Napster was a free peer-to-peer file sharing sharing program created in 1999 by co-founders Sean Parker and Shawn Fanning. At its peak in the early 2000's, the site had over 20 million users, the majority of which were college students. Napster was the first file sharing software in which users could download music from other users, rather than from a central computer. Napster was the target of many copyright infringement lawsuits from artists, record labels, and others in the music industry. The mounting legal tension eventually caused the downfall of the P2P file sharing software, which was court-ordered to shut down immediately in 2001.
Napster was created by Shawn Fanning in his dorm room at Northeastern University in Boston, MA. He operated the company with a few individuals out of its headquarters in Hull, Massachusetts. The idea was born from Fanning's dissatisfaction with the ease of finding downloadable music online; he wanted a program capable of sharing music with his friends. Fanning and his friend Sean Parker raised $50,000 in investments and launched a beta version of their software in June 1999. The company hired Eileen Richardson as a CEO, and soon after relocated to Silicon Valley. They later hired Eddie Kessler as vice president of engineering. Over the next twelve months, the program gained tens of millions of users worldwide and was considered one of the fastest growing web applications of its time.
Napster was a unique platform to distribute MP3 files because the songs resided locally on users' machines rather than being stored on a central computer; this system is known as peer-to-peer sharing (P2P). The app gave users the ability download songs via the internet. A user could search for songs they wanted to download, and the central server would search for them on the machines of users who were logged in. When a match was found, the user's computer was alerted as to the location of the desired file, and a list was then generated in the users' Winder after the server indicated the location of the song to be downloaded. After downloading, the user's computer would be disconnected from the host.
In 2001, due to Napster's rapid growth, members the of the Recording Industry Association of America began to take notice of copyright infringement on the site. Many artists, through the RIAA, sued Fanning and his team for facilitating free trade of illicit music files-- a direct violation of Copyright law. It was estimated that over 2.79 billion songs were illegally transferred during Napster's peak month, February 2001. Napster argued that because the music files were never in their own possession, but rather transferred directly between users, that Napster had no legal responsibility, which led to the debate about the criminality of Napster users.
Although it is clear that Napster's services raise ethical questions about copyright infringement, users are ultimately responsible for how they utilize the service, specifically in utilizing Napster to illegally exchange copyrighted media. None of the material exchanged on Napster's site was held on a server owned by the company, meaning that Napster cannot be blamed for doing anything illegal. Napster believed that it was only acts as a forum for exchange, and thus could not be held liable for it's users' illegal exchange of information. This argument may keep Napster from legal punishment, although the site didn't discourage the illegal sharing of files. .
Bertelsmann Acquisition and Shutdown
In 2001, Bertelsmann, a German media company, partnered with Napster to transform the site into a membership-based music catalog. Bertelsmann promised a membership-based distribution system that would compensate artists for their music, however, the lawsuit continued. In A&M Records v. Napster case Napster argued that their website ensured fair use and that using a ruling from a precedent case from 1984, Sony Corp of America v. Universal City Studios, Inc., that the only contact that it had with their users was in serving as a medium to get music, and they were not accountable for secondary liability. The courts argued otherwise and stated that Napster had the ability to see the file name of what was and wasn't being downloaded, and could therefore tell what was and wasn't copyrighted material. When the 9th Circuit Court of Appeals stated that Napster had to remove all copyrighted material from their site, Napster had to shut down since over 80% of the content traded was copyrighted material. In July 2001, the The 9th U.S. Circuit Court of Appeals issued an injunction for Napster to immediately shutdown in an attempt to prevent the trading of copyrighted music on its network. In the site's final days, usage spiked 71% as users tried to get as much music as possible before the shutdown.
The Transformation of Napster
From 2001-2011 Napster went through many acquisitions and attempted to revise the software to allow users to share media legally.
September 2001 - Napster settles its suits against the RIAA and agrees to pay $26 million in damages for all previously traded music and a down payment of $10 million dollars for future royalties.
September 3, 2002 - Napster files for bankruptcy and is forced to liquidate all assets.
2003 - Napster is bought by Roxio, a software company that produces digital media products. Roxio acquires Napster through a bankruptcy auction and intendeds to relaunch the Napster as a digital retail music distributor similar to iTunes
2008 - Best Buy, the consumer electronics superstore, agrees to pay $121 million to Roxio for Napster to compete with then rival Circuit City.
October 2011 - Best Buy no longer wants to be a part of the crowded digital music industry and sells the Napster brand to Rhapsody. Though Rhapsody had no intention to continue Napster, they purchased it for its intellectual property and notoriety. Napster was absorbed into the Rhapsody brand and is currently operating under the Rhapsody name.
Napster in Popular Culture
Several books document the experiences of people working at Napster, including: Joseph Menn's Napster biography, All the Rave: The Rise and Fall of Shawn Fanning's Napster, John Alderman's Sonic Boom: Napster, MP3, and the New Pioneers of Music, and Steve Knopper's Appetite for Self Destruction: The Spectacular Crash of the Record Industry in the Digital Age. Parodies of Napster references have also been seen in the popular television shows Futurama and South Park, as well as in the music of Tom Smith and Johnny Crass. Producer/Director/Actor Eli Roth made a small film with a parody company called "Snackster". Additionally, the 2010 film The Social Network features Napster founder Sean Parker, portrayed in the movie by Justin Timberlake, and his role in the rise of the popular website Facebook.  In the film, Parker is portrayed as a selfish character, instigating a fall-out between the two main characters for personal gain.
Parker and Metallica Partner Up
During peak years of Napster, Lars Ulrich of Metallica was one of the most outspoken opponents of Napster's service, and filed a lawsuit against the pioneering peer-to-peer service. On December 6th, 2012, Ulrich and Sean Parker ended the decade-long feud. The two men shared the stage at a Spotify event, along with Spotify CEO Daniel Ek. Ulrich announced that Metallica is now offering its catalog on Spotify, of which Parker is an investor and board member. The two spoke on stage at the event about their previous differences regarding Napster. "We wanted music to be free as in freedom, not for free," said Parker, who blamed the press for miscommunicating Napster's mission.