Napster’s New Life: From Changing the Music Industry to Just $ 60 Million

Technology News

The ‘startup’ that revolutionized music downloads and laid the foundations for companies like Netflix has just been acquired by a virtual reality company
The Napster brand seeks its place in the market after several failed attempts. There was a time, at the beginning of the century, long before song streaming became popular or YouTube or Spotify were born, in which this company co-founded by Sean Parker (also a Facebook co-founder) and Shawn Fanning was the big star of the tech firmament . With his invention, a network between computers around the world (p2p, which means peer to peer , that is, a network between peers) to share music files, the then ubiquitous mp3, not only shattered the recording industry at the time. “Thanks to Napster, people realized that they didn’t want to pay for a full album if they only wanted two songs,” says Elena Neira, a collaborating professor at the UOC’s Information and Communication Sciences Studies. “The change in philosophy that he imposed is obvious in today’s businesses, from Netflix to Spotify.”

Twenty years after its fall, MelodyVR, a British company dedicated to broadcasting events in virtual reality, has just announced the acquisition of the company’s parent company , RealNetworks in a transaction that values ​​the company at $ 70 million (almost 60 million euros to change). The payment will be made in cash (15 million), in MelodyVR shares (11 million) and in payment obligations to record labels and music publishers valued at another 44 million, according to data kept by the Financial Times newspaper. Napster and MelodyVR will continue, at least for now, to operate as independent businesses, and as plans are established they will build a platform that incorporates both live virtual immersive music and music streaming services.

Vodafone, Bertelsmann, Roxio … There are several names that have tried to find a future for a name with a long past. Napster has been in the last few quarters a loss-making company as an online music service ( streaming ). Its revenue reached $ 106 million last year, according to Statista data, light years away from the industry leader Spotify’s 6,706 million . It currently has about three million users and 90 million songs in the catalog. Nothing to do with what it was at the beginning of the century.Napster was the brainchild of programmer Shawn Fanning and entrepreneur and programmer Sean Parker, who would rise to fame as one of Facebook’s first investors (and first president). Napster was a free program that allowed its users (a peak of 80 million in 2000) to create a network to exchange songs in the form of mp3 files (hence the peer-to-peer network ). Napster, in any case, was not a pure system to share these files, as BitTorrent is . Instead, it had a central server that was dedicated to indexing users and shared files. The transfers, yes, they were made from computer to computer. It would be this central server that would prove fatal to their future.

The show debuted in June 1999 and its success was massive by the numbers at the time. The music industry 20 years ago knew little about downloads. But he did realize that his business was going down the drain. Complaints for copyright infringements became the first major public debate on the nature of copyright on the Internet. “The most interesting thing about this system is that you interact with your colleagues, exchange information with a person on the street”, Fanning himself claimed at that time.Napster became the repository where any song could be found. Free. So much so that the demo of I Disappear, a Metallica song that was not yet finished, was made available to users, which caught the attention of the RIAA (Recording Industry Association of America) and the band itself. : the legendary trash metal grouphe was one of the main battering rams on the offensive. They even demanded a 10 million compensation from the company and put on the table the names of some 330,000 of their fans who exchanged their songs. “If we are going to sell our music on the Internet, it will be the way we want it, and we cannot do it if the guy next door gives it away,” declared Lars Ulrich, the Metallica drummer. Rapper, producer and businessman Dr. Dre also joined the court battle.

I fought the law (and the law won) , the song by The Crickets (after Buddy Holly died) popularized by Bobby Fuller Four and The Clash explains perfectly what happened to Napster throughout 2000 and 2001. His lawyers argued that they were protected by the so-called Home Recording Act of 1992, which allowed the reproduction of files for personal use. The RIAA argued that Napster did not adhere to the definitions published in the law.

German record label Bertelsmann partnered with the startup to create a subscription-based legal store that would eventually fail. Meanwhile, Napster found a possible solution: block songs that artists or their record companies wanted to block. After several patches and last minute appeals, Federal Court Judge Marilyn Hall Patel decreed the definitive closure of the service in July 2001. To continue operating, Napster had to face a millionaire compensation. He did not have the funds, Bertelsmann tried to buy the company, but nothing prevented it from declaring bankruptcy in 2002.

A series of transactions then began: the first one who dared was Roxio in November 2002. The company converted it into a music store under the name Napster 2.0 . Six years later, it would be the turn of Best Buy, which spent 121 million dollars (85 million euros) in order to compete with Apple’s iTunes and Amazon. In 2011, it merged with Rhapsody , Spotify’s rival streaming music service . To survive, he came to ally himself with Telefónica and Vodafone … until he reached the purchase announced today.

Change of business model
Napster’s first victim was obviously the music industry. “What Napster did was hit the table and change the rules of the game,” says Elena Neira, from the UOC. “The problem with content is that the industry wanted to keep control of how it was going to be consumed. That model no longer exists, it has been completely broken ”. Napster’s footprint can be seen not only in the current dominance of streaming , but in business models like Netflix. “Without a doubt, the model that Netflix has adopted when launching its digital business is inspired by torrent models , in their way of distribution and in the format of premieres. And, in the end, this collaborative and compulsive consumption comes from Napster ”.

“A generation found a way to share content on the Internet without paying for it,” explains Guillermo de Haro, professor of the IE systems area . “The Napster case was symptomatic. The industry brought down a company, but failed to bring down the technology that allowed free file sharing. Who has achieved it has been the business model ”.

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