John Fanning is hesitant when I ask his permission to record our interview. Indeed, he's reluctant to agree to this at all until I assure him that our taped conversation will not be broadcast without his permission, particularly over the internet.

This seems to be rather ironic, if not downright hypocritical, given that John Fanning was the business brains behind Napster, his nephew Shawn's MP3 file-sharing brainchild.

Napster, you may recall, was the company that achieved global notoriety for encouraging the unauthorised distribution of recordings over the internet.

By doing so, the Fannings invoked the wrath of major players in the music industry, who refused to negotiate distribution deals with the fledgling company.

Napster has been back in the news after a US federal judge blocked the sale of its assets to global corporation Bertelsmann, which is also a Napster creditor.

Under the plan thrashed out between the US technology start-up and the German media giant, Bertelsmann had intended to acquire Napster's peer-to-peer technology and create a membership-based music file-sharing service.

In return, it would provide $8m cash for Napster to pay off its creditors, and write off the $85m loans that it had given Napster over the past two years.

The rise of Napster is well-documented. A 19 year-old kid stumbles on the next Killer App, is mentored by an uncle who's always been like a father to him, and quits school to create a dotcom that pulls in tens of millions of devotees eager to access free music on the web.

What's less well known, at least as far as Fanning is concerned, is the 'truth' about Napster's demise.

But to put that into context, we must get under the skin of John Fanning, someone whom the US media likes to portray as a mean and moody type from the wrong side of the tracks.

Indeed, a recent Red Herring magazine profile labelled him "the street-fighting entrepreneur" and opened with a story of how he was charged with the assault and battery of a janitor who had damaged his 1969 Mustang convertible after an argument about Christmas tree needles.

"Certainly I grew up poor," said Fanning. "My parents were divorced; my father was an alcoholic and I grew up on welfare in a very tough neighbourhood. But I was always someone who worked hard to overcome the environment I was placed in."

So much so that in high school he was nicknamed Pope John "because I was so well behaved and it was important to me not to do things that were wrong".

Now, if that gives you the impression that in his younger years Fanning was meek and mild, let him put you straight.

"In school there were always people who would pick on you or try to take advantage of you, and I learned at a very young age that you have to stand up for yourself," he said.

"So I ended up as someone who only the toughest, most courageous or egotistic would try to trouble. I'm a very tough, competitive person and you won't find anyone on the planet who's ever said they kicked me around."

Fanning recounts this with a strong note of pride. "Well, there's no other way to be," he explained. "People will attack you and you have to be prepared to defend yourself and fight back with everything you have."

This competitive streak manifested itself in games and sport, where Fanning's goal was to win every time whether it was chess, poker, basketball or pool. This love of games, or at least mastery of them, led Fanning to start a business called Netgames.

Indeed, while the common perception is that Shawn Fanning is the techno-wizard in the family, with John the business brains, Fanning senior had developed "a system that was as cool as Napster" back in 1993.

"We called it chess.net, and it's still up on the web where you'll find five or six hundred people all hanging out waiting to play chess with each other," he said.

Fanning's entrepreneurial bent continued to focus on developing small, uncontroversial web-based businesses until the day Shawn told him about his idea for an online music file-sharing service.

The two had always been close, not surprisingly given the similarity of their early years; both from large families and growing up poor in the suburbs of Boston.

John Fanning was just 16 years old when Shawn became the first of many nieces and nephews, an out-of-wedlock birth resulting from one of John's sisters having hooked up with a member of a local band.

The father never admitted paternity and Shawn spent some time in a foster home, as John had. Rumours abound that one day there will be a movie made of Shawn's life. It's not hard to see the appeal of such an idea, the way his uncle tells it.

"Shawn's father's family is probably richer than 99 per cent of the families in Massachusetts. Maybe not one of the top families, but when you grow up with nothing, a family that has tens of millions of dollars is a very rich family," he explained.

When Shawn was about 18, John became fed up with all the denial and approached the father's family to see if they could help re-establish a connection.

It didn't happen. So Fanning senior has continued to adopt the male parent role. "While there is no question that Shawn coded Napster, equally there's no question that I coded Shawn," he said.

Where Shawn Fanning's soap opera life ends (he's still only 22!), John Fanning's story of how the machinations of big business denied him a fortune begins.

Despite his tough, competitive nature, Fanning lost this particular game to those whom many entrepreneurs scathingly refer to as "vulture capitalists".

"Everyone considered to be a top venture capitalist in Silicon Valley had made an offer to finance Napster, including Kleiner Perkins, which had already given us several million dollars," he said.

"Then Hummer Winblad came in and offered us a deal five times greater than anyone else was willing to pay, in exchange for one seat on the board.

"They gave us a term sheet offering $5.68 per share and the board instructed our then chief executive to sign it and close the financing.

"Two or three days later, after we'd told the rest of the venture capitalist firms our decision and all other options had been withdrawn, John Hummer called to say they were changing the terms of their offer to only $2 a share and wanted two out of the three board seats, giving them control of Napster."

And that, indeed, is what happened. "You can take the same thing and apply it to the record industry," said Fanning. "They are just vicious, ruthless, unethical people who will stop at nothing to exert control. They didn't play fair by any stretch of the imagination."

So what does Fanning consider to be his biggest mistake when dealing with the music business?

"Expecting very smart and reasonable people," he replied. "I expected to do business with people who would look at what was happening with the internet and realise that they would never be able to control it. So why not make what money they could, by building a relationship with Napster?

"We had started out with the idea that music was free, but that was not carved in stone and was something we could have changed.

"But the record industry went down its own path and by killing Napster they taught people how to switch from one service to another. And they'll never be able to overcome that."

On the basis of claiming 80 million Napster users, Fanning calculates that such a missed opportunity involved potential revenues of $1.5bn a year, earned from just $25m in costs.

That's based on the findings of three independent researchers, which found that users would be willing to pay $5 a month for the service because, as Fanning argues, once people learn to do something, it's worth shelling out such a small amount not to have to learn a different system.

Had the music business been willing to play ball, everyone would have been happy, he claims, adding that the record industry was less interested in the money and more interested in owning Napster's technology outright.

Fanning hopes to have more luck dealing with the movie business. His latest venture, NetMovies, involves a completely different dynamic because the film industry makes money by licensing its products to third parties.

"There's a huge financial window for the movie studios from our one-to-one distribution model," he explained.

"If there's a piece of content somewhere - and this applies to music as well as film - and there's only one person who wants to access it, we can effect the distribution transaction and do it at a profit, via the computer.

"Imagine the vast vaults of material with markets that aren't big enough to warrant interest by Blockbuster Video, Tower Records or MTV."

For Fanning, Napster's demise has deprived tens of thousands of artists and musicians from making a living from the file-sharing service.

"I knew the rules before we turned the service on and I still know them. In fact I probably know them better than anyone else," he said.

"Less than two per cent of the music created on this planet is copyrighted by the plaintiffs involved in the lawsuits with Napster.

"But there was a lot more to us than downloading Britney Spears. We offered an incredibly valuable historical archive of sound recordings."

Fanning illustrates this with a story concerning his eight year-old son who had come home from school to announce that he'd chosen Martin Luther King as someone to look up to and admire, but had never heard his 1963 'I have a dream' speech.

"So we downloaded it from Napster and listened to it together. You know, that's a pretty powerful tool that people no longer have access to because a judge said we had to kill Martin Luther King in order to protect Britney Spears," he said.

If he had the time all over again, would he do anything differently with regard to Napster?

After some reflection, Fanning admitted that he wishes he hadn't given up control of the company to the venture capitalists, citing how Bill Gates, Michael Dell and Larry Ellison haven't give up Microsoft, Dell and Oracle. So, why did he?

They say you can take the boy out of his background, but you can never entirely remove the background from the boy.

John Fanning, Boston College dropout, admits that he'd bought into the belief that for a company to grow and be successful the original entrepreneur has to "step back and bring in someone who is more of a professional chief executive". Someone with an MBA, and more extensive experience.

Despite claiming to be "probably one of the best strategic thinkers you're ever likely to meet", Fanning then makes an astounding admission for someone brought up to come out on top of tough confrontations.

"We had people in charge at Napster who could not think strategically," he said. "They made absolutely every wrong strategic decision and, you know, there is not much you can do about that."

John Fanning's latest internet venture can be found here.