The Napster Software:
And The World’s Reaction to its First Widespread
Peer to Peer Sharing Architecture
CSE190/Spring 2002
Mostafa Azizi
Devin Lee Drew
Daniel Issakharian
Felip Nelson Ulip
Napster: From Where Did it Come?



Though MP3 encoding available, it was difficult to find
publicly distributed music on the internet.
Small sites hosting public music would become uselessly
slow once widely discovered.
Peer to peer file sharing with a centralized server indexing
user shared files surmounted these problems.
Napster: How it Works
The Decision

The architecture of the Napster software did
not address copy protection in any way.
– By design, Napster simply facilitated the
sharing of mp3 encoded music and the
discussion thereof.
– This design propelled the eventual userbase of
30+ million.
Who Are the Stakeholders?

The driving force:
– Joe computer-owning public

Those who responded to demand:
– Shawn Fanning et al , creators and capital behind Napster

The status quo dinosaur health care system:
– RIAA, legal team, lobby team

The creative foundation:
– Makers of music

The technical mortar:
– Providers of Internet services
History

1877
 ~1960
 ~1970
 1972
 1977
 ~1985
 1990
 1992
 1998
-The first recording of a human voice
-Personal tape recorders reach reasonable price
-Predecessors of the Internet
-Copyright law extends protection to sound recordings
-PCs get (relatively) easy
-2400baud modems, AOL, Microsoft goes public
-first World Wide Web browser
-MPEG-1 (MP3 superset) standard introduced
-DMCA becomes law
History

Late 90’s

May 99
 Dec 99
 July 00

July 00
 Oct 00

Feb 01
-A high school grad can easily afford a new computer
-Fanning et al create Napster
-RIAA sues Napster just in time for Christmas
-District judge issues injunction which would shut
down Napster service while case in progress
-9th US court of Appeals (SF, CA) stays injunction
-Bertelsmann initiates collaboration to make the next
version
-9th rules district court injunction was overboard
History


July 01
Feb 02
-District court revises injunction
-”Dead Napster Gets Deader” 9th upholds injunction

May 15

May 17
-Sale falls through, employees offered unpayed
vacation
-Bertelsmann buys Napster
Copyright Law in the US

Promotes progress of science and arts
 Protects all original works of authorship that
last for the life of the author plus 50 years
Previous Copyright Cases:

Betamax case
– Reject entertainment industry’s effort to keep the VCR
off the market.
– Supreme Court said: “Copyright is first and foremost
about promoting progress in the arts and sciences.
Monetary rewards are secondary.”
– Napster believes this is the case with their
peerto-peer file sharing.
Napster’s Peer-to-Peer file sharing

Napster user A & B find each other using a
directory maintained by Napster.
 User A copies digital music of user B.
 File is transferred over the Internet and NOT
through Napster’s servers.
Accusation Against Napster

Contributory infringement
– contributing to the direct copyright
infringement of its consumer-users

Vicarious infringement
– profiting from infringing activity under its
control
Defense of Napster:

“staple article of commerce” doctrine
– provider of technology is NOT liable if
technology is capable of significant noninfringing use
– VCR can be used both for copyright
infringement and for legal non-infringing uses
Defense Against
“Contributory Infringement”

Capable of significant non-infringing uses
–
–
–
–
Distribution of songs for independent record labels
Introducing new artists
Free authorized distribution of songs
Sampling and “space shifting”
Defense Against
“Vicarious Infringement”

There is liability if Napster has both:
– (1) Ability to supervise activity of its users
– (2) Direct financial interest in infringing
activities
• However, there is no way for Napster to distinguish
between legal or illegal copying.
Additional Defense

Napster users may have “fair use”
defense to copyright infringement:
– Most consumer copying is not for commercial
purposes
– Instead, most are for sampling or space shifting,
which are “fair use”
Additional Defense...

Audio Home Recording Act (AHRA)
– Consumers have right to create and transfer
music for non-commercial purposes
 Napster users typically share files for free
– Copying is arguably for “non-commercial”
purposes
 Napster users are therefore not direct
infringers
The Other Side:

RIAA sued Napster
– Napster’s service enables piracy of music.
– Millions of users may be logged onto Napster
trading millions of pirated recordings.
MP3 Files Offered on Napster

Majority are infringing
– Court found that Napster knew, and even
encouraged it.
• Napster is enabling illegal copying.
Copyright Law

Contributing to infringing activity is a
copyright violation.
 Knowledge of infringing activity is a
copyright violation.
RIAA’s Argument




Audio Home Recording Act cannot be applied to Napster.
AHRA covers devices for primary purpose of making
digital music recording.
These covered devices are required to incorporate
technology to prevent serial copying.
Manufacturers of covered devices also pay royalty to
copyright owners.
RIAA’s Argument cont...

General purpose computers are not covered by
AHRA
– AHRA does not apply to Napster
• Napster has no immunity under AHRA

Even if covered
– AHRA would not allow widespread distribution
RIAA’s Argument cont...

Case against Napster is nothing like Betamax case (VCR).
– VCR can be used lawfully
• Never infringe on a copyright


Overwhelming use of Napster is for infringing purposes.
Napster does not have any non-infringing use that are
commercially significant.
RIAA’s Summary of Allegations

Napster users are committing copyright
infringement.
 Napster promotes infringement.
 Napster advertises the ease of finding songs
through their server.
 Napster should be liable.
Napster and Music Sales

Two sides of argument:
– (1) Napster caused a decline in music buying.
– (2) Napster increased music sales.
RIAA vs Napster
“Napster hurt record sales.”
- Hillary Rosen,
President, RIAA
RIAA claims that sales of compact
discs singles fell by 39% last year.
And that “Napster has delayed the
development of an online music
marketplace.”
Record Sales

Music sales decline due to the illegal trading of MP3s:
“I have not bought a cd since Napster rocked my world. I download all of my
favorite hits totally free, and without the hassle of outlandish music store clerks. I
am a sharing kind of guy, so I don’t mind sharing my tracks with others.”
- Stu Fraser, college senior
Reciprocal Inc. study: CD sales within a 5-mile radius of
colleges declined 4 percent.
Napster hurts CD sales (?)
“Record sales are up despite
the widespread use of p2p
software, not because of it.”
- Larry Miller
President, Reciprocal Inc.
Shows how national album sales in
the US has increased steadily over
the past three years when album
sales in US college stores has
decreased steadily.
Napster increased music sales:

Jupiter Communications survey:
– Napster users are 45 percent more likely to purchase music.
– Because Napster itself is a catalyst for sales.
– Napster was the greatest predictor of music spending.

Cyber Dialogue report:
– Adults going online to access music increased 48%.
– Flocking music sites and spending money.
– Average music user spends $610 annually; compare to $509 spend
by average adult online.
– More than 66 percent said listening online has prompted them to
buy a CD.
Record Companies for Napster

Napster is indicative of a new form of buying and selling of music:
“Even piracy, that’s hands-down a copyright infringement, can in certain instances speed
up the process of legitimate market development.”
- Strauss Zelnick
President, BMG Entertainment

new.webnoize.com believes that Napster did not hurt
CD sales as claimed:
“They may owe Napster a larger debt than they would care to admit. Napster showed the
way for the recording industry.”
- Webnoize analyst
Napster’s Defense


The biggest decrease of CD sales occurred between first quarter of
1998 and 1999, before Napster even existed.
Reciprocal study doesn’t take into account online sales.
Napster gives music
industry a scare.
Artists For Napster

Simple logic: Napster helps non-RIAA artists
– Napster helps artists to market/promote their music without the
backing of a record studio.
How a typical
RIAA artists’ CD
cost is distributed:
Non-RIAA artists:
Production: $50,000
Album sells for: $16
Manufacturing: <$1
Retailer: $4 or $5
Record Company: $8
Artist: $2
Production: $2,000
Album sells for: $10
Manufacturing: $1 to $3
Retailer: $2 or $3
Record Company: $2
Artist: $4
“On Napster, I think it is a good thing. The
decentralization of the process of buying and
selling music will ultimately be positive for
artists. I don’t think that people will stop
buying records even if they are free. This is
the future and to deny it is to lock yourself
into the feudalism of the old major
label system.”
- Chris Ballew
musician, Presidents of the USA
Artists For Napster
– Offers a potentially better way to deliver music to
consumers. Allows fledging artists to promote/expose their
music to a larger audience.
“It is a great way of getting music to people.
If you are in some far flung part of the world
or in South Croydon, there is no better way
of accessing music.”
- Rob Lord, musician
Artists Against Napster
– Hurts CD sales, thus hurting artists’ royalties
“Napster is theft…”
“Napster is robbing me blind.”
- Scott Sapp
musician, Creed
“I spent $15,000 on my website. I paid a
publicist from out of my own pocket. Now some
kid’s going to tell me that my catalog should
be free? They’re just entrepreneurs setting
themselves up to make a ton of money off other
people’s work. Where’s the compensation for
the artist?
- Jonatha Brooke, musician
Artists Against Napster
– Poor CD sales also impact future potential
record deals:
“A record company’s decision to release a second or third CD is based on the
ability of the first release to sell enough to offset the cost of subsequent releases”
– Chris Krege, musician
– Copyright issues…
Arguments of Napster Users
– CD prices have gone up in the last 10-15 years, instead
of down, as the record company promised:
• CD sales jumped 10% in 1999, while the cash from sales
jumped 12%.
• FTC accused the Big 5 distributors of using their power to set
artificially high prices in the CD music market.
– Napster allows widespread distribution of music, which
can lead to more CD sales and more people at shows.
International Music Community
– More diversity in music; that music is not “controlled
by the Big 5”
A Social Issue:
– Provides an international music community:
“You’re going to have a massive international pot of artists making their
material in the basement and marketing it on the Web.”
– Chuck D, Rapstation.com
Service Providers

Decisions not based on the ethics, but on
the cost of bandwidth / performance.
– Commodity internet bandwidth
• ~$250 per ( Mbps * month )
• $100 per month to watch the koalas on a 384kbps
stream
Cases:

UCSD
– blocked Napster server ip’s in housing
– generally open
• security problems are the exception

Qualcomm
– strict policy against use of any software which violates
copyright law

Time Warner
– bandwidth attenuation
Summary of the Effects on
Stakeholders

Artists were arguably unaffected.
 Record companies claimed negative effects,
but market data ambiguous.
 Napster benefited, till shut down.
 Users benefited from variety of free music.
 ISPs inundated with traffic.
Conclusions
It is a legal “fact” that Napster as first
implemented, violated copyright law.
 This architecture propelled it to a 30million
user base in a short time.
 Reality is somewhere between perfect
copyright protection, and free exchange.


“Perfect protection kills innovation, just as perfect absence of
protection kills innovation” - Lessig in a slashdot.org interview
The Future

Any capitalized entity which approaches
Napster’s popularity will be taken out
legally*
 Not-so-easy fair use will live on. MP3
technology is in the public domain.
 A more restrictive means of purchasing
songs and albums will emerge.
References:
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http://history.acusd.edu
http://www.personal.psu.edu
http://wired.com/news
http://www.newsbytes.com
http://www.delasallehs.com
http://www.adam-smith.com
http://www.google.com
http://www.stanford.edu/aigenta
http://news.bbc.co.uk
http://www.salon.com
http://www.lawgirl.com
http://www.epinions.com