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Napster and the P2P Music Revolution

Abstract

Napster launched in June 1999, and by February 2001 more than 26 million people were using it to share copyrighted music files for free over the internet. It was shut down by court order in July 2001, but by then it had permanently disrupted the music industry, established peer-to-peer networking as a mainstream concept, demonstrated that consumers wanted à la carte digital music, and made the case for what iTunes would ultimately provide commercially. Napster failed legally; the idea it demonstrated succeeded completely.

Shawn Fanning’s Dorm Room

Shawn Fanning was an eighteen-year-old freshman at Northeastern University in Boston in the fall of 1998. He was trying to solve a specific problem: he wanted to find and share MP3 files (digital audio files compressed to a fraction of their original size by the MPEG-1 Audio Layer III codec) but the existing methods required knowing the URL of a file and hoping the server hosting it was online. There was no systematic way to find what other people had, no way to search, no mechanism for discovery.

Fanning’s solution was conceptually elegant: instead of a central server hosting files, build a central server that hosted an index of what files users had available, and let users download directly from each other. The index server tracked which users were online and what files they shared; actual transfers happened peer-to-peer, between users’ machines. This was neither fully centralized (files were distributed across users’ hard drives) nor fully decentralized (the index was centralized), but it worked.

He spent much of the fall semester writing the software rather than attending classes, a semester his dormmates later recalled as featuring Fanning working at his computer around the clock while music played. The program was named after his nickname, Napster.

Fanning, born on 22 November 1980 in Brockton, Massachusetts, had started computer science at Northeastern University in Boston in 1998 and belonged to the hacker group w00w00, whose members Jordan Ritter and Sean Parker helped with the software and servers. In the spring of 1999, Fanning showed the software to his uncle John Fanning, who had founded the commercial chess site Chess.net in 1996. Napster was incorporated in May 1999, at first in Hull, Massachusetts, with the uncle holding 70 percent and control, and the first version went online on 1 June 1999. A $250,000 investment that summer came on condition of a move to California, and from September 1999 the company worked from San Francisco.

Eighty Million Users

The growth was exponential. Napster spread through college dormitories (students with T1 and T3 university network connections could download albums in minutes) and then into the broader internet as residential broadband spread. The service required installing client software, registering an account, and connecting to the index server; once connected, the entire music libraries of every other connected user became searchable and downloadable.

By October 1999 a million people a day were downloading music through it. Unofficial estimates put the peak at 80 million registered users; verified use peaked at 26.4 million in February 2001, and the Heinz Nixdorf MuseumsForum counts 14 million active users in the US and 26 million worldwide in early 2001, and Fanning was on the cover of Time in 2000. The number of simultaneous users at peak times was in the millions. The volume of music transferred through Napster was orders of magnitude larger than any prior file-sharing system.

The music industry’s response was delayed because the industry’s leadership did not initially understand what Napster was. By the time they did, tens of millions of people had it installed and understood it perfectly.

Metallica, RIAA, and the Legal Attack

The first major legal action came from an unexpected direction. Metallica, the heavy metal band, learned early in 2000 that a demo of their song “I Disappear”, not yet commercially released, was playing on the radio, and traced the leak to Napster. The band sued on 13 April 2000, hired the consultancy NetPD to identify Napster users who had shared Metallica songs, and delivered a list of 335,435 usernames to Napster with a demand that they be banned. Napster banned more than 300,000 of them.

The Recording Industry Association of America (RIAA) filed suit against Napster on 6 December 1999, arguing contributory and vicarious copyright infringement. The core legal question: was Napster liable for copyright infringement committed by its users?

The answer came from Judge Marilyn Patel of the US District Court for the Northern District of California. On 26 July 2000 she ordered Napster to stop facilitating the trading of copyrighted music within two days, which the Ninth Circuit stayed pending appeal. In February 2001 the Ninth Circuit found Napster likely liable but called the original injunction too broad, and on 5 March 2001 Judge Patel issued a revised order requiring Napster to block copyrighted material on its network once the labels had identified it. Since Napster’s business was built on sharing copyrighted material (the legally unauthorized sharing of copyrighted material was not an edge case but the primary use) this order effectively required Napster to shut down most of its functionality.

Napster implemented filters that attempted to block copyrighted songs by filename and content analysis. The filters were imperfect (users renamed files to evade them) and the experience for remaining users degraded. In early July 2001 Napster shut down its network, and on 11 July Judge Patel ordered it to stay offline until it could block all copyrighted files. It never returned as a free service, and Napster filed for bankruptcy in June 2002.

The Technological Legacy

Napster’s shutdown did not stop file sharing. Its successors were architecturally more distributed, specifically designed to avoid the centralized index server vulnerability that made Napster legally attackable:

Gnutella (2000): A fully decentralized protocol with no central server; queries propagated through a network of peers. Legal targeting required targeting individual users rather than a central service.

Kazaa (2001): Used a semi-decentralized architecture with “supernodes”, users with high-bandwidth connections who handled query routing. Its FastTrack protocol was used by multiple clients. Its Dutch developers, sued at home and in the United States, handed Kazaa in 2002 to Sharman Networks, a company incorporated in Vanuatu and run from Australia, which put it beyond easy reach of either court system; In July 2006 Sharman settled with the four major labels for more than $100 million.

BitTorrent (Bram Cohen, 2001): A protocol for efficiently distributing large files by splitting them into pieces and downloading pieces from multiple peers simultaneously. BitTorrent was spectacularly efficient (the more popular a file, the faster it could be downloaded) and became the dominant protocol for large-file sharing. The Pirate Bay (2003) provided a central tracker and index for BitTorrent files.

The Music Industry’s Belated Response

Napster demonstrated that consumers wanted to purchase individual songs (not albums) at low prices, accessible immediately, from a library of millions of tracks. The music industry had spent decades insisting that the album was the product and that single sales were primarily radio promotions. Napster’s behavior revealed that consumers disagreed.

iTunes (Apple, April 2003) offered what Napster had demonstrated demand for: individual song purchases at $0.99, legal, from a large catalog, organized and searchable. The iTunes Store launched with 200,000 tracks; within a year it had sold 70 million songs. The major labels, which had refused to license content to Napster, licensed it to Apple in exchange for Apple’s DRM (FairPlay) and the retail pricing structure.

The music industry’s revenue continued to decline through the 2000s despite iTunes’s success, partly because album revenue was replaced by single revenue at a much lower per-unit price, and partly because unauthorized file sharing continued on BitTorrent and its successors at a scale that dwarfed Napster’s peak. Streaming (Spotify, 2008; Apple Music, 2015) eventually provided a revenue model that reversed the industry’s decline.

Sean Parker’s Later Career

Sean Parker, who had co-founded Napster at nineteen, went on to become Facebook’s first president in 2004, having been introduced to Mark Zuckerberg through mutual connections. Parker’s pattern recognition (identifying what Napster had demonstrated about social network effects and viral growth) contributed to Facebook’s early strategy. He later co-founded Causes and invested in Spotify, connecting his Napster experience directly to the legal music streaming that eventually replaced file sharing.

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