June 4, 2015

Adapt or Die: The Travel Sharing Economy is Having Its Napster Moment Right Now

Remember 1999? Sure you do. The dotcom bubble was in full effect: come up with any idea, really any idea, and add “.com” to it, and you could raise millions.

We now know in hindsight that many of these “businesses” amounted to nothing. As a whole, though, the revolution that time begot continues to impact our lives.

Take one example: Napster. At the time this startup completely changed how music was acquired and consumed.

No longer did you need to buy a physical CD. Heck, you didn’t need to buy anything at all, the world’s entire catalogue of music was available for free.

Now Napster is a shell of its former self – existing in name only. But the impact of that startup was huge.

While the company may have been wrong about the exact methods, the fact that the internet was permanently changing how people acquire and consume music was spot-on.

Napster ultimately led to things like Pandora, Spotify, and even the iTunes store.

Travel’s Napster era

Now the sharing economy is experiencing such a moment.

Companies like Airbnb and Uber are taking the place of Napster. Vested interests in staid industries like hotels and transportation are taking the place of the music industry.

The taxi lobby and hotel executives attack these upstarts as illegal and dangerous.

In many cases, just like the music industry executives, they may even be right.

But being right is not helpful when the ground is shifting beneath you.

The music industry, through the Recording Industry Association of America (RIAA), managed to tie Napster up in litigation, and even shut it down for a time.

Unfortunately for them, Napster was not the enemy: innovation was.

As with Whac-A-Mole, knocking down Napster did little to stop the myriad of copycat sites, or prevent the creation of new business models.

As a result, according to Cornell between 2000 and 2010 record store sales fell by over 76% and CD sales more than 50%. The music industry won the battle but lost the war.

Just as Napster paved the way, and others followed suit, the same will eventually happen in the sharing economy.

Napster took a flippant devil-may-care attitude to the legal complexities they faced. Companies like Pandora and Spotify tackled the complexities head-on.

They found ways to provide many of Napster’s benefits, using the power of the internet to provide instant access to music anywhere, but did so while staying on the right side of the law.

Growing pains

Airbnb’s approach to date of “we are just a marketplace, we can’t help if people are using our platform to do things that are illegal” may be a little too close to Napster’s early attitude to provide comfort for its investors.

Napster showed you can be right about the changes that are occurring, but still be wrong about the business model.

Pretty soon the sharing economy will have to grow up, and work with governments and industry bodies just as Pandora, Spotify, and iTunes worked with the music industry.

Perhaps the current sharing economy behemoths will make the shift that Napster never managed.

Perhaps hotels, taxis, and other incumbents will learn the lessons of the music industry and adapt in time. Perhaps they won’t.

Regardless, the taxi and hotel lobbies should take little comfort from the fact that Uber and Airbnb may still go the way of Napster, and Uber and Airbnb should take little comfort in their current popularity with consumers.

Just as with music, the way consumers are consuming lodging, transportation, and a myriad of other services is in the process of irrevocably changing.

Time for everyone to adapt or die.

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