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What Today's Online Sharing Companies Can Learn From Napster

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What Today's Online Sharing Companies Can Learn From Napster

The Sharing Economy: A Shift Away From Ownership?

What Today's Online Sharing Companies Can Learn From Napster

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Perhaps no company showed how the Internet could turn sharing into a global phenomenon more than Napster. At its peak in 2000, tens of millions of people around the world used the service to trade music files. But it was never able to turn all that sharing into a profitable business.

Thirteen years later, its story holds many lessons for the sharing economy, as NPR's Laura Sydell reports.

LAURA SYDELL, BYLINE: Ali Aydar had just moved to Silicon Valley in the summer of 1999, when an old friend tried to lure him into working at his new startup which let people share music online.

ALI AYDAR: When I first heard the concept, I was very, very skeptical. I didn't think anybody would open up their hard drives. I didn't think that people would be interested in sharing MP3s or sharing music.

SYDELL: The big hit that summer was off Christina Aguilera's debut album.


CHRISTINA AGUILERA: (Singing) If you want to be with me, baby, there's a price you pay. I'm a genie in a bottle, you got to rub me the right way. If you...

SYDELL: Aydar's friend, Shawn Fanning, showed him how anyone could find "Genie in a Bottle" and other hits on his file sharing service called Napster. Aydar was stunned by what Fanning had shown him.

AYDAR: Music is a very emotional thing, so when you're looking for something and you find it, you find somebody else sharing it, it's on their hard drive, you start downloading it, you play it, there's a wow experience there. It was when I perceived that wow experience, I was ready to jump on board.

SYDELL: Aydar, a software engineer, was Napster's first employee. He was right about that wow experience. Napster spread like wildfire across college campuses. Tens of millions of students and teenagers around the world were swapping their favorite songs. A few months later, Napster was slapped with its first lawsuit for copyright infringement.


METALLICA: (Singing) Hey, hey, hey, yeah-y, here I go now. Here I go into new days. Hey...

SYDELL: Metallica sued Napster when their song "I Disappear "showed up on the file-sharing service before the band released it. The band's drummer, Lars Ulrich, spoke out against Napster. Here he is on "The Charlie Rose Show" in 2000.


LARS ULRICH: You got the most extreme people sitting right now going: Anything that comes through their Internet is mine and I have the right to it.

SYDELL: But artists were divided. Ulrich faced off against Chuck D of the hip-hop group Public Enemy. Chuck D thought Napster was a way to get past the middleman record labels, so that new artists could get their music direct to fans.


CHUCK D: And I just think that they will thrive off the new system, as opposed to trying to beg on the old system.

ULRICH: I'm not saying that they can't thrive on it. I'm saying that there's got to be a way to make people who want to retain the control of their copyrighted material happy, and in the same way make...

SYDELL: At the headquarters of Napster, they were caught up in its success with fans, says software engineer Ali Aydar.

AYDAR: Did we though honestly feel that the labels would ultimately be interested in trying to find a way of making it work with them, instead of suing us out of existence? Absolutely.

SYDELL: At the time, Ted Cohen was working as a consultant for the record labels and Napster. Napster had attracted investment money, and Cohen says Napster was convinced that it could change copyright law using what it called the congressman's daughter strategy.

TED COHEN: If the congressman's daughter was using Napster and she showed it to her dad, and she then downloaded some Frank Sinatra music for him, he'd go: This is amazing. Copyright law is out of date. We have to change it.

SYDELL: But even though the experience of sharing music was incredibly powerful, the congressman's daughter strategy failed. In July of 2001, a court ordered Napster to shut down and it declared bankruptcy the following year. Other companies tried and failed to make file sharing work legally. Over a decade later, the old record labels are finally relenting and working to create legal file sharing services like Spotify, Rdio and iRadio. Today's sharing economy businesses look back at Napster and see some lessons.

Nathan Blecharczyk is the chief technology officer of Airbnb, which lets people rent out their homes. His takeaway is that it's important to work with established businesses in his case, the hotel industry.

NATHAN BLECHARCZYK: We're more trying to take that approach where we think proactively and say, you know, here's the opportunity and here's what we can do to help you and in your concerns.

SYDELL: Though this new brand of sharing companies is more willing to work with incumbent industries, it doesn't mean they won't fight and they have a much bigger war chest of investment money to do it than Napster ever did.

Laura Sydell, NPR News, San Francisco.

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