Last week saw the conclusion of a $70 million sale of Napster – the online music store and subscription service – to the UK based, virtual reality music concert start-up, MelodyVR. This sale has generated prolific attention in the music industry particularly around the turnaround of Napster, whose trading history is riddled with Intellectual Property disputes and financial distress. Founded in June 1999, Napster was originally based on the concept of a free online peer-to-peer music sharing software, facilitating MP3 file transfers between users of the platform. The program became an immediate success; thanks to a simple user interface and the dedicated approach to only transferring music; Napster generated a user base of circa 80 million within two years. Not only were users able to listen to their favorite songs, but certain music (older singles that were never made publicly available in digital form, rare or exclusive albums, concert and studio-session recordings) had been made much easier to obtain than before. Furthermore, up and coming artists looking to grow their audience favored Napster, as they were able to share their work free of charge to a vast audience, and in return gain popularity and boost future sales. Halfway through 2000, circa 14,000 songs were being downloaded every minute on the platform.
Where It All Went WrongNapster’s innovative software and success led to the company’s downfall – the majority of media made accessible on the platform was uploaded without licensed approval, and hence the site was hosting an incredibly high scale exploit and defiance of copyright law. Due to the lack of control and review process over files made available for transfer, anything and everything was being shared on the site – essentially making the website a hotspot for illegal infringement. Many artists, namely Dr. Dre and Metallica, were alerted to a vast library of their past and, more surprisingly, yet to be released music being enjoyed by millions of users and even radio stations without consent. With the lack of any agreement, and more importantly royalties being paid to the artist, it was obvious that action was to be taken on the company. This inevitably led to a lawsuit filed by the Recording Industry Association of America (RIAA), a US trade organisation representing record labels including Sony Music Entertainment, Warner Music Group and subsidiaries of Universal Music Group (UMG). This suit – A&M Records, Inc. v Napster, Inc. (2001) – followed previous suits filed by both Dr. Dre and Metallica, with Napster being subject to the following copyright infringement claims:
- That Napster’s users were directly violating the plaintiffs’ copyrights;
- That Napster was responsible for contributory infringement of the plaintiffs’ copyrights; and
- That Napster was responsible for vicarious infringement of the plaintiffs’ copyrights.