Jobs did everything in his power to encourage paid, legitimate downloading. Like Brandenburg, like Morris, he had made his fortune on the back of intellectual property assets. (Although not always his own.) His iPod was intended as a complementary asset to the iTunes Store, and he had pushed for a format switch to AAC to diminish the portability and overall value of the existing base of pirated mp3s. Despite all this, Apple’s rise to market dominance in the 2000s relied, at least initially, on acting almost like a money launderer for the spoils of Napster. If music piracy was the ’90s equivalent of experimentation with illegal drugs, then Apple had invented the vaporizer.

That was why, in 2003, the balance of power still favored the major labels. Jobs needed Morris. He needed legitimacy. Most of all he needed rap—he couldn’t possibly have a music store without Eminem and Fifty. But did Morris need Jobs? For a long time he wasn’t sure. Morris couldn’t help but notice that the iPod had up to 40 gigabytes of storage, enough to hold over 10,000 songs. Did that mean people were going to pay $9,900 to fill them up? Unlikely. Instead, the device rewarded digital piracy by making mp3s easier and more convenient to use. If the iPod became ubiquitous—and it certainly seemed like it was going to—then the mp3 would no longer be an inferior good to the compact disc.

The two engaged in a long, sometimes acrimonious flirtation. They were a study in opposites. Morris believed in the power of market research, and was willing to let consumers tell him what to sell. Jobs was skeptical of market research, and had once told a reporter for BusinessWeek that “people don’t know what they want until you show it to them.” Morris went out of his way to make sure people liked him and had positive things to say about him. Jobs was a notoriously difficult personality who routinely hurt the feelings of even his closest friends. Morris was the consummate East Coast dealmaker; Jobs the archetypal West Coast visionary. But somehow the two found rapport, and in any event, Morris’ hand was forced. RIAA vs. Diamond was decided, and the iPod was here to stay, whatever the repercussions. In a meeting in his office at Universal in late 2002, Jobs showed Morris for the first time the prototype for a seamless Web sales experience that could bring legal music to the masses, succeeding where Pressplay, Blue Matter, and Seagram’s laundry list of dumb investments had failed. Jobs promised him seventy cents on the dollar for every mp3, and that was as good a deal as Morris was ever likely to get. In early 2003 he finally signed on. The website went live in late April and, for the first time, all of Universal’s music was widely available for paid legal download.

The iTunes Store was an immediate hit. It sold over seventy million songs in its first year. But that contributed to only 1 percent of Universal’s total revenue, and the broader problem of digital piracy remained. Napster might have disappeared, but the peer-to-peer movement was here to stay, and there was a new generation of kids who had never paid for a CD, who viewed file-sharing as their prerogative, and who saw spending money on music as an antique form of patronage. This was the future of music, and it was an existential threat to Morris’ business.

This was compounded by the continuing problem of prerelease leaks. Anyone who had ever worked in a record store knew that Tuesdays were the busiest day, when the new releases hit the shelves. New music Tuesdays were the barometer for the industry, the equivalent of opening night at the box office, and the typical album would move over half its total sales in the first four weeks of its release. In the past the damage from an album leak had always been localized, but with peer-to-peer technology an early leak could now spread across the globe in a matter of hours.

Following the old business model, iTunes also released most of the new music on Tuesdays. But often this music had already been available in mp3 format on the peer-to-peer sites for weeks. That cost sales, obviously, and, for some reason Morris couldn’t quite figure out, Universal seemed especially susceptible to these leaks. In 2002 there had even been suspicion that someone was leaking from the tightly controlled North Carolina plant; Scarface’s album The Fix had definitely come from inside. But there were just so many potential holes in the supply chain: music stores, DJs, warehouse employees, music critics, even truckers. You couldn’t watch them all.

How badly did peer-to-peer file-sharing and prerelease leaking really hurt CD sales? There was no consensus answer, and some mavericks even wondered whether the leaks really hurt at all. Yes, the music industry was suffering, but in the aftermath of the dot-com bubble and 9/11 so was every other business. For every industry-funded study that purported to show how bad the problem was, there seemed to be another contrary study that showed that piracy and leaking had no effect, or even promoted sales. But Morris wouldn’t deign to argue the point. He didn’t need a PhD in economics to know that if something was widely available for free, people were less likely to pay for it. And, whatever the economists said, there was one point that was beyond dispute: leaking music and sharing files were illegal.

With the Vivendi contract in place, Morris would never again have to worry about money, but he still wanted to take care of his artists. The online pirates were engaged in a conspiracy against their livelihood—a conspiracy to commit copyright infringement on a historic scale. Sharing and leaking music weren’t lifestyle choices; they were crimes. Morris’ policy was to prosecute. The first round of lawsuits had failed to neutralize the problem. Perhaps a second was called for. Morris and the other music executives were now discussing the nuclear option: going beyond the corporations and suing the file-sharers directly.

Morris’ legal team spurred him to adopt this approach. Zach Horowitz, Universal’s COO, had a background in entertainment law, and was a driving force at Universal for the lawsuits. Harvey Geller, Universal’s chief litigator, was also an advocate, and saw a group of cases he knew he could win. The two were unapologetic copyright hawks for whom the lawsuits represented a chance to reconsecrate the sacred nature of intellectual property while pulling in a little cash on the side. They knew the approach was likely to generate a fair amount of bad press, but they saw this as a necessary trade-off with limited long-term consequences. Morris trusted Horowitz and Geller, and listened to these arguments. The most important thing, they all believed, was to establish a precedent that the seemingly innocent act of file-sharing could potentially have severe consequences. For capitalism to work in the digital age, sharing had to be penalized.

In internal discussions among the label executives, the lawsuits were referred to as Project Hubcap. Universal was the largest of the labels by revenue, and so contributed the most to the RIAA’s annual operating budget. In pushing for the lawsuits, the company was joined by three of the Big Five music labels—BMG, EMI, and Sony. Dissenting was Roger Ames, the head of Warner Music Group, who argued that suing one’s own potential customers was unlikely to result in long-term profitability. Many of the smaller, dues-paying independent labels objected as well. But the most vocal opposition came from a surprising source: the head of the RIAA herself. Hilary Rosen thought suing the file-sharers was a disastrous policy, guaranteed to alienate fans and leave a stain on the industry’s reputation that could last for decades. In a series of heated discussions with the label reps in late 2002 and 2003, she argued her case and made it known that she would not, under any circumstances, be the face of Project Hubcap.