Nothing Records became largely defunct in 2004 due to a lawsuit by Reznor against John Malm. The label became inactive as a whole following several further releases—the Beside You in Time (February 2007) home video was the label's final release.
Still, the label gained semi-iconic status within the industrial rock scene, and even acquired its own online-fanzine in Sick Among the Pure, although this later became a more general industrial fanzine, and ceased to exist at all in 2005. The Nothing label would often reward its fanbase over the Internet — one form of this outreach was Radio Nothing: an exclusive collection of free MP3 music streams, compiled by Nothing label artists, producers and fans.
In September 2004, coinciding with Trent Reznor leaving New Orleans for the west coast, the Nine Inch Nails website announced "nothing studios: 1994-2004", suggesting that Nothing Studios was closed. This later proved to be the end of the associated record label as well. Speculation among listeners that the label could continue ceased when Reznor successfully sued co-founder John Malm for fraud and breach of fiduciary duty (amongst others), ensuring that the Nothing era was over.
In a May 5, 2005 post to nin.com, Trent wrote, "To be clear: my involvement with Nothing Records is over. Is Nothing Records alive or an entity? You'd have to ask John Malm (we're not really speaking that much these days)... Nothing studios is still in New Orleans and I'm not sure what I'll do with it. I'll figure that out when I finish touring."
Nothing also distributed music from Warp Records, Sheffield, England's venerable electronic music label, under an exclusive license in the U.S., with albums by Autechre, Plaid, and Squarepusher (although Warp's Aphex Twin appeared on the Further Down the Spiral release, he was already under a contract with Sire Records in the U.S. at the time). This distribution deal ended when Warp expanded operations into the U.S. market in 2001. Nothing also managed to secure the U.S. release of two albums from England's Blue Planet Recordings. The two albums were slightly different than the UK releases. Plug's "Drum and Bass for Papa" included an extra disc of tracks from earlier EPs, and The Bowling Green's "One Pound Note" omitted one track from the UK release due to problems with sample clearance.
The studios, located on 4500 Magazine St., were apparently not seriously damaged by Hurricane Katrina. On the Los Angeles radio station KROQ-FM, Reznor stated during an interview (Breakfast with Kevin and Bean) that the studio in New Orleans was not a studio anymore. He later put a collection of his photos on nin.com, detailing the aftermath of the hurricane on his former studios and the surrounding area, before his band played a scheduled concert (which had become a benefit for the survivors).