With burgundy-tinted hair, a love of club music and a son whom she tends to mention, regardless of the conversation topic, Eileen Richardson isn't a typical CEO. But Napster isn't a typical company. Eight months ago, it didn't exist; now it's becoming a contender for most rapidly adopted software in Internet history.
It's also one of the most beleaguered. By offering a free, downloadable application that lets users temporarily turn their computers into servers for the purpose of swapping MP3 files, Napster has attracted lawsuits like the Beatles attracted fans. The Recording Industry of America filed suit late last year, Dr. Dre tacked on another case last month and just last week Metallica drummer Lars Ulrich appeared at the company's offices in San Mateo, Calif., to drop off an amendment to the band's own lawsuit.
Richardson has tended to take this all in stride. She was an early investor in Napster and became CEO in September, only a few months after 19-year-old Northeastern University student Shawn Fanning developed the program. After 10 years in the world of venture capital, Richardson seems happy to be leading her own band. She has good reason: A new version of Napster is in its final-testing phase, the company is hiring like mad and artists like Chuck D. and Limp Bizkit have come out in Napster's defense. But the company is far from clear of its troubles. How is she handling the heat?
When I chatted a few weeks ago with some of your employees, spirits were high and there was sense that Napster might soon come out from under the cloud of all these lawsuits. But since then, a lot has happened: Is it tough to maintain employee morale?
No, not at all. As with any start-up, you experience your highest highs and your lowest lows -- the whole range of emotions. This is no different. Maybe the highs are higher and the lows are lower, but it's still that roller coaster and that's what makes it exciting and fun. Every employee knew the opportunities that they had here at Napster, so I think they all understood that this was going to be a roller coaster.
But not every start-up gets to see Metallica's drummer hand deliver a 60,000-page lawsuit. Are you surprised by how dramatic this has all become?
It's not a shock. I guess once I heard that [Lars] Ulrich was coming, I was just like, "OK." I think we believe -- certainly I believe -- that there are better ways of handling it, better ways of getting us information, like using the Internet maybe. That would have worked.
What do you think Ulrich's stunt says about the band? About their opinion of their fans?
It's a bit crazy. It just shows, though, that they're not that familiar yet with the Internet as a medium. They're unfamiliar with how their fans are using it, and how it could benefit the band in the future. And so that's just an education process. I don't know that it's any different from what happened with radio when it was a new medium. Everyone then was up in arms, "Oh my God, how are people going to get paid; it's free and it shouldn't be." We're running into some of those same issues here.
Another analogy is the movie industry. Today, Blockbuster, and the video marketplace in general, is an $18 billion marketplace; and movies, the box office, is only a $7.4 billion marketplace. When the VCR first came out, everyone said "Oh my God, nobody's going to see another movie." But it never ended up happening because there is a market for going to movies and there is also a market for renting them and bringing them home. The effect of that was that the movie industry grew by two and a half times. And we believe the music industry will grow much larger because of us.
The Soundscan numbers came out, revealing that record-industry profits rose by 8 percent last year.
Yes, again. Do you think Napster contributed to this increase?
I'd say so. The thing that I love about Napster and using the Internet to learn about new music is that it can be more interactive. I don't have time to sit in front of MTV for two hours and get blasted with whatever somebody decided to blast me with. And it's the same with radio. It's always been a little frustrating. Whereas online, I can sit down and say, "Hey, these are the things I like, give me more." You should really check out our new artists page. You just go, "Hey, tell me other artists that sound like Celine Dion," and you'll get all these artists popping up, with new names of people that sound just like her.
Great: the cloning of Celine. Just what the world needs. I'll switch gears a bit. Now that Metallica has identified more than 300,000 Napster users that it says have downloaded the bands' songs and asked you to block them from using your service, are you doing anything to prevent these people from coming back with a different handle?
Yes. There are systems in place to keep them from coming back.
Are these systems up and running?
Can you tell me how they work?
No. Not right now. We just got them started. But we have things in place that are in full compliance with the DMCA [Digital Millennium Copyright Act]. That's about all we're saying right now.
OK. Then given the work you've put in, not to mention the time and money you're spending in defense of Napster, do you feel bitter that Napster has become the target, as opposed to Gnutella or Freenet, two other forms of file-swapping software?
Well, we're far and away the leader in this space. We're the company with the brand; we're the first movers, the inventors if you will. It's different. Maybe they target us because they can, right? Who are they going to go after at Gnutella [which was created by AOL employees without the company's approval]? So I don't think we feel bitter, to be honest. Plus, it's never been our goal to be sort of like, "Hey, what about them?"
We're building a business and we're trying to work it out in an amicable way. I'm not too worried; I don't think any of us are really all that worried about what's going on with any of the other players. We're the leaders, we're going to stay the leaders and we're going to be the company that's successful. The thing we have going for us is that we are a company, where Gnutella isn't. So, any artists who realize that this is a medium they can use to their benefit, they'll come and work with us because there is somebody to work with.
I think [Metallica and the recording industry's] actions are based on a lack of knowledge, and fear. When you're afraid of something that you don't understand, you react, usually with a lawsuit. But over time, and we see this absolutely every single day, everybody's learning. We're learning about the music industry; they're learning about the Internet. I'm confident that we'll get there together. I do realize, having been in this business of cutting-edge high tech for so many years, that many, many times you sit there and say, "Oh, that's never going to work," or "That's too scary." You know, technology's hard. It's hard to understand. It's just a process that takes a little time, and that's where we're at right now.
What about the RIAA lawsuit against MP3.com, specifically the recent ruling that MP3.com broke copyright laws by not licensing the music in its Beam-It database from recording companies. What do you think this means for Napster?
It means nothing to Napster as the cases are completely different.
What about the effects of these lawsuits: Have your usership numbers gone down since the cases ...
The numbers have not gone down, I can tell you that.
So where are you at now?
We're at a lot of users.
How many users?
Millions and millions of users.
Is that as specific as you're going to get?
OK, what about funding. Has it been hard to go out and raise money?
No, it hasn't been difficult. We have had many, many types of investors coming to us: Everything from requests of "Please tell me what your NASDAQ symbol is" to "Can I invest in you privately?" on up to very large players and venture capitalists. We've certainly received a lot more calls about people investing in the company than we did before all of this.
But have these calls turned into dollars? How much cash do you have on hand?
We're not disclosing that; we're a private company -- but we'll be fine.
Are you using any of those dollars to "educate" people like Ulrich? What do you think needs to happen before Napster is considered as safe as radio?
Well, the culture at large and the users have spoken. We have millions and millions of registered users and we've been around for eight months. We're the fastest growing Internet company of all time. So the consumers and the culture of America have spoken. This is something they very much want to do.
But we need to be proactive, too. It is going to take time. Right now, though, we're working on our new artists program, so that artists can learn how to use this new medium to their benefit, and get more fans and get in touch with their fans. So part of it is through the Web itself, and part of it is through conversations with artists.
You're also sponsoring a free Limp Bizkit tour. Are there other big-name artists who you've lined up to defend your cause?
There are definitely other artists, certainly the Offspring has come out and spoken on our behalf.
But are there plans to do anything as public as the Limp Bizkit tour?
Yes. I don't know that it's going to be exactly like the Limp Bizkit tour. In fact, it probably won't be, but we just this second heard from another huge artist who we'll be working with in the future.
I can't say who it is right now; but soon.
Ultimately, where do you think this is all going? Why is Napster important and what would you like to see it do?
Personally, the reason I came here was because of my involvement with Firefly and its collaborative searching technology that enabled you in an interactive way to rate musical artists and then learn about new musical artists that you otherwise wouldn't have learned about. It's something no other medium can do in music. The rest are passive, like radio and MTV. I thought that was the most brilliant breakthrough; the consumer tool with the most excitement, if you will. That was five years ago. But when I saw Napster, I thought, "Oh Lord, this is it. This will fulfill my dream."
So that's one side of it. And the other side is that my very own son is a musical artist, as are many, many of my friends. And the thought of having them be able to finally have a career based on what they love to do, i.e. create and play music, because of this new medium -- it touches my very soul.
That's one of the things that I would hope would happen. The labels can keep doing what they're doing; they'll still have their megastars, etc. But what about that next [level] of the music industry? The artists that may have only 200,000 or 400,000 lifetime fans? The artists that we talk to daily that, let's say, have been dropped from record labels, but have music [they'd like to distribute]? Giving them the ability to connect directly with their fans, well, that's why this is important -- they're going to be able to make a living out of this.