Music and decentralization
I would like to tell you a story from a time when social media and streaming services did not exist. We were just experiencing the advent of the Internet, and communities gathered in forums and chat channels. Those of us who grew up in the ’80s and ’90s had been duped. We had been convinced that by the year 2000, there would be flying cars, trips to Mars and laser weapons. But none of these things happened, and to make matters worse, there was speculation that computers might react in the wrong way, not possessing the necessary code to update the calendar beyond 1999.
But those of us connected with the technological world was more enthusiastic than ever. We were ecstatic about the Internet. It was something new and disruptive which opened the doors to create and share all kinds of content, or rather, only some content, since at that time it was unthinkable to share a complete music CD, and it was even very difficult to share a single track.
Luckily, a few years ago, the German scientist Karlheinz Brandenburg was experimenting with an audio compression technology that resulted in the advent of the MP3 format. This new technology reduced the size of an audio file by about 11 times and gave us the opportunity to compress our CDs and store them on our hard disk. Although it was still difficult to share audio over the Web, a new world opened up for music lovers with the emergence of the first massive P2P platform: Napster. In 1999, a small group of programmers led by Sean Parker and Shawn Fanning came up with a project that sounded crazy: they designed a platform that would allow MP3 music tracks to be shared directly between users.
By mid-1999, Napster was available, and I felt like I had the world at my feet. I searched for a song and could download it in minutes. My PC began to suffer more wear and tear than ever, as I would spend entire nights on it, downloading content. Most of us Napster users were young people experimenting with new technologies, and we hadn’t even contemplated the concept of “piracy.” If it was shared on the Internet, we were free to download it, we thought, but our naivety would cause a scandal.
In 2000, Paramount (NASDAQ: PARA) was spending $125 million on the production of the movie Mission Impossible 2. Music lovers couldn’t wait to hear the soundtrack, which already included big-name artists such as Metallica, Limp Bizkit and Foo Fighters. Our eagerness was met with Metallica’s “I Disappear”, which was specially composed for the film. The striking thing is that the song had not yet been officially presented, and to make matters worse, the studio had not finished remastering it, but it was already being played on the radio.
Metallica and their production company Warner Music (NASDAQ: WMG) were shocked. It was clear that the track had been leaked, but how had it reached the world so quickly? It was Napster. All it took was for someone to leak the track, and within days millions of people were sharing it. Warner Music (NASDAQ: WMG), along with other bands and labels who felt affected, sued the platform’s creators. Napster was a file-sharing service, but was it responsible for the content its users shared?
The final ruling led to the closure of Napster and the payment of compensation to those affected. But the seed was planted, and at least a dozen platforms had already appeared that took the Napster concept. From then on, the Napster brand mutated and passed through several hands. In 2008 it was acquired by the retail chain Best Buy (NYSE: BBY) and then merged with Rhapsody.
The truth is that record companies began to falter and had to adapt in order not to be overwhelmed by technological evolution. When Warner Music (NASDAQ: WMG) numbers were in the red, it entrusted Goldman Sachs Group (NYSE: GS) with the task of finding potential buyers. Ironically, Napster creator Sean Parker, a current Spotify (NYSE: SPOT) shareholder, was interested in the acquisition but his offer was rejected.
And so was the turbulent arrival of P2P technology. To this day, whenever I talk about decentralization, I can’t help but remember that Napster logo sticker (a blue cat with headphones) that decorated my computer, those sleepless nights searching for CDs I once thought I would never be able to access, while the platform’s chat allowed me to meet people with the same love of music, which encouraged me to get to know more bands and genres that fed my melomania, which has lasted through the years.