On July 21, 1999, Mp3.com went public after amassing millions in investments from companies like Cox Interactive Media. Once it went public, shares cost roughly $68, and it raised more than $370 million in a single day. This seemed like the future of music file sharing, the precursor to streaming as we now know it.
But within the next couple of years, Mp3.com would face opposition from the major record companies. Lawsuits would eventually force site owners Michael Robinson and Greg Flores to sell the URL, which would eventually get shut down. Without the legality of Mp3.com acting as sheriff of a lawless town, illegal file sharing filled the void.
When we think of mp3 file sharing, Napster and Limewire usually come to mind. Those two sites were often at the forefront of copyright lawsuits and anti-piracy campaigns. But Mp3.com was unique within that world. It had high-profile investors like Alanis Morissette, who made roughly $3.4 million in profits after selling her shares around 2000. It also provided independent artists with a platform to post their music for streaming and downloads.
Artists who set up a monetized platform had a custom URL on the Mp3.com domain. In late 1999, the Pay-for-Play model was launched, paying these artists based on the number of streams and downloads their mp3s had. Kind of like if Spotify and Bandcamp had a baby.
mp3.com Flourished for a Time, but the Record Companies Always Come Calling
Mp3.com was revolutionary at the time, it seems. The site had about 25 million registered users, and roughly 4 million music files were delivered per day. Company engineers had to design a unique infrastructure and content delivery network to handle the sheer amount of data.
In 2001, My.Mp3.com was launched, which caused the record companies to take notice. This new service allowed users to register CDs that they owned, which turned them into digital streams. The point was for users to listen to their music online, and only after verifying that they owned these CDs.
But the record companies, of course, didn’t see this as anything but copyright infringement. Universal Music Group represented the interests of 11 other record companies, and sued Mp3.com. The suit claimed that My.Mp3.com promoted unauthorized duplication of copyrighted music.
Mp3.com countered that, under fair use and first sale doctrine, consumers were entitled to make copies of CDs they had legitimately purchased. Additionally, this included uploading the files to a personal, verified online library. This, they explained, was simply space shifting, or consuming previously purchased media in a different environment. Their counter-argument also included claims that the lower audio quality of mp3 files compared to a CD constituted transformative use.
The End of a Legal File Sharing Era
But all the counter-arguments in the world won’t hold up when the record companies cry copyright. The judge on the case rejected claims of space shifting and transformative use. Instead, he shared the opinion that the My.Mp3.com model “misappropriate[d] [the record companies’] property.” Mp3.com eventually owed more than $150 million to the record companies, sending the company into financial ruin.
However, an acquisition by Vivendi Universal in 2001 saved Mp3.com from having to shell out hundreds of millions. But it also spelled the end of legal file sharing. Vivendi couldn’t get the site model back off the ground. The logo and URL were sold to CNET, which established the site as a tabloid-style news blog. Tragically, how the mighty fall.
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