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Don Dodge, the VP of Project Development at Napster in 2000, notes that this year is the 7th anniversary of that enterprise, in How Napster changed the world - A look back 7 years later.
"We went from just a million users to over 50 million users in about 7 months time. At the time it was the fastest growing application in the history of the internet. Unfortunately, this success turned out to be a business disaster:
Napster started out as a free download tool but the goal was to make it into a real business in partnership with the record labels. At first Napster was too small and unknown to get a meeting with the major labels. The record labels, and most of the rest of the world, had never heard of Napster and didn’t know what it was. That changed in a hurry…in fact too fast. Napster went from being an unknown underground technology to the biggest threat the record labels had ever seen, all in the span of less than six months. At this point the record labels wanted us dead. The story goes on, with lots of interesting fodder, including the problem of institutional adaptation. As Dodge notes with respect to the labels:
In retrospect, the reality was that they couldn’t have made a deal with us even if they wanted to. The record labels existing contracts with the artists had no provisions for digital distribution of individual songs. The payments to artists were all based on CD sales through the normal channels. It took them several years to rewrite their contracts with artists to get to the point where today you can buy a single song via digital distribution. It's an interesting piece, from the standpoint of both intellectual property and business history, even though I don't buy all of it -- if Naptster wanted a relationship with the labels, the way to start was not with massive appropriation of the property at the heart of the business.
Clayton Christensen, the disruptive innovation guru, would probably say that it was a mistake to try to deal with the incumbent labels at all. The proper approach would have been to start with small indies and new music, and build from the bottom up, without confronting the intellectual property issue at all. The outcome might have been quite different.
posted by James DeLong @ 1:17 PM | Internet: P2P, Search Engines..., Markets: Business, Investment & Innovation, Media: Video, Music...
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