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What is Napster?
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October 31, 2000: 6:40 p.m. ET
Sharing is basic idea, and alleged flaw, behind Napster's service
Staff Writer Franklin Paul
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NEW YORK (CNNfn) - To understand Napster better, imagine a holiday gathering of friends, each contributing armfuls of food and sampling as much as they can stomach. It's all free and there's no harm done, right?
Not exactly. Therein lies the heart of the battle between upstart software company Napster Inc., a San Mateo, Calif.-based company started last year by 19-year-old college freshman Shawn Fanning, and the $40 billion recording industry.
 Napster, in so many words, has argued that friends have the right to share their favorite cake, to let their loved one taste their most special salads. Moreover, Napster maintains that its role is that of the passive dining room table, simply the place where the goodies gather – not that of the gatherer.
Not so, the music business says. According to the law, they argue, and the complicated copyright structure that is key to the industry's revenue system, the producers of the goods are due compensation each time the cake is cut or the salad is served.
Both arguments have merit. What's to stop a music lover from getting all of his or her tunes from a Napster-like service, never again paying for albums and singles? Where would the money come from to finance new artists and projects? And let's be serious; does anyone really have 38 million friends?
On the other hand, one can argue, if that same enthusiast purchased a music CD for upwards of $20, shouldn't he be empowered to lend it, copy it or give it to whomever he chooses, either in person or over the Internet?
How does Napster work?
Napster software acts like a directory that compiles a list of the songs that are in the memory of other online users' personal computers. Those songs, compressed into the popular MP3 file format, can then be copied to a user's hard drive via the Internet.
The songs get onto a computer either by trade with other users, or after being purchased from online music sellers, such as Amazon.com, which allow one to download tunes.
Would you pay for Napster? Take our poll.
Perhaps the most troubling method of moving a song from a compact disc to a hard disk is "ripper" software, easily accessible programs that enable users to transfer their songs into MP3s, the de facto standard for Internet music sharing.
Once an enthusiast supplies some personal and PC-related data to Napster, the mass of musical choice becomes available. Users can search for a particular tune or artists, and can download works from whomever else is online at the time.
Market research firm Webnoize said that 1.39 billion songs were downloaded via the Napster network during the month of September. During the same month, it said, an average of 640,000 music swappers were using the service at any one time.
I Hate You! I Love You!
On Tuesday, BMG funded Napster and promised to partner in a song-swapping service, while its lawyers presumably are still preparing to sue Napster later this year for copyright infringement.
Indeed, the Recording Industry Association of America, which represents BMG, Seagram Co. Ltd.'s (VO: Research, Estimates) Universal Music, Sony Corp.'s (SNE: Research, Estimates) Sony Music, EMI Group PLC and Time Warner's (TWX: Research, Estimates) Warner Music Group, still are pursuing their case against Napster.
But it's not unlikely that each company at some point will come to terms  with Napster, or, perhaps, launch a service like the one proposed by BMG and Napster.
Why? Because the industry recognizes that more than 30 million music lovers have downloaded Napster's software and registered with the service, a jackpot resource of personal likes and habit information that the industry would love to own.
That's because the purchase of a CD is a very anonymous transaction. Though millions of CDs are bought each year, record companies know precious little about who buys what, when and how much.
While Napster says it does not track the usage patterns of its participants, it would not be far fetched for such tracking software to become a part of a future service. 
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