. Introduction: In the midst of the heated debate on whether music is free or not, there are also ethical and moral considerations. Downloading MP3 music has become the latest trend among computer owners. One computer site where users can download MP3 songs is Napster. The emergence of digital entertainment, be it an MP3, a Liquid Audio book, or a streaming video, has caused an inevitable shift in the entertainment market from a commodity base to a service base. One reason is that the digital medium eliminates acquisition costs for the consumer. Upon request, a perfect copy of the original good is automatically created. Using open platforms and formats, new entertainment companies have literally bypassed traditional production and distribution channels to reach the consumer. Napster is the perfect example of this new paradigm, turning each member's computer into an audio server and distributing a personalized playlist. However, this trend seriously limits the content owner's ability to limit the supply of his intellectual property on a large scale and thus control it. In response, the music industry has resorted to litigation and restrictive usage rules on digital products licensed or sold at retail.2. Economic Analysis of the Music Recording IndustryThe music industry continues to be characterized by commodity prices. This is largely due to the fact that major labels' revenues are predominantly derived from CD sales. Therefore, the focus of the industry's online strategy has been to prevent the cannibalization of CD sales by controlling the supply and distribution of products online. Without this control, copyright holders would not be able to maintain control over prices. As a result, the industry has taken the initiative to define new rules for online digital distribution that would replicate existing conditions for offline digital distribution. Copyright infringements (excluding Internet effect) – bootlegging, piracy and counterfeits – are costing the music industry dearly at around $5 billion a year sales in the five largest music industry markets (United States, Japan, Germany, United Kingdom and France) are growing slowly, if not stagnating3. Analyze the history, development and growth of the company. James Breyer (venture capitalist): "Napster is truly revolutionary and will be a precursor to some of the most important web applications in the coming years.)"3.1. History