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companies. Listen to this song once, keep it for two days, and away it goes. Traditional fair use, such as making a copy of a purchased CD, was quietly heading for an early grave. Microsoft even slipped into its Media Player licensing terms the right to disable unapproved content or rival programs, such as peer-to-peer systems, on users’ computers. Microsoft’s monopoly power ensured that its restrictive Media Player would be widely adopted, but just to be on the safe side, exclusive songs by Peter Gabriel and Elvis Costello in the format forced downloaders to accept the new technology. “I was looking at their new innovation, and I was very much impressed,” said Jack Valenti of the Motion Picture Association, after making his first visit to Microsoft’s Redmond headquarters in August 2002.

With the benefit of having watching the Napster drama unfold and powerful allies in both Washington, D.C., and Washington State, the movie companies had a much better shot than the record labels at handling the crisis correctly. But they, too, were showing early signs of blowing it. They put little digitally protected content online and dictated new usage terms that were likely to annoy their customers. (In an echo of Napster’s antirust claims against MusicNet and Pressplay, authorized online movie provider Intertainer Inc. sued three big studios for conspiring to drive it out of business after they set up a rival joint venture. And just like it had with the major labels’ ventures, the Justice Department opened an antitrust investigation.) The pirate services, which learned the Napster lessons better, were providing an easy way to empower customers who chose to express their dissatisfaction. Because broadband connections are spreading slowly, the entertainment giants have a few years to get their answer right. In the meantime, their foot-dragging is giving people less incentive to pay for high-speed access, according to the U.S. Department of Commerce. And the broadband delay, concluded the Brookings Institution, is in turn costing the sputtering national economy an estimated $500 billion a year in lost gross domestic product.

Silicon Valley remained full of believers in peer-to-peer. The Napster revolution came late in the cycle of the Internet boom and continued even after the NASDAQ began shedding points almost as rapidly as it

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