In June 1999 the music industry had made £30.6 billion, however, Shawn Fanning, a student at a university in Boston had linked computers together in order to share music files.
With the help of Sean Parker, who he met through a chat forum, Napster allowed users to download music over the Internet instantly and without paying for it. Within 4 months it had 150,000 users with 26.4 million within 2 years.
A venture capitalist Eileen Richardson had reservations about the legality of the service, however, after fears were allayed, became the company’s CEO who planned to offer music at $0.99 per song, so that user’s could download those that they wanted, rather than needing to buy an entire album. However, this plan was not well received by the record labels and Richardson stepped down from Napster in 2000 with a copyright lawyer, Hank Barry becoming the new CEO whose company invested $15 million into Napster.
By 2000, other peer-to-peer applications, such as LimeWire has begun ad a result of the success of Napster.
However, Napster was being threatened by the music industry with the RIAA starting to sue the company, including Metallica and Dr Dre who identified users suspected to be illegally sharing their music over the network.
However, Napster was attempting to make a deal with record labels, however, these did not materialise, even with plans to turn the business into part subscription based and, in 2001, Napster agreed to pay copyright of £20 in settlement.
By 2002, it could not afford to pay staff and it filed for bankruptcy protection the following month. The company was then sold to Roxio and was relaunched as a legal service the same year.
The music industry values dropped for the next 14 years and many other services, including Spotify that now has over 100 million subscribers, benefited from the path that Napster had taken.
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