This case about the online music subscription service Napster illustrates how different
elements of the mix can be varied online. It also highlights success factors for developing
an online marketing strategy since Napster's proposition, objectives, competitors and risk
factors are all reviewed.
The Napster brand has had a variedhistory. Its initial incarnation was as the first widely
used service for 'free' peer-to-peer (P2P) music sharing. The record companies mounted a
legal challenge to Napster due to lost revenues on music sales which eventually forced it to
close. But the Napster brand was purchased and its second incarnation offers a legal music
download service in direct competition with Apple's iTunes.
Napster was initially created between 1998 and 1999 by a 19-year-old called Shawn Fanning
while he attended Boston's Northeastern University. He wrote the program initially as a way
of solving a problem for a friend who wanted to find music downloads more easily online.
The name 'Napster' came from Fanning's nickname.
The system was known as peer-to-peer since it enabled musictracks stored on other
Internet user's hard disks in MP3 format to be searched and shared with other Internet
users. Strictly speaking, the service was not a pure P2P since central services indexed the
tracks available and their locations in a similar way to which instant messaging (IM) works.
The capability to try a range of tracks proved irresistible and Napster use peaked with 26.4million users worldwide in February 2001.
It was not long before several major recording companies backed by the RIAA (Recording
Industry Association of America) launched a lawsuit. Of course, such an action also gave
Napster tremendous PR and more users trialled the service. Some individual bands also
responded with lawsuits. The rock band Metallica found that a demo of their song 'I
disappear'began circulating on the Napster network and was eventually played on the radio.
Other well-known artists who vented their ire on Napster included Madonna and Eminem
by posting false 'cuckoo egg' files instead of music; Madonna asked the downloader: 'What
the fuck do you think you're doing?'! However, not all artists felt the service was negative for
them. UK band Radiohead pre-released sometracks of their album Kid A on to Napster and
subsequently became number 1 in the US despite failing to achieve this previously.
Eventually, as a result of legal action, an injunction was issued on 5 March 2001 ordering
Napster to cease trading of copyrighted material. Napster complied with this injunction, but
tried to make a deal with the record companies to pay past copyright fees and toturn the
service into a legal subscription service.
In the following year, a deal was agreed with German media company Bertelsmann AG to
purchase Napster's assets for $8 million as part of an agreement when Napster filed for
Chapter 11 bankruptcy in the United States. This sale was blocked and the website closed.
Eventually, the Napster brand was purchased by Roxio, Inc. which used the brand torebrand
their PressPlay service.
Since this time, other P2P services such as Gnutella, Grokster and Kazaa have prospered and
these have been more difficult for the copyright owners to pursue in court; however, many
individuals have now been sued in the USA and Europe and the associations of these services
with spyware and adware has damaged them, which has reduced the popularity ofthese
New Napster in 2008
Fast forward to 2008 and Napster now has around 830,000 subscribers in the United
States, Canada and the United Kingdom who pay up to £14.95 each month to gain access to
about 1.5 million songs. The company is seeking to launch in other countries such as Japan
through partnerships. Revenue for financial year 2008 is expected to exceed $125 million,...