Napster: the product people loved that the courts shut down

What Napster was

Shawn Fanning built Napster as a student in 1999, with Sean Parker as co-founder. The software let users search each other's hard drives for MP3 files and download them directly. Within about two years it had tens of millions of registered users, many of them students on fast campus networks.

The major record labels sued for copyright infringement. In 2001 the courts required Napster to block copyrighted material, which it couldn't do effectively, and the service shut down in July 2001. Bertelsmann had lent it money hoping to turn it into a paid service, but Napster filed for bankruptcy in 2002.

Why it failed

1. 1

   The core value was the infringement

   Napster's appeal was free access to any song. The central index that made search easy also made Napster responsible for what flowed through it. Once a court ordered it to filter copyrighted music, the product lost the very thing users came for.

2. 2

   Nothing to bargain with

   Napster never charged users or shared revenue with artists or labels, so it had nothing to offer the music industry except its user base. Licensing talks didn't produce a viable paid service before the courts acted.

3. 3

   Fighting its suppliers instead of partnering

   The product depended entirely on content owned by a handful of powerful companies. Treating them as adversaries meant the people who could have made Napster legal had every reason to destroy it.