Napster being twofaced?

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From: Karee Swift (
Date: Wed Jul 26 2000 - 11:29:16 PDT

<In general, I find this kind of disturbing. They had a whole
discussion on /. and one of the major arguments was the difference
between trademark and copyright law. Napster doesn't like people
stealing the stuff that's trademarked, but they're alright with
holding copyrighted material and distributing it to people. Seems
not only hypocritical, but this is one of the first challenges to the
whole 'Napster is cool' philosophy I had. How can a CEO look at
himself in the mirror when his business (!) survives on stealing from
others, yet at the same time, writes cease-and-desist letters like
they're going out of style? Any thoughts on this? == BB>

Napster lays claim to New Frontier, but it doesn't want any company
 By Lee Gomes
The Wall Street Journal
July 26 If there's one thing that Napster seems to believe in,
it's sharing.
THE FAST-GROWING SERVICE lets users obtain free MP3 files of popular
music, something the record industry calls "copyright infringement"
but which Napster describes as fans "sharing" their favorite songs
over the Internet. When Hank Barry, Napster Inc.'s president,
testified before Congress earlier this month, he mentioned sharing
seven times in his opening statement. Among Mr. Barry's sharing-
friendly remarks: "Napster ... is a return to the original
information-sharing approach of the Internet."
Napster even has a theme song in the form of the winning entry
the "Why I Support Napster" songwriting contest it recently promoted
on its Web site that expresses similar sentiments. Among the

"I'm fighting for freedom.

Trade laws? We don't need 'em,

Especially when living

In the Information Age."

But while Napster is eager to help its users share music, there is
one kind of sharing it won't tolerate. That's the sharing of anything
that belongs to Napster itself. The company may, through its rap
anthem, appear to encourage a disdain for "trade laws" where music is
concerned, but it readily invokes those same laws when its own
property is at stake.

Last month, when the punk-rock band the Offspring started selling T-
shirts featuring the Napster logo, for example, Napster promptly sent
the group a cease-and-desist order, backing off only after some Web
sites commented on the apparent hypocrisy of the move.

More significantly, the company repeatedly has tried to stymie
independent software developers working on Napster-compatible
software and Web sites. While these programs could benefit the
millions of music fans that Napster claims are its only constituency,
they might also diminish the commercial potential of Napster itself.

The company has refused to share technical information about its
software code, has made changes to its software that have prevented
other programs from working with Napster's own and has blocked
computers from outside music sites from accessing Napster's database
of hundreds of thousands of songs.

The fact that Napster seems to sing a different tune when its own
property is involved is just one of the ways the reality of Napster
is at odds with its public image. The service's management and
ownership structure, for example, is quite different than many users
suppose, with Napster's highly publicized teenage founder, Shawn
Fanning, playing only a minor role.

Napster's Mr. Barry, a former corporate lawyer, insists there is
nothing inconsistent about the company's efforts to protect its
intellectual property. "We are not an open-source software company,"
he says. "This is not Gnutella," he adds, referring to the popular
free software product that lets users exchange music files. Mr. Barry
says that while Napster and the music industry disagree about the
rights music owners have to put digital music files on the Internet,
the company respects copyright laws and wants to find a way to
compensate artists for use of their work.

The recording industry, of course, sees Napster's "sharing" as a
euphemism for music piracy on a massive scale. Wednesday, industry
representatives are scheduled to appear in a San Francisco courtroom
in an effort to persuade a federal judge to close Napster down, at
least in the service's current, unbridled form.

Arguments are set for the afternoon, but Judge Marilyn Hall Patel
isn't expected to issue a ruling right away.

Napster's hopes of transforming its busy Web service into a source of
revenue depend on its withstanding the music industry's legal
assault. At the same time, however, it is taking an increasing amount
of flak from those seeking access to its database or its technology.
The result is a public-relations skirmish over whether Napster, which
portrays itself as a champion of youth culture and the Web's
freewheeling ways, applies a double standard to intellectual
property, making it cavalier toward other people's, but
hyperprotective of its own.

"At Napster, they jealously guard their own property, yet they
complain when the music industry jealously guards its own property,"
says Adam Powell, chief executive of AngryCoffee, a music-oriented
Web site that has had run-ins with the closely held San Mateo,
Calif., company.

As a condition of using its software, for example, Napster demands
that users agree that they won't "decompile, reverse engineer, or
disassemble" the program, which precludes anyone from trying to
figure out how it works. The phrase is a standard one at big
commercial-software companies such as Microsoft Corp.

What's more, Napster has had occasionally testy relations with the
community of outside developers who began gravitating toward Napster
as soon as the program started to catch on. They were usually
interested in writing add-on software for Napster or developing
versions of the company's program that worked on other computer
operating systems, such as Linux. Many of these programmers had
assumed that Napster, because of the nature of the service and the
public stances of young people who founded it, would be sympathetic
to their efforts.

Instead, Napster told them, in effect, to get lost.

"You don't know why we implemented the things we did, and [we] can't
explain them to you, mainly because it's not public information,
simple as that," one Napster developer said in an open letter to
outside developers published in January on an online newsgroup. "We
can't give you any information because Napster is not some garage
organization ... but rather an incorporated company with a
development team, marketing team, bizdev team, and an executive
management team. Hypothetically speaking, if I were to have a strong
desire to give you all the information you needed. ... I couldn't. I
do, actually, but that is no longer relevant. It's not mine to give
anymore, it's the company's."

Some outside Napster developers were surprised by the letter. "Maybe
you need to lighten up," one of them wrote in response, telling
Napster that its software is "just a way to pirate music, after all."

Some have tried to figure out the workings of Napster's internal
protocols on their own. One of them, David Weekly, a Stanford
University student, put a version of them on his personal Web site.
Soon, he received an electronic message from Napster demanding that
he take it down.

Another Napster fan, Chad Boyda, wrote a program called Napigator
that allows Napster users to connect not only to the music databases
on Napster's own computers, but also to the growing list of "Open
Napster" servers that emulate Napster's music-trading service, but
which are operated outside the company. Because most Napster users
don't know those other computers even exist, programs such as
Napigator have the potential for creating competition for Napster.
(They also show how Napster-style threats to the music industry will
continue even if Napster Inc. is shut down.)

Not long after Napigator was released, the company rewrote the main
Napster program in a way that prevented Napigator from working
properly. Napster says it is always rewriting its software, and
wasn't targeting Napigator. But Mr. Boyda is skeptical. "I had to
rush out a new version that got it working again," he says.

Napster also demanded that Mr. Boyda not include usage information
about its servers in his software. Mr. Boyda acquiesced and, as a
result, a Napigator user can get statistical information about all of
the servers listed on Napigator such as how many users are
on and how many MP3 music files they are making available for
download except for those run by Napster.

Another issue for Napster is whether it really is the fan of new
Internet information-sharing technologies that it says it is. For
example, in his Senate testimony, Mr. Barry tutored senators in the
essentials of the "peer-to-peer" file-sharing system that is one of
Napster's technical foundations. He also reminded the Senate panel of
the many examples "of new technologies struggling to survive as
copyright holders argue that these new technologies will impede their
ability to be compensated for copyrighted works."

But there is one new Internet sharing technology that Mr. Barry
didn't mention to the senators, and of which Napster will have no
part. These are "bots," or "agents," a kind of software that can
quickly search several Web sites and present the findings to a user
in a central place. Many enthusiasts see agent software as an
essential feature of the emerging Internet, even more so than peer-to-
peer file sharing, with programs roaming the Web, on the prowl for
the sorts of personalized information or files that an individual
user might want.

That was something of the vision of AngryCoffee, a San Francisco
music-oriented Web site, which last month used agent software to
allow its users to search several music sites at once, including
Napster's, when looking for a particular song.

Mr. Powell, AngryCoffee's chief executive, said the service would be
a boon to music lovers, since with a single request, they could
survey the Net's growing number of music-sharing sites and have all
the results listed on a single page. But in the process,
AngryCoffee's users would never actually encounter Napster's site,
since the software would visit it automatically on their behalf. That
would mean fewer "eyeballs" would be attracted to the Napster site,
diminishing its commercial prospects. Two days after AngryCoffee
started its service, Napster blocked its computers from accessing the
Napster site.

"Napster is treating its database as its private property," complains
Mr. Powell. "But it's not Napster's property. It's a list of pirated

Napster's Mr. Barry says his company, like many big commercial
Internet sites, blocks agent software programs because they impede
the performance of its computers. EBay Inc. has used similar
arguments in battling sites that compile information from multiple
auction services. Some Napster engineers, however, say well-designed
agent software would be no problem for the company's computers. And
Mr. Powell says the author of AngryCoffee's agent software was one of
the best in the business.

Overall, Mr. Barry says there is nothing hypocritical or
contradictory in Napster's handling of these matters. "We respect
copyrights, but differ with the music industry about their scope," he
says. "And we will enforce our copyrights wherever we think we
should. It's a perfectly consistent approach."

Naptster's hard-nosed approach to protecting its assets may stem from
the fact that its real owners aren't a group of young, tech-savvy
music fans, but rather a network of seasoned investors whose goal is
turning the company into a profitable business.

Napster's public face is often Shawn Fanning, the ex-Northeastern
University student who conceived the idea for Napster and who, along
with some friends he met over the Internet, helped write the actual
program. While Mr. Fanning makes a winning posterboy the beefy
year-old weightlifting buff is rarely photographed without his
baseball cap his actual role at the company is smaller than
people know, including many Napster employees. He owns less than 10%
of Napster's stock, according to internal company documents, has no
senior-management position and isn't even on its board.

Larger chunks of Napster are held by a roster of older and often
extremely wealthy investors, some of them veterans of successful
Internet companies. Chief among them is John Fanning, uncle to Shawn,
who at one point owned 70% of Napster to Shawn's 30%. Insiders say
that because of subsequent investments, Shawn Fanning's current stake
in Napster is about 6%, with his uncle, the biggest individual
shareholder, having about 12%. Napster itself won't discuss the

The senior Mr. Fanning, who often introduces himself as "the founder
of Napster," is himself an Internet entrepreneur, though none of his
projects have had anywhere near the success of his nephew's. In an
interview, the senior Mr. Fanning said his initial 70% stake in
Napster was justified by the executive role he played in Napster's
early days, and by the money he invested in the company, an amount he
says was in the "tens of thousands of dollars."

Several friends of Shawn said that the big size of his uncle's stake
is a sore point with the young Mr. Fanning, one that he doesn't like
to discuss. But Mr. Fanning says his nephew, who grew up without a
father, was well provided for when Napster was incorporated. "If
Shawn weren't my nephew, he wouldn't have got the deal he got," Mr.
Fanning says. "Usually, for people in that position, it's hard to get
3% or 5%."

In an interview at Napster's headquarters, Shawn Fanning says he had
no quarrel with the size of his uncle's holding. "We worked very
closely together," he says.

Other big Napster shareholders include Yosi Amram, an associate of
the senior Mr. Fanning, who holds about 5% of the company on account
of a $250,000 investment he made last year. Mr. Amram has worked with
a number of high-profile companies and is currently chief executive
of ValiCert Inc., a Silicon Valley supplier of tools for secure
Internet communications. He has also played a key role in Napster's
development, serving on its board and orchestrating its move to
Silicon Valley from the Boston area, where the Fannings had been

Mr. Amram also helped Napster raise money from the large pool of
wealthy "angel" investors that resides in Silicon Valley, especially
those with "dot-com" money. Today, dozens of people in California and
even Asia have Napster investments, most of them relatively small.
While they stand to profit handsomely from their stake, not everyone
wants their links to Napster known; one investor pleaded that his
involvement in the company not be revealed, lest the controversy over
Napster hurt his other business deals.

Copyright 2000 Dow Jones & Company, Inc. All Rights Reserved

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