[Originally appeared in New Orleans Beat Street magazine, July 2003.]
By Warren America
The word “Napster” is synonymous with free Internet music. Although Napster, Inc. did not survive bankruptcy proceedings last year, the Napster name, and that little blue cat, still comprise the best-known brand in Internet music.
Napster branding could probably sell anything, from music subscriptions to Saturday morning cartoons. Yet behind the cathead logo is a patent that lays claim to the basic design of all subsequent Peer-to-Peer file sharing networks, and may even be their undoing.
This chapter begins during the ugly days of Spring, 2001. The stock market tanked a year earlier, Internet businesses were crumbling, and the world’s most popular music software had been declared illegal by the Ninth Circuit Court. Napster had to stop trading of unauthorized tracks, or pull the plug.
Simple name-filtering schemes were easily defeated, and heavier filtering rendered Napster useless. So Napster voluntarily unplugged, and built a legitimate version, while attempting to resolve their legal, financial, and internal issues. They successfully tested a secure, copyright-compliant system with a group of 20,000 users. But Napster ran out of steam before the new service launched, declaring bankruptcy in June 2002.
Today Universal and EMI are suing former Napster-backers Bertelsmann and Hummer Winblad. They contend that financial support from the label and VC perpetuated Napster’s copyright infringements. While that may sound reasonable, if the plaintiffs won, it could set a scary precedent. When lenders and stockholders are liable for misdeeds by companies in their portfolios, expect a severe chilling effect on investment. And this squabble is just a sideshow. Elsewhere, the cat is in play.
Peer-to-Peer (P2P) file sharing is a type of computer networking, a way of moving data between two (or more) computers. Each computer is a “peer,” that can take files and share files. When sharing files, it’s called being a “server,” or a “host.” When taking files, you’re being a “client.” File sharing has been part of the Windows and Mac operating systems since the get-go; it’s not some new invention.
Sean Fanning’s inspiration was to slap a search engine (and other features) onto the P2P idea, so his fellow students could easily locate files on each other’s computers. If you know all your friends’ IP addresses (the unique address that identifies each computer on the Internet) it’s easy to connect to those computers and access any shared files. But when you don’t know other computers’ addresses, it’s tough to reach them.
To overcome this obstacle, Fanning added a central server (eventually hundreds of linked Linux boxes). The server negotiated each new peer’s connection, then made a list of what files the peer was sharing. This “cache,” meaning the file list, and the IP addresses where they reside, was saved on a central server, and used to provide search results. Caching has an extra benefit; cached search results can be provided quicker, with less network load, compared to searching through every computer in the network.
Fanning and his Napster partners filed for a patent on this “Real-Time Search Engine” in 1999; it was awarded in April 2002 (US Patent 6,366,907 B1). While Napster also has some International patents pending, this piece of intellectual property is core. All other P2P networks make some use of Fanning’s P2P search scheme.
Whoever controls the Napster patent could have an interesting licensing business, extracting fees from network operators who’ve copied the idea. That includes well-known borderline operations such as Kazaa, Grokster, and Morpheus. It also includes a number of managed, legitimate networks, including Kontiki, CenterSpan and Yaga.
Napster’s assets, including the branding, the search engine patent, and the tested-but-never-used, RIAA-friendly music service, were sold in a bankruptcy auction last November. The purchaser was a software company called Roxio, makers of the CD burning programs Easy CD Creator (Windows) and Toast (Mac). Roxio also licenses disc burning technology, providing the CD recording features that are built-in to Windows ME and XP.
In May, 2003, Roxio acquired a music subscription service called Pressplay, a joint venture of Sony and Universal. Pressplay had signed up very few customers, and aroused anti-trust concerns. Roxio essentially bought Pressplay for its licensing deals, securing big-name content from the five major record labels, in a single transaction.
With these pieces in place - Napster branding and patents, Pressplay licenses, and their own expertise in CD recording - Roxio seem well poised for the next phase of the Internet music business. Unsurprisingly, they’ve become an acquisition target themselves.
Rumors began circulating in early June that RealNetworks, the streaming media giant, may acquire Roxio. RealNetworks is already partnered in a lackluster music subscription service, called MusicNet. Real announced they’re in a buying mood, they have lots of cash, and their traditional business keeps eroding. But as we go to press with this story, the rumor mill is buzzing with new speculation that Steve Jobs is making a run at Roxio.
Peter M. Allen, former Director of Client Software Engineering at Napster, told Beat Street “while Real Networks drools at the Roxio proposition, little of Roxio’s portfolio complements Real’s product offerings. The fit for Apple, however, is in lock step with their blockbuster introduction of iTunes, and sings harmony with their other media offerings. The new Napster/Roxio backend system will even run on Apple’s servers” according to Allen, who led the “legal” Napster development team.
Roxio would bring Apple a strong PC software line, heavy influence over disc burning on both Mac and Windows, and a patent lock on hybrid P2P designs. That Napster patent could give Apple (or any purchaser) a big stick in the P2P ecosystem. In one scenario, the buyer might decide to not license the patent, keep it exclusive, and sue all competitors for patent infringement. In another scenario, they could demand steep licensing fees, and milk competitors to death. It just takes a big company, like Apple or Real, with legal and financial resources, to pursue this kind of path.
Perhaps Apple could succeed, where the RIAA has failed, at truly cracking down on P2P file sharing networks. If the popular file sharing applications themselves are patent infringements, and their distribution is enjoined, it could drive the big P2P networks underground. File traders would migrate to small group sharing, using programs such as Nullsoft Waste, or onto Instant Messaging and IRC, ending the large-scale P2P era that Napster started.
It would be a richly ironic endgame: using Napster’s own DNA to kill its descendants.