I’m trying something new for today’s blog entry, a book review. I find myself constantly referencing books in most of my blog posts. Books often provide me with inspiration for blog topics and people have been telling me they sometimes buy the books after reading my comments. In particular, my constant ravings about The Perfect Store: Inside eBay by Adam Cohen has led to a few extra sales of the book (I’ll do a review of the book soon for sure) and I think I should get a referral fee!

I enjoy reading and I’m more than happy to give a brief review of each book as I finish it. I’ll be focusing more on business-related books in my reviews because this blog is about entrepreneurship. I do read other books but they would not be appropriate for a business blog (Discworld anyone?).

In each review, I will comment on how the book impacted me, what I learnt from it, and how I can apply its teachings to my own business endeavors. I link to the Amazon.com sales page for each book using my associate ID so if anyone does decide to buy the book from Amazon as a result of reading my reviews about 5% of the fee will be going to me. On to the first review…


All the Rave: The Rise and Fall of Shawn Fanning’s Napster by Joseph Menn.

As the title says this book is all about Napster.com which you will probably remember was the first Peer-to-Peer (P2P) software application to achieve widespread use. Napster today is now a legitimate legal music subscription service but back in its original form it was THE place to swap MP3 music files and most of the trading going on was illegal (breaking copyright). During its heyday, you could find virtually any song on Napster and I admit it, I was a user too.

The author of this book, Joseph Menn, must be commended for the depth of research done to complete the book. He really did his homework, including interviews with all the key players. It starts from the very beginning when Shawn first develops the concept while participating in ‘hacker’ chatrooms and finishes at the end when the assets, which after all the lawsuits left pretty much just the brand, domain name, and logo, were sold off.

The book was not boring and I found myself very interested in the whole story, the only problem I had was that I couldn’t keep track of the variety of personalities that kept coming in and out of focus. With so many investors and employees entering and leaving the story over the years and such phenomenally quick growth, it’s hard to maintain a grasp on who owns what and where everything was going. The scary thing is I don’t think even the people running the business always understood what was going on regarding ownership and strategic direction.

The ownership and investment future of Napster was always a contentious issue because of John Fanning, Shawn’s uncle. John came on board early on in the story and offered to provide business leadership support (and he sure had a shonky business past). Based on his portrayal in the book, John Fanning was a greedy man, with terrible business practices. He incorporated Napster and only gave his nephew 30% ownership in the business that Shawn’s invention created. Uncle John took the remaining 70%. This one decision and due to the greedy nature of John, would haunt Napster and result in many a deal falling through because John wanted more money.

I read this book after reading the eBay story. The feeling with eBay’s story was one of a nice guy building a nice community business, making profits from day one and always trying to keep the customers happy. While Napster also had a strong sense of community it was based on illegal activity and often the community creed was to shove it to the powers that be, the record companies. The business model was focused on not making a profit because in a lawsuit, which the management team was expecting, if they were found to have been profiting from an illegal activity it would have hurt their case. Basically, they had no profitable business model and just hoped to get big enough that they could negotiate a deal with the record labels.

Napster, which grew faster than any company in history at the time, would not have grown at such a stunning rate if it wasn’t for offering such a suspect service. Much like in eBay’s story the press, which in Napster’s case was almost always negative and focussed on court cases, helped to popularise the brand to such an extent that it became part of pop culture. If it wasn’t illegal then it wouldn’t have got the attention it did. I find that a wonderfully ironic twist.

This book reinforced a few concepts that are important for any entrepreneur.

  • News, media coverage and press are the best tool for mass awareness generation. No form of advertising can match sensational press. Richard Branson knows this and works it to his benefit on every new product launch. Half.com also realized this and went to great lengths to find a stunt crazy enough to get attention when they launched, and they sure did.
  • The importance and power of investment capital. Napster, with its profitless business model, functioned day-to-day by living off investment cash. At one point they had over 100 employees. That’s a lot of salaries to pay when you are not making a profit……In fact, after reading this book I realized that I personally have a knowledge gap about venture funding and I went out and purchased a book to help bridge that gap. I’m not certain I intend to ever go the VC way with a business but I definitely want to have more knowledge about how the whole process works.
  • Although the concept of P2P was revolutionary at the time and deserved great attention (and still does today), it was being applied to encourage an illegal activity and consequently, in the long run, was shut down. P2P and digital content are the way of the future but even today there is no model out there that truly satisfies consumers, the record companies, and the artists. That’s a fairly big opportunity for someone that can get it right.

Napster was a revolutionary concept and existed during a very exciting time for Internet business. You can learn a lot from reading about the behind the scenes deals going on between venture capitalists and business owners during the peak and decline of the Internet business bubble.

Young Entrepreneur