John Fanning

Cofounder of Napster

• Born: December 21, 1963
• Place of Birth: Boston, Massachusetts

Primary Company/Organization: Napster

Introduction

John Fanning is a somewhat controversial figure who is both credited and chastised for his role in the founding and fall of the Internet-based peer-to-peer music-sharing company, Napster. He cofounded the company with his nephew, Shawn Fanning, in 1999. As owner of a 70 percent stake in Napster, John Fanning maintained control of the company as its chief executive officer (CEO) and chairman of the board of directors. At first hailed as a revolutionary new way to distribute music, Napster soon became the target of media and recording industry giants claiming copyright infringement and illegal distribution. Fanning ultimately lost the legal battles and the company but continues to be recognized as an Internet industry pioneer. In addition to his role in the original Napster in the area of distributed aggregation of content, Fanning has been involved with Internet innovations such as client-server game play, Voice over Internet Protocol for audio chat, and auto-upgrading/authentication as part of his own startup firms, NetGames, NetMovies, and NetCapital.

Early Life

John Fanning grew up in Rockland, Massachusetts, a working-class town approximately twenty miles south of Boston. He and his seven siblings lived with their parents in a three-bedroom house and were constantly on the brink of poverty.

When Fanning was fourteen years old, his older brother, Eddie, graduated from high school. To celebrate, the Irish family threw a big party for the entire neighborhood and hired a local band to provide live music. Fanning solicited all the attendees with a hat to collect money for the band's fee. He ended up with several thousands of dollars in profit thanks to the massive crowd. The experience ignited in Fanning a passion for entrepreneurism.

The following year, Fanning joined the carpentry program at South Shore Vocational Technical High School in southeast Massachusetts. During that time, his family moved to nearby Brockton and his older sister, Colleen, discovered she was pregnant. The baby's father abandoned her, and Fanning would eventually go on to become a sort of father figure to Colleen's son, Shawn.

After high school, John Fanning enrolled in the Economics program at Boston College. However, he left the program before completing his degree when an opportunity arose for him to purchase a beleaguered computer company called Cambridge Automation from a friend on credit. While that company ultimately failed, the experience gave Fanning valuable knowledge and the drive to create his own company. He moved to Hull on the Nantasket Peninsula of Massachusetts Bay and in 1993 secured investor backing of some $500,000, tapped the programming expertise of several students from Carnegie-Mellon University—including chess Grandmaster Roman Dzindzichashvili—and founded an Internet chess service company called Chess.net.

Life's Work

Chess.net became a haven for Fanning's nephew, Shawn. He would spend his summers learning about computers from the company's programming team. By the time Shawn entered Boston's Northeastern University, he was already an accomplished programmer with a knack for hacking. During his freshman year, Shawn developed an MP3 digital music file sharing program that he called Napster in honor of his school nickname. He would work on the program at the Chess.net offices on weekends and his uncle soon became intrigued by the concept and its considerable potential. John Fanning recognized that his nephew's program offered a revolutionary new way of distributing information, enabling individuals to share their own content with one another via a global information index and their own computers. With the elder Fanning's support, Shawn dropped out of college to focus full time on Napster from the Chess.net offices. Shawn's tech-saavy hacker friends Jason Ritter and Sean Parker soon joined the project. Within months, in mid-1999, John Fanning surprised his nephew by incorporating Napster as a company. He persuaded his nephew to sign over a 70 percent share in the enterprise to him based on his contention that the company would be able to attract necessary investors only if an experienced business leader was running the company.

John Fanning began to woo investors while Shawn Fanning launched a test version of Napster among thirty of his friends. Within just a few days, word of the revolutionary new music-sharing service had spread like wildfire across the Internet, with fifteen thousand users downloading the program within the first week. Napster's initial success enabled John Fanning to secure the company's first external investor. Venture capitalist and software executive Yosi Amram invested $250,000 in the fledgling firm. In exchange, he stipulated that the company relocate to his own stomping ground in northern California and that he be given the right to name new company management. Fanning agreed and in September 1999 the company moved to San Mateo, California. John Fanning was named chairman of the board.

Almost immediately the company encountered problems. By the end of 1999, usage became so strong among college students that many schools began to block the service in order to avoid clogging their servers with bandwidth from Napster-related file transfers. At about the same time, the music industry had started to notice Napster. The Recording Industry Association of America called a meeting with Napster's Amram-appointed CEO, Eileen Richardson, asking the company to cease operations until copyright infringement allegations could be addressed. Richardson refused and in December 1999 the company found itself at the center of a heated legal battle with the country's major recording labels and media companies.

While some of Napster's leadership favored a settlement, John Fanning did not and worked to delay settlement talks until he could round up more funding, which he felt would bolster Napster's credibility and influence at the bargaining table. However, Fanning, Richardson, and Napster's board of directors spent too much time arguing the details, and several opportunities from interested big-league venture capital firms fell by the wayside. Other opportunities to save Napster were missed as a result of disorganization among the company's top management and poor pitches to potential investors by Fanning, who tried to bundle investment in his own start-up Internet firms into a Napster bailout package.

Napster and Fanning got a reprieve in May 2000, when Hummer Winblad Venture Partners invested $15 million in the company and took control, ousting Amram and Richardson but keeping Fanning on the board. Fanning was soon forced out, however, and by July the company found itself facing a federal court order to cease operations. An appeals court ruling stayed the injunction almost immediately, giving Napster enough time to secure a $50 million loan from German publisher Bertelsmann in an effort to establish a more traditional commercial music service. Hopes of a Napster revival were short-lived: In February 2001, the company was ordered to stop permitting the sharing of copyrighted material on its website. Napster attempted to comply with the order but fell short. By this time, John Fanning had sold some of his 70 percent stake in the company, earning himself half a million dollars while the company he cofounded with his nephew faltered. Napster voluntarily shut down its site on July 1, 2001. A year later, Napster filed for Chapter 11 bankruptcy protection to avoid a takeover by Bertelsmann. The following year, in November 2002, digital media company Roxio purchased the Napster name and intellectual property for $5 million. A new version of Napster went live in 2003, armed with appropriate licensing agreements and new leadership, which did not include John Fanning.

After leaving Napster, Fanning focused his efforts on his other Internet ventures: online gaming software company NetGames (which owns Chess.net), boutique venture capital and private equity firm NetCapital, and online movie site NetMovies (in partnership with Blockbuster). In November 2011, Fanning also joined the advisory board of business-to-business cloud commerce solutions company, Savtira Corporation, as an expert in the areas of streaming, distribution of content aggregation, and video on demand. As of 2024, Fanning was the CEO at ChipBrain, a call analyzer that links Zoom, Hubspot, RingCentral, and other companies. It uses intelligent AI to find good and bad customer interactions. Fanning holds patents for Real Time Search Engine and Use Sensitive Distribution of Data Files Between Users.

Personal Life

John Fanning located his nephew's biological father via an Internet search when Shawn was seventeen years old. He approached his sister with the information. With her permission, Fanning helped orchestrate an in-person reunion between father and son that sparked a lasting relationship between the two men.

Apart from family and finance, Fanning is a man of varied interests. In addition to his appreciation for music, movies, and chess, Fanning is an avid player of the massively multiplayer online role-playing game World of Warcraft. He is also a dedicated supporter of the Boston Red Sox baseball team and New England Patriots football club. In addition, Fanning is a renowned poker player. He placed eighth in the world during the 2004 World Poker Tour, winning more than $200,000 for his efforts. The following year, he won more than €11,000 and secured the twenty-first spot during the 2005 European Poker Tour in Monte Carlo.

Bibliography

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Himelstein, Linda, and Tom Lowry. “The Sound at Napster: Tick, Tick, Tick.…” Businessweek 3777 (2002): 73. Web. 25 Sept. 2012.

Menn, Joseph. All the Rave: The Rise and Fall of Shawn Fanning's Napster. New York: Crown Business, 2003. Print.

Navissi, Farshid, Vic Naiker, and Stewart Upson. “Securities Price Effects of Napster-Related Events.” Journal Of Accounting, Auditing and Finance 20.2 (2005): 167–83. Web. 25 Sept. 2012.

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