Many of you have probably heard yesterday's court decision, basically
temporarily shutting down Napster.
Before everyone gets up in arms, read this great story from the Wall
Street Journal, Tuesday, explaining where Napster, Inc. really stands....
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Napster Lays Claim to New Frontier,
But It Doesn't Want Any Company
By LEE GOMES
Staff Reporter of THE WALL STREET JOURNAL
If there's one thing that Napster seems to believe in, it's sharing. The
fast-growing service lets users obtain free MP3 files of popular music,
something the record industry calls "copyright infringement" but which
Napster describes as fans "sharing" their favorite songs over the
Internet.
When Hank Barry, Napster Inc.'s president, testified before Congress
earlier this month, he mentioned sharing seven times in his opening
statement. Among Mr. Barry's sharing-friendly remarks: "Napster ... is a
return to the original information-sharing approach of the Internet."
Napster even has a theme song -- in the form of the winning entry in the
"Why I Support Napster" songwriting contest it recently promoted on its
Web site -- that expresses similar sentiments. Among the lyrics:
"I'm fighting for freedom.
Trade laws? We don't need 'em,
Especially when living
In the Information Age."
But while Napster is eager to help its users share music, there is one
kind of sharing it won't tolerate. That's the sharing of anything that
belongs to Napster itself. The company may, through its rap anthem, appear
to encourage a disdain for "trade laws" where music is concerned, but it
readily invokes those same laws when its own property is at stake.
Last month, when the punk-rock band the Offspring started selling T-shirts
featuring the Napster logo, for example, Napster promptly sent the group a
cease-and-desist order, backing off only after some Web sites commented on
the apparent hypocrisy of the move.
More significantly, the company repeatedly has tried to stymie independent
software developers working on Napster-compatible software and Web sites.
While these programs could benefit the millions of music fans that Napster
claims are its only constituency, they might also diminish the commercial
potential of Napster itself.
The company has refused to share technical information about its software
code, has made changes to its software that have prevented other programs
from working with Napster's own and has blocked computers from outside
music sites from accessing Napster's database of hundreds of thousands of
songs.
Issue Briefing: I Want My MP3
The fact that Napster seems to sing a different tune when its own property
is involved is just one of the ways the reality of Napster is at odds with
its public image. The service's management and ownership structure, for
example, is quite different than many users suppose, with Napster's highly
publicized teenage founder, Shawn Fanning, playing only a minor role.
Napster's Mr. Barry, a former corporate lawyer, insists there is nothing
inconsistent about the company's efforts to protect its intellectual
property. "We are not an open-source software company," he says. "This is
not Gnutella," he adds, referring to the popular free software product
that lets users exchange music files. Mr. Barry says that while Napster
and the music industry disagree about the rights music owners have to put
digital music files on the Internet, the company respects copyright laws
and wants to find a way to compensate artists for use of their work.
The recording industry, of course, sees Napster's "sharing" as a euphemism
for music piracy on a massive scale. Wednesday, industry representatives
are scheduled to appear in a San Francisco courtroom in an effort to
persuade a federal judge to close Napster down, at least in the service's
current, unbridled form.
Arguments are set for the afternoon, but Judge Marilyn Hall Patel isn't
expected to issue a ruling right away.
Napster's hopes of transforming its busy Web service into a source of
revenue depend on its withstanding the music industry's legal assault. At
the same time, however, it is taking an increasing amount of flak from
those seeking access to its database or its technology. The result is a
public-relations skirmish over whether Napster, which portrays itself as a
champion of youth culture and the Web's freewheeling ways, applies a
double standard to intellectual property, making it cavalier toward other
people's, but hyperprotective of its own.
"At Napster, they jealously guard their own property, yet they complain
when the music industry jealously guards its own property," says Adam
Powell, chief executive of AngryCoffee, a music-oriented Web site that has
had run-ins with the closely held San Mateo, Calif., company.
As a condition of using its software, for example, Napster demands that
users agree that they won't "decompile, reverse engineer, or disassemble"
the program, which precludes anyone from trying to figure out how it
works. The phrase is a standard one at big commercial-software companies
such as Microsoft Corp.
What's more, Napster has had occasionally testy relations with the
community of outside developers who began gravitating toward Napster as
soon as the program started to catch on. They were usually interested in
writing add-on software for Napster or developing versions of the
company's program that worked on other computer operating systems, such as
Linux. Many of these programmers had assumed that Napster, because of the
nature of the service and the public stances of young people who founded
it, would be sympathetic to their efforts.
Instead, Napster told them, in effect, to get lost.
"You don't know why we implemented the things we did, and [we] can't
explain them to you, mainly because it's not public information, simple as
that," one Napster developer said in an open letter to outside developers
published in January on an online newsgroup. "We can't give you any
information because Napster is not some garage organization ... but rather
an incorporated company with a development team, marketing team, bizdev
team, and an executive management team. Hypothetically speaking, if I were
to have a strong desire to give you all the information you needed. ... I
couldn't. I do, actually, but that is no longer relevant. It's not mine to
give anymore, it's the company's."
Some outside Napster developers were surprised by the letter. "Maybe you
need to lighten up," one of them wrote in response, telling Napster that
its software is "just a way to pirate music, after all."
Some have tried to figure out the workings of Napster's internal protocols
on their own. One of them, David Weekly, a Stanford University student,
put a version of them on his personal Web site. Soon, he received an
electronic message from Napster demanding that he take it down.
Another Napster fan, Chad Boyda, wrote a program called Napigator that
allows Napster users to connect not only to the music databases on
Napster's own computers, but also to the growing list of "Open Napster"
servers that emulate Napster's music-trading service, but which are
operated outside the company. Because most Napster users don't know those
other computers even exist, programs such as Napigator have the potential
for creating competition for Napster. (They also show how Napster-style
threats to the music industry will continue even if Napster Inc. is shut
down.)
Not long after Napigator was released, the company rewrote the main
Napster program in a way that prevented Napigator from working properly.
Napster says it is always rewriting its software, and wasn't targeting
Napigator. But Mr. Boyda is skeptical. "I had to rush out a new version
that got it working again," he says.
Napster also demanded that Mr. Boyda not include usage information about
its servers in his software. Mr. Boyda acquiesced and, as a result, a
Napigator user can get statistical information about all of the servers
listed on Napigator -- such as how many users are logged on and how many
MP3 music files they are making available for download -- except for those
run by Napster.
Another issue for Napster is whether it really is the fan of new Internet
information-sharing technologies that it says it is. For example, in his
Senate testimony, Mr. Barry tutored senators in the essentials of the
"peer-to-peer" file-sharing system that is one of Napster's technical
foundations. He also reminded the Senate panel of the many examples "of
new technologies struggling to survive as copyright holders argue that
these new technologies will impede their ability to be compensated for
copyrighted works."
But there is one new Internet sharing technology that Mr. Barry didn't
mention to the senators, and of which Napster will have no part. These are
"bots," or "agents," a kind of software that can quickly search several
Web sites and present the findings to a user in a central place. Many
enthusiasts see agent software as an essential feature of the emerging
Internet, even more so than peer-to-peer file sharing, with programs
roaming the Web, on the prowl for the sorts of personalized information or
files that an individual user might want.
That was something of the vision of AngryCoffee, a San Francisco
music-oriented Web site, which last month used agent software to allow its
users to search several music sites at once, including Napster's, when
looking for a particular song.
Mr. Powell, AngryCoffee's chief executive, said the service would be a
boon to music lovers, since with a single request, they could survey the
Net's growing number of music-sharing sites and have all the results
listed on a single page. But in the process, AngryCoffee's users would
never actually encounter Napster's site, since the software would visit it
automatically on their behalf. That would mean fewer "eyeballs" would be
attracted to the Napster site, diminishing its commercial prospects. Two
days after AngryCoffee started its service, Napster blocked its computers
from accessing the Napster site.
"Napster is treating its database as its private property," complains Mr.
Powell. "But it's not Napster's property. It's a list of pirated music."
Napster's Mr. Barry says his company, like many big commercial Internet
sites, blocks agent software programs because they impede the performance
of its computers. EBay Inc. has used similar arguments in battling sites
that compile information from multiple auction services. Some Napster
engineers, however, say well-designed agent software would be no problem
for the company's computers. And Mr. Powell says the author of
AngryCoffee's agent software was one of the best in the business.
Overall, Mr. Barry says there is nothing hypocritical or contradictory in
Napster's handling of these matters. "We respect copyrights, but differ
with the music industry about their scope," he says. "And we will enforce
our copyrights wherever we think we should. It's a perfectly consistent
approach."
Napster's hard-nosed approach to protecting its assets may stem from the
fact that its real owners aren't a group of young, tech-savvy music fans,
but rather a network of seasoned investors whose goal is turning the
company into a profitable business.
Napster's public face is often Shawn Fanning, the ex-Northeastern
University student who conceived the idea for Napster and who, along with
some friends he met over the Internet, helped write the actual program.
While Mr. Fanning makes a winning posterboy -- the beefy 19-year-old
weightlifting buff is rarely photographed without his baseball cap -- his
actual role at the company is smaller than most people know, including
many Napster employees. He owns less than 10% of Napster's stock,
according to internal company documents, has no senior-management position
and isn't even on its board.
Larger chunks of Napster are held by a roster of older and often extremely
wealthy investors, some of them veterans of successful Internet companies.
Chief among them is John Fanning, uncle to Shawn, who at one point owned
70% of Napster to Shawn's 30%. Insiders say that because of subsequent
investments, Shawn Fanning's current stake in Napster is about 6%, with
his uncle, the biggest individual shareholder, having about 12%. Napster
itself won't discuss the matter.
The senior Mr. Fanning, who often introduces himself as "the founder of
Napster," is himself an Internet entrepreneur, though none of his projects
have had anywhere near the success of his nephew's. In an interview, the
senior Mr. Fanning said his initial 70% stake in Napster was justified by
the executive role he played in Napster's early days, and by the money he
invested in the company, an amount he says was in the "tens of thousands
of dollars."
Several friends of Shawn said that the big size of his uncle's stake is a
sore point with the young Mr. Fanning, one that he doesn't like to
discuss. But Mr. Fanning says his nephew, who grew up without a father,
was well provided for when Napster was incorporated. "If Shawn weren't my
nephew, he wouldn't have got the deal he got," Mr. Fanning says. "Usually,
for people in that position, it's hard to get 3% or 5%."
In an interview at Napster's headquarters, Shawn Fanning says he had no
quarrel with the size of his uncle's holding. "We worked very closely
together," he says.
Other big Napster shareholders include Yosi Amram, an associate of the
senior Mr. Fanning, who holds about 5% of the company on account of a
$250,000 investment he made last year. Mr. Amram has worked with a number
of high-profile companies and is currently chief executive of ValiCert
Inc., a Silicon Valley supplier of tools for secure Internet
communications. He has also played a key role in Napster's development,
serving on its board and orchestrating its move to Silicon Valley from the
Boston area, where the Fannings had been based.
Mr. Amram also helped Napster raise money from the large pool of wealthy
"angel" investors that resides in Silicon Valley, especially those with
"dot-com" money. Today, dozens of people in California and even Asia have
Napster investments, most of them relatively small. While they stand to
profit handsomely from their stake, not everyone wants their links to
Napster known; one investor pleaded that his involvement in the company
not be revealed, lest the controversy over Napster hurt his other business
deals.
Write to Lee Gomes at lee.gomesATwsj.com
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