CNBC EXCERPTS: CNBC’S ANDREW ROSS SORKIN SPEAKS WITH SEAN PARKER, NAPSTER, AIRTIME CO-FOUNDER AND FORMER FACEBOOK PRESIDENT, AND SEAN FANNING, AIRTIME CO-FOUNDER & CEO, NAPSTER CO-FOUNDER, TODAY

WHEN: TODAY, THURSDAY, JUNE 7TH

WHERE: CNBC’S “SQUAWK BOX

Following are excerpts from the unofficial transcript of a CNBC interview with Sean Parker, Napster, Airtime co-founder and former Facebook President, and Sean Fanning, Airtime Co-Founder & CEO, Napster Co-Founder, today. Excerpts from the interview will run throughout CNBC’s Business Day programming.

All references must be sourced to CNBC.

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PARKER ON DISRUPTORS:

PARKER: I ACTUALLY DON'T I DON'T EVEN REALLY HAVE A GOOD ANSWER FOR THAT QUESTION. I'M PRETTY BORED WITH MOST OF THE STUFF THAT PEOPLE ARE DOING. THEY TEND TO BUILD THESE REALLY SMALL KIND OF NICHE APPS. THERE'S SO MUCH EMPHASIS ON MOBILE NOW EVERYBODY IS BUILDING MOBILE APPS AND THEY ARE ALL, YOU KNOW, SOME OF THEM DO REALLY WELL. WORDS WITH FRIENDS THAT I THINK WAS BOUGHT BY ZYNGA, INCREDIBLY SUCCESSFUL. DO I FIND THIS REVOLUTIONARY OR INTERESTING OR WORLD CHANGING? NO, NOT REALLY. MOST OF THE STUFF THAT I SEE THAT'S DOING WELL FITS INTO THAT CATEGORY

PARKER ON GOVERNANCE:

PARKER: I'M BIASED IN THIS BECAUSE IN THE SETTING UP OF SOME OF THOSE STRUCTURES. WHEN I FIRST STARTED BUILDING TECHNOLOGY COMPANIES IN 1999 A LOT OF THE RULES WERE VERY DIFFERENT. VENTURE CAPITALISTS WERE IN A POSITION OF LEVERAGE. VENTURE CAPITAL DEALS, EARLY STAGE DEALS IN SILICON VALLEY WERE DONE BY FORMULA. THEY ALL LOOKED THE SAME AND THE LAW FIRMS THAT DID THEM WERE MUCH MORE LOYAL TO THE VENTURE FIRMS THAN THEY WERE TO THE COMPANIES. SO TRYING TO DO ANYTHING OUTSIDE THE BOX WAS SEEN AS (YOU KNOW) A SORT OF CERTAIN DOOM. YOU WERE UNLIKELY TO GET FUNDED IF YOU BROKE THE RULES. AND THEN OVER TIME I WAS ABLE TO CHANGE THE WAY THESE DEALS WERE WRITTEN BY DOING THINGS. GOVERNANCE RELATED CHANGES THEN FIRMS LIKE DST, YURI MILNER'S FIRM, ACTUALLY A BIG PART OF WHAT THEY'VE BEEN ABLE TO BRING TO COMPANIES LIKE FACEBOOK IS THAT THEY ARE OPEN TO BEING PASSIVE SHARE HOLDERS. THEY DON'T NEED TO TAKE A BOARD SEAT IN ORDER TO CHAPERONE THEIR LARGE INVESTMENT. THEY ARE COMFORTABLE AS SHARE HOLDERS AS LONG AS THEY HAVE CERTAIN RIGHTS AND PRIVILEGES THAT YOU WOULD WANT AS A SHARE HOLDER IN A PRIVATE COMPANY.

SORKIN: VALUATIONS BROADLY, DOES THE FACEBOOK IPO OR ANYTHING ELSE GOING ON IN THE VALLEY RIGHT NOW CHANGE THINGS? CHANGE THE WAY YOU WILL NOW LOOK AT NEW INVESTMENTS?

PARKER: I MEAN I DON'T MAKE INVESTMENTS VERY FREQUENTLY. I'VE ONLY MADE ONE LARGE INVESTMENT AT FOUNDERS FUND WHICH WAS SPOTIFY. AT THE TIME I DID THE SPOTIFY INVESTMENT I WAS TOLD THE VALUATION WAS INCREDIBLY EXTRAVAGANT, THERE WAS NO WAY THE COMPANY WOULD EVER WORK, THE LABEL DEALS WEREN'T GOING TO GET DONE. I HAD INVESTED BECAUSE OF THE TEAM BECAUSE I THOUGHT THAT I COULD ACTUALLY HELP. AND I BELIEVED THAT ULTIMATELY THE LABEL DEALS WERE NOT SOME X FACTOR UNKNOWN, THAT THEY WERE MANAGEABLE AND SO IF I WORKED CLOSELY WITH THE COMPANY THAT WE COULD ACTUALLY GET THOSE DEALS DONE WHILE PRESERVERING THE PURITY OF THE PRODUCT VISION, AND THAT WORKED OUT REALLY WELL. I MEAN THE COMPANY IS NOW IN PRIVATE MARKETS TRADING MUCH MUCH HIGHER THAN THE PRICE THAT WE INVESTED IN.

PARKER ON EBAY:

PARKER: WHEN E-BAY ORIGINALLY BOUGHT SKYPE IT WAS PANNED BY THE MEDIA, BY THE BUSINESS PRESS AS A HUGE MISTAKE BECAUSE THERE WEREN'T PERCEIVED SYNERGIES. I THINK THE REAL REASON WHICH HAS NEVER BEEN DISCUSSED PUBLICALLY WHY MEG WHITMAN AND THE TEAM AND E-BAY BOUGHT SKYPE WAS THAT THEY WERE LOOKING FOR OTHER BUSINESSES WHICH HAD A POWERFUL NETWORK EFFECT. E-BAY IS A NETWORK EFFECT DRIVEN BUSINESS, NETWORK EFFECT S ARE INCREDIBLY VALUABLE IN TERMS OF RETENSION. AND A MARKET PLACE HAS INHERENT NETWORK EFFECTS, THE BUYERS WANT TO BE WHERE THE SELLERS ARE THE SELLERS WANT TO BE WHERE THE BUYERS ARE. THIS IS SORT OF A, THERE'S A LOCK-IN THAT COMES FROM THAT. THAT'S WHY E-BAY REMAINED THE AUCTION LEADER FOR YEARS DESPITE NEVER HAVING THE BEST PRODUCT. AND SKYPE IS ANOTHER BUSINESS THAT IN MY OPINION NEVER BUILT THE BEST PRODUCT BUT BECAME A HUGE AND POWERFUL NETWORK. NOW THAT TAKES YOU PRETTY FAR BUT IT DOESN'T MAKE YOU INVINCIBLE.

PARKER ON FACEBOOK:

PARKER: IT SEEMED LIKE A NECESSARY STEP THE COMPANY HAD TO MAKE WE HAD TO AT SOME POINT. REGISTER, YOU KNOW, GO THROUGH THE PUBLIC OFFERING. IT'S POSSIBLE THE TIMING COULD HAVE BEEN BETTER. AND THERE WERE A LOT OF GLITCHES ALONG THE WAY WHICH WERE UNEXPECTED AND UNPRECEDENTED. THAT YOU KNOW THE NASDAQ STUFF, THE VOLUME, YOU KNOW THE INITIAL TRADING VOLUME WAS SO (…) REALLY HIGH. THE RELIEF IN GOING PUBLIC WAS ACTUALLY JUST THAT THE SPECULATIVE MARKET WHICH WAS DRIVING ALL OF THE VOLATILITY HAS DISAPPEARED. SO THERE WAS THIS BELIEF THAT RETAIL INVESTORS WOULD DRIVE THE STOCK PRICE UP INCREDIBLY HIGH. IT WASN'T EVEN SO MUCH THAT FACEBOOK FAILED IN ITS FIRST DAY OF TRADING, IT WAS ACTUALLY DID FINE IN ITS FIRST DAY OF TRADING. IT'S JUST THE EXPECTATIONS WERE SO EXAGGERATED AND THEN THE MEDIA KICKED IN. AND THIS PRESS CYCLE, THIS ANTI- FACEBOOK PRESS CYCLE KICKED IN AND THAT SPOOKED ALL THE RETAIL INVESTORS WHICH YOU KNOW CAUSED A REBALANCING OF THE STOCK PRICE. SO I'M NOT EVEN WORRIED IF THIS BECOMES A FUNDAMENTAL'S DRIVEN STOCK, I WANT THIS TO BE A FUNDAMENTAL'S DRIVEN STOCK.

SORKIN: WOULD YOU BUY MORE NOW THEN?

PARKER: IF I, YEA ACTUALLY. I THINK YOU KNOW, I THINK I AM DEFINITELY A BUYER AT THIS PRICE.

SORKIN: WHEN YOU THINK ABOUT THIS IPO, YOU'RE ON THE BOARDS OF OTHER COMPANIES THAT HOPEFULLY WILL HAVE IPOS AND OFFERS IN THE FUTURE. IS THERE A LESSON FROM THIS OFFERING? THE NEXT TIME MORGAN STANLEY, GOLDMAN SACHS OR JP MORGAN OR (…) ARE THERE DIFFERENT QUESTIONS YOU'RE GOING TO ASK?

PARKER: WELL THEY DIDN'T COME TO ME, YOU KNOW I'VE BEEN GONE FROM OPERATING FOR YEARS. I THINK EVERYONE IS GONNA ASK DIFFERENT QUESTIONS. THERE WERE GOOD REASONS WHY THE COMPANY NEEDED TO CONDUCT SUCH A LARGE OFFERING. WE WANTED TO HAVE A BIGGER FLOAT THAN IS TYPICALLY SEEN. YOU KNOW THERE WERE GOOD REASONS TO WANT TO HAVE A BIGGER FLOAT, IN SOME WAYS THIS IS A LEGITIMATE OFFERING THAN SOME OF THESE OTHER TEXT STOCKS WHICH HAD A VERY, VERY SMALL FLOAT. THERE WERE SOME PROBLEMS IN TERMS OF HOW, HOW THE ALLOCATIONS WERE DONE, AND I DON'T KNOW AND I'M NOT EVEN SURE YOU CAN POINT A FINGER AT ANYBODY. THERE'S A STANDARD WAY THESE THINGS GET DONE. THEY WERE DONE IN THAT WAY. YOU KNOW THIS WAS SORT OF AN EXTRAORDINARY CIRCUMSTANCE WHERE PERHAPS YOU KNOW THEY SHOULD HAVE RETHOUGHT SOME OF THE CONVENTIONAL WISDOM. SO I'M NOT EVEN SURE HOW RELEVANT THESE LESSONS ARE TO OTHER IPOS BECAUSE FACEBOOK WAS SUCH AN ANOMALY.

SORKIN: GOING PUBLIC, A GOOD THING OR BAD THING THESE DAYS?

PARKER: MY PREFERENCE IS TO ALWAYS KEEP A COMPANY PRIVATE. IN PART BECAUSE WE NOW HAVE VERY EFFICIENT SECONDARY MARKETS WITH YOU KNOW SCC QUALIFIED INVESTORS, FUNDS, HEDGE FUNDS, YOU KNOW FAMILY OFFICES THAT ARE ACTUALLY WILLING TO BUY PRIVATE SECURTIES. AND THOSE MARKETS I THINK ARE EFFICIENT AND MATURE ENOUGH THAT A LOT OF THE BENEFITS OF GOING PUBLIC ARE LESS CLEAR.

PARKER ON AIRTIME LAUNCH:

PARKER: THE DEMO WAS ACTUALLY A STAGED SORT OF STAGED PRESENTATION OF THE PRODUCT AND THE PRESENTATION WAS TWO WEEKS OF WORK. WE SHOULD HAVE JUST PROBABLY RUN WITH THE PRODUCT THAT WE KNEW WORKED AS OPPOSED TO TRYING TO WALK PEOPLE THROUGH A STAGED VERSION OF IT.

SORKIN: I DON'T KNOW IF IT WAS JIM CAREY BUT HE ASKED YOU OR SOMEBODY ASKED YOU WHOSE GOING TO GET FIRED. WERE YOU THAT UPSET OR NO?

PARKER: I CAN'T BE THAT UPSET BECAUSE WE TRIED TO DO SOMETHING NO ONE'S EVER DONE WHICH IS TO (YOU KNOW) A LAUNCH OF THAT MAGNITUDE WITH THAT MUCH PRESS WHERE WE'RE DEMOING COMPLEX INTERACTIONS THAT INVOLVE COMPLEX LOGISTICS BACK AND FORTH BETWEEN PEOPLE. I THINK THERE IS PROBABLY A REASON PEOPLE DON'T DO LAUNCHES LIKE THAT AND WE LEARNED THAT THE HARD WAY. BUT THE AMOUNT OF COVERAGE THAT WE'VE GOTTEN AS A RESULT OF IT HAS BEEN ENORMOUS. I'M ACTUALLY NOT SURE WE WOULD HAVE GOTTEN AS MUCH COVERAGE HAD WE NOT HAD SOME OF THE PROBLEMS THAT WE'VE HAD, SO IN A WEIRD WAY IT SORT OF BENEFITTED US BECAUSE PEOPLE STILL GO AND USE THE PRODUCT. IF THE PRODUCT DIDN'T WORK AS WELL AS IT DID WE'D HAVE A PROBLEM

PARKER PART 1 ON AIRTIME:

PARKER: IT FELT LIKE THE INTERNET HAD BECOME KIND OF STALE LIKE THERE WAS NO LIFE IN IT, PEOPLE'S REAL PRESENT IDENTITIES WEREN'T THERE. IT'S INCREASINGLY DIFFICULT TO CURATE A COLLECTION OF STUFF THAT YOU LOVE AND SHARE THAT WITH YOUR FRIENDS.

FANNING: NOTHING REALLY FELT THAT, ESPECIALLY NOWADAYS, NOTHING REALLY FEELS LIKE IT'S INTENDED FOR JUST YOU SO YOU'VE GOT A HUGE OPPORTUNITY TO BROADCAST TO THE PEOPLE THAT YOU KNOW. YOU'VE GOT THINGS THAT ARE REALLY MAKING IT POSSIBLE TO PRODUCE AN ENORMOUS AMOUNT OF CONTENT AND POSTS AND INFORMATION AT SCALE. BUT AT THE END OF THE DAY THE BEST POSSIBLE FORM OF FEEDBACK IS SEEING ANOTHER PERSON RESPOND, SEEING THEIR FACE, SEEING THEM LAUGH, THAT THOSE ARE THINGS THAT ARE THE MOST NATURAL, THE MOST MEANINGFUL AND GRATIFYING RESULTS AND IF YOU THINK ABOUT WHY WE POST STUFF ONLINE IT'S CERTAINLY CHANGED OVER TIME THE MORE INTIMATELY, OR THE MORE WE'VE BEEN CONNECTED BROADLY.

SORKIN: WAS THERE A MOMENT, I MEAN DO YOU REMEMBER TALKING TO EACH OTHER AT TWO O'CLOCK IN THE MORNING, THREE O'CLOCK IN THE MORNING ONE DAY WHEN YOU GUYS WERE TALKING ABOUT WHAT WE COULD DO TOGETHER?

PARKER: I WAS ALREADY THINKING ABOUT THIS PROBABLY TWO AND HALF YEARS AGO, THREE YEARS AGO SOMETHING LIKE THAT, HOW THERE WAS JUST NO PRODUCT WHERE YOU COULD HAVE A SHARED SPACE WHERE PEOPLE COULD PLAY VIDEOS FOR EACH OTHER AND SOMEONE COULD SIT IN THE DIRECTOR'S CHAIR AND CHOOSE WHAT VIDEO THE ROOM WAS WATCHING. A LOT OF THAT FUNCTIONALITY WAS IMPLEMENTED BY HANGOUTS WHICH WAS ACTUALLY A SWEDISH COMPANY. A LOT OF EXPERIENCE WORKING WITH SWEDISH COMPANIES NOW THAT BUILD SHARING APPLICATIONS. BUT YEAH WE TALKED ABOUT THIS STUFF FOR QUITE A WHILE AND THEN THE SORT OF BACKGROUND INSIDE STORY THAT MIGHT BE INTERESTING IN THIS CONTEXT WAS THAT YURI MILNER WAS WORKING WITH ANDRE, THE FOUNDER OF CHAT ROULETTE, AND HE APPROACHED ME ACTUALLY AT THE GRAMERCY TAVERN IN NEW YORK AND WE HAD A LONG CONVERSATION ABOUT THE POSSIBILITIES AND HE SAID YOU KNOW THERES TWO THINGS WE NEED. WE NEED TO FIND A GREAT TEAM AND WE NEED TO FIND (YOU KNOW) WE NEED A PRODUCT VISION. AND I SAID WELL AS A MATTER OF FACT SHAWN AND I HAVE BEEN TALKING ABOUT A LOT OF THESE THINGS AND BUILDING A PRODUCT AROUND THIS AND SO WE LOOKED AT CHAT ROULETTE AND WHAT WAS INTERESTING ABOUT IT WAS, I ULTIMATELY THINK IT WAS SORT OF A NOVELTY PRODUCT BECAUSE IT DIDN'T HAVE, IT DIDN'T HAVE STICKINESS, IT WASN'T A PRODUCT THAT PEOPLE WERE, THERE WAS NO WAY TO BUILD RELATIONSHIPS ON IT, IT WAS VERY, VERY RUDIMENTARY, BUT I THINK IT JUST CHANGED THE WAY WE THOUGHT ABOUT THINGS. IT INTRODUCED US TO AN ELEMENT OF RANDOMNESS AND SERENDIPITY FOR THE FIRST TIME. ALL OF OUR INTERACTIONS ONLINE ARE NOW SO, SO, FILTERED BY, PREDICTABLE AND FILTERED BY OUR SOCIAL NETWORK. WHICH IS VERY MUCH WHAT I SPENT AT YEARS OF MY LIFE WORKING ON OR LONGER EVEN, JUST TRYING TO FIGURE OUT HOW TO, BUILD THE SOCIAL GRAPH AND USE THE SOCIAL GRAPH IN ORDER TO BASICALLY FILTER MEDIA.

SORKIN: SO REVENUE MODEL? HOW ARE YOU GONNA MAKE MONEY DOING THIS?

PARKER: SO, I AM A PRETTY FIRM BELIEVER HAVING DONE A BUNCH OF INTERNET COMPANIES BEFORE, CONSUMER INTERNET COMPANIES THAT THE FIRST STEP IN BUILDING COMPANIES IS TO BUILD YOUR USER BASE. YOU KNOW GET, CREATE A GREAT PRODUCT. BUILD A PRODUCT THAT'S A JOY TO USE. BUILD LOYALTY IN YOUR USER BASE, BUILD A NETWORK. AND THEN OVERTIME GRADUALLY TRY TO FIGURE OUT THE RIGHT BALANCE OF FREE VERSES MODERNIZATION. I THINK WITHOUT GIVING AWAY TOO MUCH ABOUT OUR THINKING, IT'S PRETTY OBVIOUS IN LOOKING AT OUR PRODUCT BECAUSE THERE'S SO MUCH MEDIA, IT'S A MEDIA EXPERIENCE BECAUSE PEOPLE ARE ESSENTIALLY PERFORMING FOR EACHOTHER. AND THERE A LOT OF OPPORTUNITES TO INTRODUCE VIDEO ADS INTO THAT EXPERIENCE BUT IT'S NOT SOMETHING THAT WE HAVE IMMEDIATE PLANS TO DO. THERE'S ALSO A BUNCH OF SUPREMIUM UPGRADE TYPE MODELS THAT YOU COULD CONCEIVE OFF WHICH I THINK WOULD WORK PRETTY WELL. BUT AGAIN IT'S MORE IMPORTANT TO US AT THIS STAGE TO BUILD THE PRODUCT, BUILD THE USER BASE AND THEN WORRY ABOUT MODERNIZATION LATER.

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