Napster Tried to Make Streaming Happen in 2005. Why Did it Fail?

Michael Beausoleil

I remember watching the Super Bowl in 2005. I’m not a huge sports fan, but I said I was watching for the commercials. Turns out, there was a commercial that actually caught my attention. It was from a name I’d never expect: Napster. In the commercial, they highlighted their legal music service. For $15 a month, you could fill your MP3 player with all the music you wanted.

Later in the week I would go online and search for Napster. I’d find out the ad was voted the worst Super Bowl commercial of the year. Despite this, the offer was real. I could listen to all of the music I wanted for $15 by using “Napster To-Go.”

In 2005, this was an entirely new concept to most people. The numbers made Napster look like a viable competitor to Apple, because purchasing music could get expensive. This was the period of time when the iPod was on the rise in popularity. People who wanted to fill up an iPod had three main options to acquire music: legal downloads from iTunes, ripping songs from CDs, or illegally downloading music. With the “Napster To-Go” service, users could access all the music they wanted for a low monthly fee.

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Yet the service failed. As interesting as the idea seemed to be, American consumers didn’t gravitate to the new model of music acquisition that should have changed the game.

The Rebranding of Napster

If Napster is part of your digital vocabulary, it’s likely for its peer-to-peer(P2P) file sharing client. This enabled people to distribute music across the internet and obtain it for free. While this would ultimately be ruled as theft of music, it also revolutionized the music industry. People wanted to get music from the comfort of their homes, and they wanted to be able to discover new music. With the original Napster, you could do that. Then the software was removed and users had to find music elsewhere… probably just another P2P client until legal options emerged.

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(image via Business Hunting)

After the decline of Napster’s P2P client, Rixio bought Napster and its assets in a 2002 bankruptcy sale. They also purchased an early digital music store named pressplay in 2003. Rixio had visions of merging the two brands and designing a competitor to the iTunes Music Store. At the time, Apple had just begun their journey into music sales but were establishing themselves as the frontrunner in digital music market.

By 2005, Napster was offering a music service different than Apple’s. Napster users could stream their library of music on their computer. This meant users didn’t have to pay for each individual track or album. The service was very similar to the streaming services we have today except the term “smartphone” didn’t have any real meaning in 2005. Our mobile devices weren’t strong enough to stream these tracks, but Napster did have a creative solution.

If you had a “Napster To-Go” membership, you would have unlimited access to “tethered downloads.” Subscribers could download restricted files that could play on their Napster-compatible MP3 player. These songs couldn’t be burned to CDs, but you could fill 20 GB with music for a low cost. Once you stopped paying your Napster subscription you would lose your ability to play these tracks and you would need to resubscribe to gain access.

Unlimited downloads would have been a music lover’s dream in 2005. Not only was is cost-friendly, it addressed the half of P2P downloads that the iTunes Music Store didn’t. Unlike Apple’s store, Napster allowed you to discover new music without the monetary commitment. If you wanted to listen to Kanye West’s Late Registration after hearing Gold Digger it would cost you $9.99 on iTunes. With Napster, this is included in the cost.

The Allure of Apple

Offline downloads seem like a compelling reason to try a new service. This would be similar to offline mode on Spotify or Apple Music, so why did it fail in 2005? The answer lies in the middle of the Napster software and the MP3 player.

In 2005, music downloads were plagued by DRM (digital rights management). Napster To-Go’s music lived on Windows Media Player, not iTunes. This meant people in the Apple ecosystem couldn’t take advantage of Napster’s music in the same way iPhone users can now take advantage of Spotify’s library. A lack of iTunes support meant a lack of iPod support, and a lack of iPod support meant you weren’t trendy.

2004 and 2005 were very important years for the growth of the iPod. This was when they had their iconic silhouette ads, iPod Minis were adding color to our pockets, then Mini was shrinking to Nano.

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(photo of Apple iPod sales via Statista)

Apple had 82% of the US MP3 market share by the end of 2004. If Napster wanted to be a strong presence in the digital music market, they would need to convert iPod users. They seemed confident they would be able to convince users to switch, even offering free MP3 players to people who paid for a full year’s subscription.

Some people did subscribe, but the numbers weren’t super strong. By the middle of 2005 they had just over 400,000 subscribers. They also obtained competition from similar streaming services from Real’s Rhapsody and Yahoo! They continuously lost money, and there didn’t seem to be a clear path to profits.

In 2005, Napster may have been concerned with competitive streaming services. Hindsight tells us this wasn’t their biggest problem. We all know Apple was the winner of the digital music revolution, and they didn’t need streaming to give them the title.

What Happened to Napster?

Napster wouldn’t see huge growth past 2005, but it did maintain a moderate user base. In 2008, with about 700,000 subscribers, Napster was acquired by Best Buy. This wasn’t due to a demand for music streaming. Rather, it was an attempt for Best Buy to jump into digital music sales.

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As physical media sales continued to decline, iTunes eventually removed DRM from its songs in 2007. Likely, this was due to competition from other major retailers like Walmart or Amazon. As such, Best Buy wanted to attract customers purchasing digital music and allow them to put songs on any device. This didn’t remove subscriptions from Napster’s services, but it did shift focus.

In 2011, Rhapsody acquired Napster from Best Buy. This time, the merge was an attempt to eliminate competition. Rhapsody’s interest in Napster was due to their history as a streaming pioneer. At the time, Pandora was rising in popularity and Spotify had just entered the US market. Other streaming and cloud-based services were appearing, and Rhapsody hoped its prior reputation would skyrocket it to success. Over time, Spotify would emerge as the clear winner, but Rhapsody did have the correct vision for the future of music.

Rhapsody would rebrand itself as Napster in 2016. Apparently the Napster branding was more recognizable than Rhapsody’s. In this capacity, Napsterstill exists today. If you don’t want to live an a Spotify and Apple Music binary, Napster might be the third option you’re looking for.

Did Napster 2.0 Fail?

Looking at the history of Napster’s relaunch, it’s hard to call it truly successful. Multiple companies have tried to use the Napster brand, and multiple times it failed. The name still exists; having an alleged 1.2 millionworldwide subscribers at the end of 2020. Still, Napster lacks the same name recognition as Spotify and Apple Music.

In retrospect, it’s hard to deny that Napster saw the future of music. Napster 1.0, the P2P client, demonstrated the internet was going to become a primary method of audio distribution. Napster 2.0, the legal subscription, found a solution to use the internet to discover new music. Their problem lied within the restrictions on distributing music, and this didn’t align with the hardware trends of the time.

Napster 1.0 created a market where MP3 players were necessary. Apple saw this opportunity to perfect the MP3 player. Then, they used legal music sales to created another business model with the iTunes Music Store. All legal music was restricted by DRM in the early 2000’s, and this meant Napster and iPods couldn’t work together.

Looking at the Napster To-Go model over sixteen years later the pros seem to outweigh the cons. In 2005, the concept was too forward-thinking for a market that had just invested in millions of iPods. Over time, DRM would become less prominent, and services like Napster can be used on an iPhone. For this, we should be thankful for Napster. They added competition to a budding digital music market. They prevented Apple from creating a true monopoly, and they demonstrated a different structure of music.

Now, it seems like Napster’s history is defined by their legal battle at the turn of the millennium. While this was a catalyst for the digital revolution, the Napster brand has a greater history than the one shown in The Social Network. They tried to steal customers from Apple, and they established an early streaming service. While Napster is unlikely to ever be a true success again, their legacy paved the way for services like Spotify to thrive.

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