Evaluating only Napster (Original)’s profile at its peak — without knowing the outcome — the model ranked Unit economics as the #1 likely cause. Documented cause: Regulation.
Napster was created by Shawn Fanning and Sean Parker in 1999 as a peer-to-peer file sharing platform for music. Within two years it reached 80 million registered users — one of the fastest consumer product adoptions in history. The Recording Industry Association of America (RIAA) filed suit in December 1999, and in 2001 the Ninth Circuit Court of Appeals ruled that Napster was liable for contributory and vicarious copyright infringement. A court injunction in July 2001 effectively shut down the service. The company filed for Chapter 11 bankruptcy in 2002 and its assets were sold. Sean Parker went on to become Facebook's first president. The model Napster pioneered — licensed music streaming — eventually became Spotify, Apple Music, and a multi-billion-dollar industry.
Lesson
“When incumbents destroy a transformative platform instead of licensing it, they do not protect their business model. They delay the transition by a decade and surrender the upside to new entrants.”