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> while at the same time selling a service based on proprietary software

Napster never sold anything. The business model was a plan to build a subscription service sometime in the future, but music labels wouldn't let us license their catalogs.

Source: worked at Napster

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yes.. that is correct (also worked there 2000-01). Bertelsmann offered 1B to settle the suit with the Labels (including the ones Bertelsmann owned, somewhat ironically) so the subscription service that we were building could go live, but this was rejected out of hand. After that, it was an existential moment for the entire Industry.. until Steve Jobs pitched what Apple had been working on (iTunes). My personal recollection was that probably at no other time would the Music Industry agree to the terms that Jobs wanted for the iTunes service, but there literally were no other viable options at the time so they agreed. you know the rest.

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