Journalism Issues

In 2001, Napster was ordered by a federal court to stop allowing its users
to infringe on music copyrights. A sort time later, the service shut down.
In this 2002 Wall Street Journal interview, the founder of the "first
Napster" -- the first Internet file-sharing service to reach the mass
market -- gives candid views about copyright law.

http://online.wsj.com/article_email/0,,SB1033415659676981993,00.html

With Napster shut down since last summer, a number of music-sharing Web
sites have rapidly gained audience share. Remarkably, the Napster service
still gets traffic even though it is no more, presumably from users
launching the application and attempting to access the site.

Application June 2002 U.S. Home Users % Change vs. June 2001
Kazaa Media Desktop 8,257,000 +1,491%
Audiogalaxy Satellite 3,217,000 +346%
Morpheus 2,950,000 +265%
Winmx 2,326,000 +256%
Imesh 1,223,000 +32%
Napster 896,000 -89%
Bearshare 683,000 -19%
Aimster 440,000 -18%

Napter founder ponders His Legacy -- and Future

By NICK WINGFIELD
Staff Reporter of THE WALL STREET JOURNAL
October 1, 2002

Shawn Fanning, at 21 years old, has already created something of
significance, nurtured it and watched it die.

His music-sharing software program Napster caused panic in the recording
industry when it showed up on the Internet in 1999, only to be shut down
last year in legal proceedings over copyright issues. Napster Inc.'s best
hope for survival as a company was dashed last month when a bankruptcy
court judge blocked its sale to German media concern Bertelsmann AG.

Napster laid off its employees. Its headquarters in a drab office park in
Redwood City, Calif., sit empty but for a lone former executive dealing
with financial odds-and-ends. The company's creditors last week said they
signed a nonbinding letter of intent with an unidentifed party to sell
Napster's assets, but the creditors continue to talk with other bidders.

Now Napster's founder and former chief technology officer is spending his
first few weeks of unemployment embarking on another type of nurturing
relationship, as new legal guardian of his 15-year-old half-brother. Mr.
Fanning, who quit college as a freshman at Northeastern University in
Boston and who has no current plans to return to school, says he's also
not ready to jump back into the online music industry.

But this is not to say the music industry can rest easily. Online
music-swapping through Napster copycat programs has exploded. In an
interview, Mr. Fanning discusses the entertainment industry's continuing
battle against Internet file-sharing services, the legacy of the service
he created and life after Napster.

WSJ: Since you created Napster in 1999, many clones have appeared on the
Internet, including Kazaa, Morpheus and Grokster. The music and movie
industries are now suing the creators of all three. Recording companies
are even considering legal action against the biggest users of
file-sharing services. Do you think Internet-based piracy can be stopped
in the courts?

Shawn Fanning: You can't stop technology. Even if they succeed in shutting
down those particular services, new services will spring up. It's the
nature of the Internet.

I think the [industry's] approach of providing a limited catalog of music,
providing services that are significantly below the consumer's
expectations, and then simultaneously scaring them from trying to do what
they want is the wrong approach. They really need to try to determine what
are the core things that people really love and respect from a music
service and make sure they satisfy those needs.

WSJ: There's proposed legislation in Washington that would excuse the
industry from antihacking laws, allowing them to thwart piracy by
employing technical countermeasures on peer-to-peer networks. Do you think
such technical approaches to stopping online piracy will work?

Mr. Fanning: I don't. Trying to get authorization to attack peoples'
personal computers ... is so completely ludicrous and could have very,
very significant implications. My view is that it won't have the affect
that they're hoping for and, if anything, it will unite a lot of people
against them.

WSJ: Compact disc shipments fell 7% in the first six months of this year.
The recording industry says its data show consumers who download music
from the Internet are purchasing fewer CDs. Do you agree that the
Internet-based music services are hurting the music industry?

Mr. Fanning: It may be hurting the music industry at this point, but my
view is when consumers have the ability to learn about new and interesting
music -- and the barrier is lowered in a way that gives them control over
how they experience it -- I think those are positive things.

As Napster grew and ultimately hit its peak, if you look at CD sales
[they] were up as long as Napster was popular. The point at which Napster
started filtering (blocking out certain songs after a court order in March
2001) is the point at which the record industry announced that this
constant increase in their CD sales suddenly changed.

WSJ: If you were able to do it over again, is there anything you would do
differently from a technical or legal perspective to ensure Napster's
future?

Mr. Fanning: There are certainly areas I can identify where there were
poor decisions on the part of the company, but each of those decisions
certainly had a justification. As soon as we brought in our first CEO, we
were trying to talk to the record companies about obtaining licenses.
We've always had an interest in paying artists and rights-holders based on
usage if we could come up with a business model that made sense for
everyone involved. We were pursuing those from the start.

On a personal level, I can certainly think of some things I would have
done better as far as managing my time and living a healthy lifestyle.

WSJ: Were you spending an unhealthy amount of time at the company?

Mr. Fanning: For sure. I was spending a lot of time on technology
development. We would create artificial emergencies and stay up for days
at a time writing code. Toward the latter part, after we'd had so many
emergencies, so many up and downs on the roller coaster that was Napster,
I learned to stay focused and ignore some of the outside influences. It
helped me mentally to accomplish a lot more and do higher quality work.
We kind of got wrapped up in the lawsuit [with the recording industry]. It
was important to stay focused on representing why we believed we were
right and certainly put our time and money into protecting the company
legally. I think the product certainly suffered a bit in the process.

WSJ: Napster was hugely popular although unprofitable, and never struck it
rich by going public or selling to a larger company. Do you feel any
bitterness about having missed out on the big money of the Internet era?

Mr. Fanning: Not at all. I started out with the intention of learning
about Windows programming and trying to solve an interesting problem.
[Napster's popularity] certainly far exceeded my expectations. I didn't
walk away with a ton of money, but I earned a salary while I was working
obviously and I was able to make a little bit of money in the process. If
I had just cashed out, it's possible I could just have blown it all.

WSJ: What have you been doing since you left Napster?

Mr. Fanning: I've been relaxing. I just adopted my 15-year-old brother so
he's out in California with me now. I'm working on getting him in school
and just hanging out with him, and I'm working on my own personal
situation, which I've sort of been neglecting for a while.

WSJ: You're living in Mountain View, in Silicon Valley?

Mr. Fanning: Yeah, I rent a house here.

WSJ: You're kind of a dad now.

Mr. Fanning: I wouldn't say that. I would say this environment represents
a much more positive environment for him than his East Coast environment.
He's around a lot of people who give him positive feedback. I've had him
out here for extended periods of time before, and he's always changed in a
positive way just because of the people he's around. (He declined to
discuss his family further.)

WSJ: What's next for you -- do you have any ideas you'd like to pursue?

Mr. Fanning: I love early-stage companies. If I do something it's going to
be a start-up but right now I'm not in a position to really say anything.

WSJ: Is it music-related?

Mr. Fanning: I have some music-related ideas, but I'm a little burnt out
on that space. If I do ultimately pursue those [ideas], I'm certainly
going to make sure that they're well thought out, and I get the right
people involved.

Write to Nick Wingfield at nick.wingfield@wsj.com

Updated October 1, 2002 9:50 a.m. EDT

NAPSTER'S GREAT FADEOUT

Napster rocked the music industry with its popular but controversial
file-swapping service. Browse a timeline of key events in Napster's rise
and fall, and review key coverage below:

. Judge Blocks Sale to Bertelsmann (Sept. 3, 2002)
. Napster Files for Chapter 11 Ahead of Sale (June 4, 2002)
. Bertelsmann, in Reversal, Buys Napster (May 17, 2002)
. Top Napster Executives Resign (May 15, 2002)
. Court Orders Napster to Stop Infringement (Feb. 13, 2001)

// posted by newshare @ 11:55 PM