In the Wisconsin Law Review, Mike Masnick explains why the war on Napster didn't only fail to stop piracy, but also put the brakes on innovative new companies working in online music. In short: Had the RIAA been less keen to kill Napster, perhaps Apple wouldn't have ended up stealing their business:
This should have been obvious from the fact that people would flock to these new services, yet failed to show up to the record labels’ own attempts to innovate or provide something new. However, as soon as any service showed any kind of promise, even if “licensed,” the labels would seek to kill the golden goose by claiming that the rates were unfair, and the innovators were making money unfairly off the backs of the copyright holders (by which they meant the labels, not the musicians, of course).
Take, for example, the brief heyday of music video games like Guitar Hero and Rock Band. For a year or two, the recording industry fell head over heels in love with these games, because people were playing them quite a bit, and they were (briefly) willing to pay a slight premium to get access to music from well-known bands and musicians. Rather than build on that, the industry did two things: it focused all of its attention on those kinds of games, absolutely flooding the market and making people get sick of the game genre, and demanded much higher royalties.
The viewpoint seemed to be that there could be almost no benefits for the innovators. Nearly all of the benefits had to accrue to the labels, or it would be seen as a problem. In fact, the one exception that got through was iTunes, and that was quickly seen as a “problem” by the labels, even as it was dragging them, kicking and screaming, into the marketplace for digital music. The view is one of an extreme zero-sum world, where if someone else is benefiting, it must mean that the labels were losing out. They didn’t even hide this view of the world. Doug Morris, then head of Universal Music (now head of Sony Music) explained to a Wired reporter that investing in new innovations that weren’t paying money upfront meant that “someone, somewhere is taking advantage of you.” As laid out in the article, Morris was uninterested in technology, and didn’t even know how to hire a competent technology person, so his focus was on making sure everyone paid up immediately. Anyone making money in the music world without first paying a massive cut were dubbed “thieves.”