The Micro$oft - Napster Connection

[Curve Dominant]

http://www.thestandard.com/article/display/0,1151,15319,00.html

May 19, 2000

Hummer Winblad Funds Napster

The high-profile VC firm will take a chance on the controversial Net song-swap service.

By Lessley Anderson

Amid a maelstrom of lawsuits and public debate, file-sharing music service Napster has closed its first round of venture financing, as reported Friday in The Standard.

San Francisco-based Hummer Winblad, a top-tier VC firm, confirmed Monday that they led a $15 million round of financing for the company. A press release from Napster's PR firm also stated that Hummer Winblad partner Hank Barry will take over as interim CEO, replacing Eileen Richardson. Partner John Hummer will also join Napster's board.

The news is somewhat surprising. Although Napster might go down in history as the most quickly adopted application in Net history, making it a sexy target for VCs, its business woes are daunting. A recent flurry of lawsuits from the Recording Industry Association of America, rapper Dr. Dre and the rock group Metallica and Napster's silence on the subject of its financing had left many in the industry wondering whether venture capitalists had decided Napster was too risky.

Hummer Winblad apparently was willing to take that risk.

------------------------------------------------------------

Gates reveals partnership in Hummer Winblad

By Bloomberg News

December 1, 1999, 2:25 p.m. PT

URL: http://news.cnet.com/news/0-1003-200-1475875.html

WASHINGTON--Microsoft chairman Bill Gates disclosed that he is in a venture partnership run by his friend Ann Winblad, giving the founder of the world's biggest software maker an indirect interest in newer companies that someday could become competitors for Microsoft.

Gates disclosed in documents filed with the Securities and Exchange Commission that he is a limited partner at Hummer Winblad Venture Partners. The filing didn't give details about the size or nature of Gates' investment. It does shed some further light on the portfolio of the world's richest man, who has revealed little about how he invests billions raised from sales of Microsoft stock.

San Francisco-based Hummer Winblad, created in 1989, was the first venture capital provider to focus on software businesses. It has backed companies such as Net Perceptions, an online marketing software business, and also backs Internet competitors such as FurnitureOnline.com and HomeGrocer.com.

Winblad founded the firm with John Hummer, a venture capitalist who also spent six years playing professional basketball for the Seattle Supersonics and the Buffalo Braves.

Personal ties between Gates and Winblad have received some publicity, with several newspapers reporting that the two dated during the 1980s. Not as well-known is their business relationship, which includes a stint by Winblad as a strategy consultant to Microsoft.

The Form 4 that Gates filed with the SEC to report his Hummer Winblad interest provided no additional information, making it difficult to determine the exact nature of Gates' involvement with the venture capital firm.

Winblad didn't return telephone calls seeking comment. Michael Larson, who manages money for Gates as chief investment officer for Cascade Investment, declined comment.

 

Feedback...

[tonemonkeyyahoo.com]

So what's the point?

 

Did I stumble onto the "rampant paranoia" forum by mistake?

 

Curve, those helicopters are just traffic reporters.

[Guest]

This is definitely interesting. One that could run the full the gamut of insight. Odd though one of the worlds greatest proponents against piracy is a silent partner in what some perceive as out right theft. Not my view at this point.... but this could be that I don't have a disc in distribution.

 

Yes this is going to be a very educational thread.

 

Morigeau

[Curve Dominant]

Tonemonkey: Since when are traffic helicopters painted black?

[alphajerk]

its kinda odd that bill gates is investing in a piece of software that goes against steve case's new venture AOL/TimeWarner. bill has been getting into media heavily and as probably looking to lay down some lines. ironically, steve case's new investment [nullsoft] are responsible for gnutella [which is now a open source virus far more damaging to the industry than napster]

[Curve Dominant]

<>

 

Interesting story behind Nullsoft. Its founder, Justin Frankel, created WinAmp and subsequently sold it and Nullsoft to AOhelL for $80 million. PlayMedia then sued Nullsoft/AOL because Frankel had plagerized the code for PlayMedia's PlayAmp to create WinAmp, and AOL was eventually forced to settle with PlayMedia for $20 million. It was in this environment that Frankel and Nullsoft released Gnutella, which was intended as a tie-in to AOL's new investment in WinAmp. Then, one of the suits in AOL's legal department informed the geniuses at AOL that giving copyright-protected entertainment away for free might jeopardize their pending merger with Time-Warner, for obvious reasons. Hello! AOL ostensibly "pulled" Gnutella and claimed their indignation at this "unauthorized" product release, but gnutella was out.

 

But Gnutella is currently in gnots. It seemed like the end of copyrights as we knew it at first, because unlike Napster it is a decentralized peer-2-peer network. But a funny thing happened when all the Nappyheads ran to Gnutella: it slowed to a crawl. The more people get on it, the slower it gets. Brilliant, eh? First of all, it is not limited to MP3s the way Napster was, so when you send a search for an MP3 it has to look through every other kind of file for it, and most likely it will time-out before your search is complete. Searches that produce no results are due to bottlenecks on the Gnutella network. These bottlenecks are being caused by a couple of reasons in addition to bad code writing in the client software. If user A makes a request for a file from user B, who is offline, the software sends a "push" packet broadcast to all the other computers connected to user A instead of routing it back to where it came from. This lack of routing and pushing when the host is offline contributes to more than 50 percent of the total traffic on bad days. So much for the Gnutella revolution.

[Punchmo]

Curve,

 

Very interesting! Very good research! It looks like some new devils have already moved in. Please keep us informed.

sp

[alphajerk]

from what i understand, nullsoft let loose the source code which [like all software] has to be streamlined and debugged in real world situations. with the new hacker kids working on it freely, im sure any problems can easily be resolved if need be [like napster getting shut down, OR charging people to use it (i heard a rumour)]

[Curve Dominant]

Alphajerk - that was no rumour...

 

November 1, 2000

Napster to Charge Fee for Music Rights

By MATT RICHTEL and DAVID D. KIRKPATRICK

The Associated Press

Napster, a start-up that has terrified the recording industry by letting its users copy music from each other free over the Internet, agreed yesterday to a plan to change course and charge a fee for its service, distributing part of the fee as royalties to record companies.

The plan would be financed partly by one of the companies that tried to shut it down the German media giant Bertelsmann, which lent Napster an undisclosed sum to help change the service and received an option to buy a stake in the company in return.

BMG, a Bertelsmann subsidiary, along with the other four major record companies, sued Napster in December, accusing the service of abetting copyright infringement. The companies are still fighting Napster in court. But Bertelsmann said it would drop its suit once the new service was in place and was now seeking to persuade fellow record companies to follow its lead.

The agreement promises to change Napster from a freewheeling Internet phenomenon with 38 million users that has not generated a profit, into a viable business. Napster, started in 1999 by an 18-year-old college student, enables users to exchange music files stored on their computers, a practice that some artists and the music labels have called wholesale copyright infringement because they are not compensated.

But the deal announced yesterday signaled substantial compromise by each party, with Napster announcing it would begin paying record companies. For their part, Bertelsmann executives said they concluded it was unwise to fight the underlying file-sharing technology of Napster and the clear demand it has created on the Internet.

 

 

 

[This message has been edited by Curve Dominant (edited 11-11-2000).]

[Curve Dominant]

Tonemonkey: I've noticed lately that traffic reporters in my area are wearing black jumpsuits and carrying Uzis. Have you noticed this in your neighborhood?

[Curve Dominant]

MP3 has by now settled out of court with all 5 major distributors.

[Anderton]

Very interesting thread. The truth is out there .

[Curve Dominant]

Perhaps a little too interesting for this crowd, but thanks, Craig. What sparked this thread was a cover story on Napster that Time Magazine ran, which made no mention of Bill Gates or Hummer Winblad's involvement. I emailed a letter to Time detailing this information (see my original post), and they emailed me back saying they were going to publish my letter. So imagine my reaction when the I saw that they had printed my letter with all the info about Bill Gates & Hummer Winblad EDITED OUT! And that was the point of the letter in the first place! The remainder of what Time printed made no sense; it just made me out to be anti-Napster for no reason! SPOOKY...and very suspicious. Tonemonkey - take note! I really was looking out for helicopters after that. But I re-sent the same letter in response to a Napster article in Keyboard Magazine, and Ernie Rideout emailed me back "Good research...and check out our MusicPlayer.com forums..." and here I am.