alias names like Limp Hashbrown," "In Suck, Flu Fighters, Pappa Crotch," "Dick See Chicks and Crotch Box 20." "When the effort went from you know, trying to make it a successful service and make the product better, to trying to uh, play this game of Whack A Mole, it was kind of you know, foreshadowing" "of a, what was to come." "Hopefully be able to show to them that we do support Napster and we do believe in a cause." "And that basically, the music's out there." "I mean they can't erase all the MP3s that I have and all the MP3s that tons of millions and millions of people..." "Dedicated online music fans maybe planning to spend a hard day's night at their computers." "Downloading free songs through the popular Napster website." "A San Francisco Federal Court made it clear today the times they are a changin'" "It's been a somber week for fans of copyright infringement." "As a federal court judge ordered popular file sharing service, Napster, to remove millions of songs that are owned by the major record labels." "Record companies fought tooth and nail over the issue and the court's agreed." "It's the record companies who hold the patent on cheating musicians out of money." "American intellectual property is our nation's greatest trade asset." "We cannot stand idly by as our nation's assets are in jeopardy or dismissed." "By those who would use them for their own enrichment." "That's why today's decision is so especially important." "Now, Napster can take a nap." "I'd like to add a word or two about the future of Napster." "we've been developing a Napster service that offers to members of the community." "and importantly, makes payments to artists." "I"m focused on building this better service and I still hope to have it in place this year." "The new technologies we are developing are amazing." "I hope that by further review, or by agreement we can find a way to share them with the community." "I would also like to thank everyone for being so supportive." "Napster works because people who love music, share and participate." "many people have said it would never work." "We've heard that we couldn't survive before, when we had 700,000 members and when we had 17 million members." "Today we have more than 50 million members." "to keep this community growing." "If we work together, I know this will succeed." "Thanks." "The tipping point for my romance was uh, after we were injuncted and then reinstated and then reinjuncted." "That was it." "It was like being broken up, uh, with, with your favorite girlfriend uh, and and getting heartbroken and then her coming back to you and, and your heart just like okay, maybe I can look past the wound." "And, and nope, we reject you again and I'm out." "It's like, ahhh, this sucks." "That was the point at which uhh, I realized that the cool of what we had done was pretty much over." "You know, Ritter left because of all this." "And Parker was shown the door and Shawn Fanning slowly became detached." "He He would just sit at his desk and strum his guitar." "And if you went up to him, to ask him a question or to talk to him" "He would just keep strumming his guitar." "And he'd look at you, he'd look at you with like, some curiosity as if you're like an alien." "But he would just keep strumming his guitar." "And..." "I think that, that was his way of dealing with this." "That sort of pivotal, pivotal sort of moment, where uh, it looked like things weren't going well" "Fanning was  on the cover of Time Magazine." "Sort of, which is, in American culture, like the peak of public recognition." "And it all felt, it felt sort of, it all felt sort of false." "I think Fanning probably felt the same way." "It's like he was going through the motions and doing what he had to do... [clears throat]" "Doing a huge amount of press." "But you could tell that, that the company was coming unglued." "Well, what's interesting is, can I just start," "I'm so sorry, man, okay." "Well what's interesting is that, that's not going to change." "We're going to maintain uh, Napster uh, in it's current form, what can I start over again?" "I'm sorry." "I keep mixing up my words." "Oh, those days in San Mateo, that was our youth." "We had a lot of energy, we were excited, we were like a little kid running around." "And then we became teenagers and-and-and then the lawsuit happened and we started going into adulthood." "And we get these adult figures coming in." "And we start to get older and by the time by the time it had gotten close to the end it was like, we're old, we're fragile." "It's the end of days, so we're just letting the time pass." "That's what it was like." "And I can remember right up until the day that" "I was fired, thinking, there must be a shot." "There must, there's just no way all this can just go away." "Uh, and then I remember being out the other end of the company and still talking to the folks that were there and you'd keep hearing about, you know, the next Bertelsmann loan, the next label deal," "discussions, the next and, and you know, and once you're removed from it, you're just like oh," "Like this is not gonna happen." "Uh, but still, maybe they're right and uh, I don't, that, that, it's amazing to me now how there was not a chance in hell that any agreement was gonna be come to." "There was a very long, slow decline of Napster at the end." "And ultimately getting shut down when the filtering was ineffective because the technology wasn't there yet." "Um, 98 point something percent, wasn't good enough." "I called Ali Aydar and I said," "'You know, we need to turn off the file sharing here.' we never talked about this, but can you do it?" "And he said, 'Yeah, I can do it.'" "And he left the room and he came back in a couple hours and said," "'I turned everything off, but it's still working.'" "And it found, and we found out that there were a bunch of open Nap servers out there, that were not controlled by the company." "That other people had implemented and were around the world, so the, the software client was still working, but we, the company had nothing to do with it." "Today, Napster filed for bankruptcy." "Oh man, we, we had to have raised north of a hundred million dollars." "So and that, I don't think any of us know where that went." "This was such a common question from people which was sort of, how do you make money and investment vs. actually making money from service, but you know, the idea is that we're not gonna generate any revenue" "until we can actually pay artists." "And it's hard to actually think of a startup that's ever raised that amount of money that went away as quickly." "Like, usually if you raise a hundred million dollars, in a startup, like you got about five years of, of runway." "Like you've got a ton of runway." "The thing is 80 million of it came from Bertelsmann." "Thirty million probably went back to Bertelsmann." "Using all their other services, right?" "Yeah." "But then the B was 15." "We gave a million dollars to Dr. Dre." "Another million dollars to Metallica." "I have no, I mean it's just crazy." "This is mind boggling dude." "I mean in, in any investment calculation, you say the paying capital let's say, 115 million dollars." "And then the company did so badly that it went to zero and so the money lost, was 115 million dollars." "But wait, there's more." "In Napster's case, you have to now tally the settlement dollars that will float out of Bertelsmann and everyone else and Hummer." "You're talking about a 500 million dollar sink hole." "Perhaps more that went on for years after the asset was sold out of Chapter 7 Bankruptcy." "We went to the uh..." "Good job." "Yeah, so thanks..." "Wow, man." "I promised, I promised I wouldn't, but yeah, uh, and that's Shawn's fault, for the record." " Uh, no." " That's kind of crazy." "But we went to, we took this awkward drive like a year, I think ... [conversation fades out] [ping pong ball bouncing]" "[no audible dialogue]" "We thought about going to the Supreme Court, we got advice from the lawyers that the timing wasn't right." "That we should wait until there was more decision in the trial." "Do you regret that?" "I regret it now, yeah." "I would have liked to taken it" "I would like to have had a jury trial." "You know, we never had a jury trial." "is the effective shut down of Napster." "And what that's going to do is give birth to a thousand of Napster spawn." "And these children are going to be much better bred." "So once the record companies went after Napster, did that end this kind of illegal music sharing?" "This pirated music sharing on the internet?" "Actually,not at all." "There's a theory out there that piracy will be eradicated and no one will ever share a music file." "But that's really a pipe dream for [stammer] really getting everything getting the internet under control." "What was seen from piracy, is that after Napster people went to other music sharing software." "Such as Limewire, or Morpheus, Gnutella or Music City." "Things like that." "A bomb went off and nobody knew what the hell was happening." "The cat wasn't going back in the bag." "I don't care how many people we sued." "I don't care how effective or ineffective the RIAA were, was with certain aspects of it." "It wasn't going back." "People are gonna still download for free." "It's free!" "It's free." "It's wrong, but it's free." "If there is an under-net of piracy, that's something that our industry has always had to live with." "The idea is to keep commercial pirates out of the marketplace, so that legitimate commerce" "They were saying was it's just a matter of copyright is gonna be fixed." "And maintained by, by some combination of enforcement and education." "And I said, well this sounds a lot like the war on drugs, guys, I mean, I don't think this is gonna work." "That certainly didn't." "File sharing services allow for the illegal downloading of copyrighted works, which can get you into trouble in a hurry." "Many parents may be surprised to learn those consequences can include lawsuits with penalties and legal fees costing thousands of dollars." "Downloading or sharing music without permission is not okay." "I don't think people are stealing music." "I think the record companies are not adjusting to technology." "But rather than adjust and figure out how to work with it and use it, they fought it." "And they started to sue their customers." "And everything." "And I, I think that alienated them from both the public and the artists." "Can you explain again, [inaudible] what, if anything, you're doing to catch thieves?" "Well, we have tried to be, uh, and I think, have succeeded in being as responsible in this space toward individual users as anyone could hope to expect from the music industry." "We have historically been um, very uh, tolerant of of downloaders, but very aggressive against the uploaders." "We have tried to be focused on distribution sites with significant amounts of music." "I don't think this is about punishing individuals." "Well, they did." "They sued over 18 thousand regular old normal people and uh, average settlement size was about $4000 dollars." "from people who could hardly afford $4000." "So I don't think that was a good move." "Particularly from a public relations perspective." "You don't get your market to like you by suing the shit out of them." "I mean what they've done is to, is to turn an entire generation of kids into electronic hezbollah." "Who hate them for ideological reasons." "I mean I know a lot of people that, that won't buy music, period." "Because they don't want to enrich those people." "And they didn't have to have it like that." "[music]" "Good hard working people all of a sudden got laid off as major music industries, entire floors were turning" "I remember, you know, people who'd been working so hard, doing such great work, there's no longer a need for them because the market shrinking because these people kind of caved in on their own greed." "Their bosses, their CEOs, their rock star AR people all of a sudden, realized they'd been shoveling a bunch of mediocre crap to a bunch of people who they devalued." "But now the people have a choice." "They can cherry pick the records." "They now can not have to take it from you for $22" "They can now spend three bucks on the three songs that got made into videos." "And everything came loose." "Well it's the perfect storm, again." "It's three sides really, when you really think about it." "Free is a pretty big component." "The corporatization of America and the world in creative companies." "Right?" "And the downsizing of the structure of the music companies." "The whole crux of the argument, I guess, is that there's great things about modern technology, music and there's things that's shit." "And there's great things about the past, some of the past stories had to go because the people demanded it." "Therein lies the problem." "I think uh, we dropped the ball you know, but I-I-I don't see why we can't read you know, recapture it to some degree." "But uh, it'll it'll never be like it was, when we controlled everything." "Napster ended up, unfortunately in the strip they [inaudible] process and when uh, people like Steve Jobs, they were so smart and business smart, that they said where is talent okay, we hire the Napster people." "iTunes in the US has an 84% market share last month for all legally downloaded music." "I don't think you can point to any digital music service that exists now that doesn't uh, tip its hat in some way to Napster." "and I, I can tell you that you know with the first version of iTunes that was released, had shocking similarity to the UI that Napster was using." "And I don't think that was accidental." "When we finally, we made money at Napster." "So, I mean that we, I was left with pretty significant legal debt." "Um, which was you know, to the extent that Napster was like Napster University." "Was actually not that different from the college debt that most kids would have at that age." "Sort of comparable uh, in scale." "Uh, so, but I had this, this legal debt and Fanning wasn't that much better off." "After Napster was shut down," "Shawn Fanning and I cofounded a company called Snocap." "Which was Shawn's attempt to rectify the rights issues." "Having been a bit disillusioned with how the case had gone and the way that the conversation and debate had operated at such a superficial level" "I jumped on this idea of wanting to create an independent copyright database where any rights holder, independent or otherwise could register their work." "And the idea was that everything that was unclaimed, would be freely sharable until somebody came in and said this is mine." "to try to work back towards a world where all this interesting diverse music would be available." "And it was nice and it made sense in my head, but the actual act of trying to get everyone to buy into as an intermediary was an incredibly challenging" "What happened was there was a lot of excitement and, and there was a lot of interest in Snocap until Steve Jobs came up with his deals and the iTune Store." "Not because Snocap was't a great idea, but because the industry was not prepared." "They felt much safer with one retailer." "And once that happened, you could just see the air go out of the tires." "It was, actually, that was one of the hardest times for me." "I had just, and then you know, I, I just uh, 'cause I enjoyed it and uh, eventually started a, you know, a company, but it took uh, gaming and sold it to EA." "I'm very fond of both of them, personally." "And..." "I think Shawn Fanning is coming through it reasonably well." "I-I-I-I think Sean Parker is having a difficult time in ways that you know, I would too." "I mean it's, first of all, he was, he was crushed." "And then he came up with something else that was great, which was Plaxo, and it never had the opportunity to demonstrate that greatness." "and he was crushed again." "And then he attached himself to Facebook and has made an absurd amount of money." "He actually came up with, I think, some of the most important ideas that drove the success of Facebook." "I mean while he was living in my apartment." "I, I was there." "I watched it happen." "he's genuinely trying to reinvent the music business." "With Spotify." "It seems incredibly archaic that we've' come this far and we finally started to figure out that there's models like Spotify, models like iTunes that, that work, that are beginning to restore growth to this industry." "And, and even as all of this is starting to click, you still have these reactionary lawmakers who think they can legislate the problem away." "that's somehow gonna solve piracy." "I mean haven't they learned anything from watching the last ten years." "of peer-to-peer distribution" "It's not connected to any particular IP address." "It's totally decentralized." "I think of what we've seen in the last decade is that this war, which has basically criminalized a whole generation is uh, culture's Vietnam." "Uh, it's been a complete disaster." "It has not achieved its objectives." "Which should be to pay artists, uh." "The only people that have gotten paid in this war" "Who've been waging the ever-expanding legal actions against people using culture the way technology seems to encourage them to use it." "There's always this idea that the format and the style of the way people access culture is gonna destroy an industry, you know." "So people tend to get like psychologically bugged out, you know, completely not being aware that the change underneath their feet is the way we live." "Alright, here we go." "♪In the squares of the city" "We live in a very new world." "You know, technology in the last ten years, has turned the world on its head." "Art and artists are going to start revolutions" "We've already seen it in the year of 2011." "Art and artists are going to change governments." "They're going to change the direction of rivers." "And it's gonna be done through flash mobs, file sharing." "People vous le vous-ing half-way across the world in a microsecond on their hand-held device." "Trading music, trading files." "This front of information in music it makes, it makes me hopeful and it makes me sleep well at night." "In that, the more the music flows, the more the information flows, the more wiki keeps leak leaking, the more governments are going to be hard pressed to be more transparent." "[crowd singing]" "The main thing here is for people to recognize" "That what we're doing is creating the foundations of the future in a very fundamental way." "I mean we are building the future that we all might want or might not want." "Depending on our current vested interest." "And I think that it takes a really crummy ancestor to want to maintain his current business model at the expense of his descendants' ability to understand the world around them." "And if you really want to figure out which side you're on here, ask yourself you know, what's gonna make you a better ancestor?" "[music]" "The journey was like a, was like a theme park ride or something." "IT was like Pirates of the Caribbean." "People just like you know, weird scary people popping up at you." "and you're kind of moving through this thing." "You're not really in control." "we're in like a you know, a little, little, you know, car at the top of a giant hill and we got all the momentum and inertia at the start and the rest of it is just trying to survive" "the downhill, you know, slope and..." "The drunk skiing or the Pirates of the Caribbean." "Um.... [both laugh]" "I don't know, if we found a good analogy for that experience, I'd be impressed." "Um, it sort of a..." "I get to be Johnny Depp." "Alright." "Who are you?" " I don't know." " Who else was in that movie?" "You know, I had something I really wanted to say." "I just fucked that all up." "No, but ...." "I don't even know if it was important." "If I'd known what it was actually gonna take to solve those problems back then, I probably never would have done it." "It took, it took that naiveté, that maybe these were problems we were capable of solving at that time." "To even, even you know, get up in the morning and go to work." "You're born into the world thinking that you are uh, you know, you're entering an industry that people understand." "Or you're entering a world that's been seen before." "And seldom do you, do you, do you sort of wake up to the realization that you're, you're the uh, um that you're the, the explorer." "In most cases you assume that um, there is some history." "To what you're doing and that uh, especially when" "When you're that age, and you, and you find yourself in an, in an, in a new industry that's new to you you assume there must be someone out there, who has the answers." "And then you wake up and realize the answers are being written." "You know you, you are the precedent." "[music] the idea itself is out there." "People understand it, people enjoy it." "And so to me, I mean that was absolutely worth all of the, the trouble along the way." "I think um, you know I think the technology itself is pretty powerful and people have shown that they love it." "And so um, I think you know, it will always exist." "Regardless of how it evolves or how it changes."