2 clarifications for the summary, since I was the 10th engineer at MP3.com and worked there from 1999-2003:
- We lost to the record labels/publishers not because we gave people access to their music, but because we compiled the music library and streamed it without paying the labels/publishers any royalties. Our strategy was to buy a copy of the CD ourselves, rip it, then claim fair use doctrine when we streamed it to someone else who also owned it. This was a supposed grey area in the law that got cleared up REAL FAST in a media-friendly district court. Services that you see now are paying royalties on what they stream. MP3.com later sued its lawyers that gave the advice on the so-called "grey area" it tried to go through.
- We where not a Silicon Valley company, we where in San Diego. Perhaps if we where SV we would of gotten better legal advice :p