It was sheer anarchy. That's exactly what transpired in the late 1990s when teenage computer whiz and college dropout Shawn Fanning created Napster--a system that connected computer owners and allowed them to swap music files over the Internet. The $40-billion music industry reeled as a generation of young computer users, completely ignoring the notion of copyright, adopted a disturbing credo: Why pay for music you can get for free? By May 2000, it was estimated by the Internet research firm Webnoize that 73% of U.S. college students were using Napster.
In these excerpts from the book "All the Rave: The Rise and Fall of Shawn Fanning's Napster" (to be published April 15 by Crown Business), Times staff writer Joseph Menn chronicles how a few unworldly kids almost caused the powerful music industry to implode: Artists were caught between trying to maintain their livelihoods while not appearing greedy to their fans, and at one point, the German media conglomerate Bertelsmann AG antagonized its peers by financing Napster at the same time its own BMG record label was suing to shut down the online service.
In her ruling against Napster, the presiding judge noted that technology had gotten ahead of the law. It also had gotten ahead of reason: If Fanning and his young colleagues didn't understand the full implications of what they had created, the professionals in charge of Napster's business didn't care. The music industry understood, but it had no idea how to stop the juggernaut.
As Napster is stymied (the site is in limbo as its new owners attempt to develop a pay-for-play service), its legacy continues to spiral outward: Pirate successors now combine for a bigger reach than Napster had at its peak; Hollywood and Silicon Valley are jousting on Capitol Hill over whether widespread anti-copying mechanisms will be mandated in future computers; and sales of blank CDs, often used to make custom discs of downloaded music, now top sales of prerecorded CDs.
It all began with a poor Boston-area kid who came west to Silicon Valley and started a revolution.
Shawn Fanning and Sean Parker packed their bags for California in September 1999 because Napster's first equity investor, Yosi Amram of Palo Alto, wanted to keep an eye on the company. Parker took what he could carry from Virginia and went to the airport. Fanning was to fly the same day from Boston, but he misplaced his driver's license and couldn't make the flight.
When Parker arrived at the San Francisco airport and discovered his partner wasn't there, he realized he was alone in a city where he had no friends, no support network and no place to stay. Fanning arrived a day or so later, exhausted. "I was in really bad shape, just from programming for eight months," he said. "I was going to a strange place. I didn't get a sense of what I was getting into or really much of an understanding for what it meant to start a company or raise money or any of those things."
They were relying on the experienced adults in the company, such as Napster CEO Eileen Richardson. But Richardson hadn't done enough homework. She said that her first question to Amram before she signed on had been about copyright law. Anything as powerful as Napster, which took away so much music without paying any money to the labels, had to be illegal, she worried. Amram assured her it wasn't, and he told her about a lawsuit-defense memo that had been prepared for the company. That was enough to convince her. She was foolish for not doing at least a modicum of due diligence and speaking to a lawyer. But she thought people would just use Napster to sample music, then purchase what they liked. CD burners were rare at the time--they would soar in popularity later, precisely because of Napster.
Richardson decided to move fast to raise more money. After word about Napster had leaked out in June 1999, 100,000 users had downloaded a test version. When college students returned for the fall term, Napster had the potential to turn into the ultimate case of viral marketing, with word of mouth spreading it faster than any advertising could. But the usage was already straining Napster's capacity, and the system kept crashing. If the positive buzz was replaced by griping about the crashes, Napster could die before its first official release.
By the end of their first week in Napster's San Mateo office, Fanning and Parker had been surprised so many times by the chaos that they began referring to the encounters as "What the hell is going on?" moments. "We didn't have any real world experience to process what was happening to us," Parker said. "It really felt like we were in a movie."