Episode 8 | 10m 6s | Video has closed captioning.
Napster, created by an 18-year-old developer, exploded across college campuses across the country in 1999. With a mouse click, music lovers gained free access to their favorite tunes. The record industry took to the courts to shut down the upstart company. But a generation of consumers had tasted instant entertainment on demand, and there was no turning back.
Aired: 10/29/19
Expires: 10/06/26
- These days, we take for granted that with a couple of clicks on our phones, tablets, or laptops, we can instantly stream or download our favorite TV shows, movies, and songs.
But this easy access direct to the consumer, and sometimes, even for free, isn't new.
- It all began two decades ago with a pesky startup in a college dorm.
The disruptor was a file sharing program called "Napster."
With it, you could download and share music for free.
The record industry didn't like it, Napster wound up in court, and the startup didn't last long.
But it had sounded the first shot that the way we consume media, not just music, was about to chance dramatically.
At the 2019 Academy Awards, "Roma," by acclaimed director Alfonso Cuarón, took home 3 Oscars.
- Roma!
(crowd cheers) - [Narrator] But the film's significance wasn't merely measured in trophies.
For many, it marked a turning point for the American motion picture industry.
- [Newscaster] "Roma" is a Netflix streaming platform production, one few people saw in an actual cinema.
- That really sparked a debate in Hollywood as to what constitutes a film.
There's a lot of traditionalists that see a film as something, you go to a theater, you see it on the big screen.
The Napster experience for the music business shows the futility of trying to fight an innovation that people are clearly embracing.
- [Narrator] The year was 1998.
Will Smith and Shania Twain dominated the pop charts.
Ben Affleck and Cameron Diaz were the big draws of the box office, and tens of millions tuned in for the final episode of "Seinfeld."
- Why don't you just blow it out your- - (stuttering noises) - And, in a dorm room at Northeastern University in Boston, a freshman named Shawn Fanning had an idea for a computer program.
- I first started engaging with Shawn online over instant messenger through his username, "Napster."
The conversation went something like Shawn saying, "Hey, I've started creating this service to help people find music."
He was insistent that this was going to be huge, and he might make a lot of money out of it.
My response to him was, "You need to just concentrate on your studies."
- [Narrator] Fanning didn't follow Aydar's advice.
He dropped out to focus on the program, and partnered with fellow teenage programmer Sean Parker to release a beta version.
As it started to spread through chat rooms, they traveled to the Bay Area to grow the business.
- Initially, I was skeptical that, gosh, I'm sitting across from two 18 or 19 year olds.
I changed my tune once I learned that there were already 40 thousand people using this thing.
- [Narrator] Fanning called the program "Napster," after his online username.
Over the internet, it allowed users to access music files stored on the hard drives of fellow Napster users.
- [Aydar] - 40 thousand wasn't a big number, but it was bigger than what I thought it was going to be, initially, which was zero, because people weren't willing to open up their hard drives.
What I realized was that people's emotional ties to music, their general interest in music, was more than enough to overwhelm any kind of security or privacy concern.
- [Narrator] It was on college campuses with high speed internet that Napster really took off in the fall of 1999.
- [Man] So how many mp3s do you have on your computer?
- About 600.
- Maybe like 100, or something.
- 6 or 7 thousand.
- [Various Newscasters] Napster.
Napster.
Napster.
It's called "file sharing," seen by some as the wave of the future.
- [Narrator] But not everyone was cheering Napster's rise.
- College students are making good use of the internet, the latest software makes it a bit too easy for students to access their favorite tunes.
- No longer do you have to go to a store and plunk down money.
- [Steve Knopper] From '84 to 2000, the music industry made so much freaking money selling CDs.
First it was hair bands, then it was grunge bands, and then it was boy bands.
("I Want it That Way" by the Backstreet Boys plays) - I mean, it was a great time to be in the business.
1999, you had 2 or 3 records come out, in one week, you'd sell a million records.
- You actually had to drive your car to the Tower Records and buy a CD for 18 dollars to get the one song you liked.
And that was a good model, it made the industry tons and tons of cash.
("Tubthumping" by Chumbawumba plays) - Selling millions of Chumbawumba albums with one good song was an economic boom.
- [Narrator] It didn't take long for the music industry to take notice something was afoot.
Months after Napster's rise, industry executives began a legal battle to stop it.
- [Female Newscaster] They're waging a war in the courts over who controls what artists create.
- [Male Newscaster] To record companies, whose artists range from Tony Bennett to Metallica, this new technology in the wrong hands is simply stealing.
- Napster hijacked our music without asking.
- A business model built on infringement is not only morally wrong, but legally wrong.
- Illegally downloading music is the same thing as going into a CD store and stealing a CD.
- [Aydar] We felt pretty strongly that digital distribution was going to bring the industry closer to its customer, and instead of killing it, they would take advantage of the value that it brought.
- We've heard that we couldn't survive before, when we had 700 thousand members, and when we had 17 million members.
- A chorus of studies show that Napster users buy more records as a result of using Napster.
- We wanted it to be an industry supported service that would be a successful business.
We tried to make sure that the record industry could understand how this could be beneficial to them, but it was very clear to me from the early going, that they were really loathed to a licensed Napster.
- Anybody with enough money could go and make a record, but that didn't guarantee you getting into stores, which was the only place that you could actually buy that record.
That was the power of the music business.
The distribution.
The industry went wrong in trying to hold on to that distribution channel and those chains, and not trying to find a solution to what was obvious was coming in the future.
- [Narrator] In July of 2001, after more than a year of legal battles, the record industry got its wish.
- The free music service run by Napster was ordered to stop the music.
- [Narrator] Napster, which at its peak had about 70 million registered users, was shut down due to court orders.
But while the industry may have defeated Napster, the idea had taken hold.
A flurry of other downloading services took its place.
Desperate to stem the tide, the labels upped the stakes, and sued almost 20 thousand people for using illegal downloading software.
- Do you feel like you're being made some sort of test case here?
- Yeah.
- [Narrator] But CD sales continued to plummet, shuttering record stores across the country.
- An industry in turmoil.
- [Narrator] So, when Steve Jobs came to the table with plans for a new online music store, the major labels finally surrendered.
- [Galuten] You had only two choices.
Either you don't do a deal with Steve, in which case people continue to just email the mp3s to their friends, or you do business with him, and he has a store, and then you can sell things.
- [Narrator] And as online streaming services like Spotify and YouTube gained popularity, the music industry realized it was better to partner than fight them.
In recent years, streaming revenues have provided the industry's first real sign of positive growth since the pre-Napster days.
- Streaming is rapidly changing how media is bought, how it's consumed, who profits from it, and even how much is made.
- [Narrator] But for mid-tier artists, who once benefited from album sales, the payouts from streaming can be slim.
- [Galuten] The top 1% generate most of the revenue.
Hopefully, more will be able to earn a living as time goes on, but it is ever more challenging.
- [Narrator] And as for record labels, the opportunity for them to be leaders in online distribution had long passed.
- [Aydar] They didn't take the time to really understand what was going on and think about the future implications of it.
Because it was clear to us.
If we didn't exist, something else was going to exist.
The whole reason why there are so many people using this service is because this is how people want to access their music.
- [Narrator] The lessons of Napster are resonating today, as another established industry, television and film, faces the same existential challenges.
- [Littleton] When the music industry was in the depth of the legal fight with Napster, smart people were looking at the film and TV industries, and saying, "You're next."
Just wait until the internet speeds and capabilities get fast enough so that you can distribute a movie or a TV show.
- [Narrator] That day is here.
Nearly 70 million American households now stream movies and TV shows from an internet connected device.
- [Littleton] What Napster introduced America to was the idea that you could have a very large menu of content at your fingertips, and you could hit a button and get that delivered.
In Hollywood, the move toward direct consumer business models has been incredibly disruptive.
(20th Century Fox theme plays) - [Littleton] You're talking about an industry that has functioned basically the same way for about a century.
- [Narrator] And a new study predicts revenues from online streaming services like Netflix and Hulu will outpace movie theater box office receipts in 2019.
- [Littleton] There's a tendency to be so ingrained in an industry, that you don't see the potential for innovation, for improvement.
Right now, Hollywood is in the throws of a very fast and furious reaction to what's clearly been embraced by consumers about the Netflix model.
- [Newscaster] Disney is taking on Netflix with its own streaming service, and it's called "Disney+."
- [Narrator] Today, with TV and film companies navigating the internet revolution in real time, Napster's impact on the music industry is a reminder of the peril of taking too long to embrace the future.
- We've had a massive change.
Massive.
I haven't seen anything like it since the invention of the printing press.
There are going to be many, many new and wonderful ways to exploit, enjoy, distribute creative works.
We just have to be open to them.
companion show
Retro Local is a companion initiative to Retro Report on PBS, highlighting local headlines and the historical seeds that were planted years ago in communities across the country.
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