The Music Industry: Tonedeaf and Near Death
The recording industry as we know it is as good as dead, having overdosed on a toxic cocktail of arrogance and stupidity. Its failure to embrace downloadable music at a critical juncture — ca. 2001, when a mutually beneficial deal with Napster was the only option that made sense economically — will go down in history as the business equivalent of Napoleon sending his armies into Russia.
In the market, the quickest way to commit suicide is by badgering your clients, rather than listen to their needs; by willfully crippling your products, rather than enhance them; by stubbornly defaulting to litigation, rather than innovation.
So sue me (ha!): I no more shed a tear over the industry's last gasps than I would over the demise of coal-fired trains. Truthfully, I'm rather entertained by the spectacle of seeing formerly high-flying record executives twisting in the wind. Rolling Stone reminds us how bad it's gotten for these entitlement junkies.
In 2000, U.S. consumers bought 785.1 million albums; last year, they bought 588.2 million (a figure that includes both CDs and downloaded albums), according to Nielsen SoundScan. In 2000, the ten top-selling albums in the U.S. sold a combined 60 million copies; in 2006, the top ten sold just 25 million. Digital sales are growing — fans bought 582 million digital singles last year, up sixty-five percent from 2005, and purchased $600 million worth of ringtones — but the new revenue sources aren't making up for the shortfall.
The reason I'm bringing this up is the hubris on display in England right now, where the guy once known as Prince has made a deal with the Mail on Sunday to have his latest album sealed in copies of the newspaper. I'm not sure how viable a business model that is, but if the two parties involved think it's a swell plan, who would quibble?
The local record industry would. Retailers, too. They're seething. Because, you know, how dare Prince decide what to do with his own property? He made the industry hundreds of millions of dollars, and now, naturally, he's obligated to give them a cut once again.
Or something.
From the Guardian:
One music store executive described the plan as "madness" while others said it was a huge insult to an industry battling fierce competition from supermarkets and online stores. Prince's label has cut its ties with the album in the UK to try to appease music stores. The Entertainment Retailers Association said the giveaway "beggars belief". "It would be an insult to all those record stores who have supported Prince throughout his career," ERA co-chairman Paul Quirk told a music conference.
And then, toothless threats. Warns Quirk:
"The Artist Formerly Known as Prince should know that with behaviour like this he will soon be the Artist Formerly Available in Record Stores. And I say that to all the other artists who may be tempted to dally with the Mail on Sunday."
Most amusing. And they wonder why people hate them, and why their sorry-assed industry is going the way of the dodo.
SHAMELESS SELF-CONGRATULATORY P.S.: Speaking of Rolling Stone, and of music downloads: a feature article of mine, published in Rolling Stone in (I think) June of 1997, marks perhaps the first time a mainstream magazine predicted the profound transformation that MP3s would force upon the music industry. At the time, MP3s were a new phenomenon; the launch of Napster, the first mass-market filesharing service, was still two years away. Even my otherwise plugged-in Rolling Stone editors had to be convinced that this MP3 thing wasn't some minor fad. I've posted the piece below, after the jump. Enjoy.
Free Samples?
A new breed of music pirates is distributing digital clones of copyrighted music tracks across the Internet. Fans are as happy as clams — but the recording industry, nerves fraying, may be in for the fight of its life.
He won't talk unless I promise to conceal his identity, so one of his online monikers will have to do. Carmagedn (rhymes with Armageddon) takes his name from a computer game that has players run virtual cars over as many pedestrians as possible. Not a badly chosen alias, perhaps: this computer science major at the University of Maryland might just help turn a few hapless record company executives into roadkill. That's because he's gotten into the habit of distributing copyrighted sound recordings gratis, on the Internet, without a license.
Psst — want a copy of Emerson Lake & Palmer's Peter Gunn, or Marilyn Manson's Beautiful People? Always had a soft spot for the Beach Boys' Surfin' USA? Or how about a little gangsta rap from Coolio; or some Fugees tracks; or a few songs from Evita; or, if you're into dead European guys, something by Grieg or Mozart? Carmagedn's got it, and it's yours for the asking. Click, download, play — no fuss, no questions asked.
The recordings he offers are known as MPEG3s or MP3s, after the fairly recent compression technology that has made the song files small enough to transfer them quickly and conveniently. With a standard 28.8k modem, it now takes less than half an hour to download a near-CD quality song, in stereo. With a faster data line — ISDN, T1, cable modem — the same recording can sit on your hard drive in under two minutes. "Creating MP3s is as easy as dubbing a tape, and takes less time," boasts Carmagedn. "And spreading them is as easy as sending email or going to a Web page."
The way he sees it, he is not pilfering or fencing copyrighted material. "MP3s are not about stealing," he believes. "They're about a better way to store and listen to music. Instead of wasting space in my dorm room with hundreds of CDs, I just have all the songs on my hard drive and leave the CDs at home. Trading MP3s is a good way to preview a CD before buying it in a store, like renting a video game before purchasing it." More importantly, he quips, "I can listen to Milli Vanilli without anybody finding out."
Unexpected effects
When Philips and Sony launched the CD some fourteen years ago, a good time was had by all. Consumers loved the convenience of the new format and the promise of 'perfect sound forever.' Consumer electronics firms made a killing selling players. Record companies and music retailers broke out the Dom Perignon when tens of millions of older fans began steadily replacing their vinyl with CDs.
But now the ubiquitous existence of music coded into ones and zeros is starting to have unexpected side effects — effects that will likely transform a nervous music industry before the millennium is out.
Early last year, music recordings couldn't be sent across the Internet or an online service with speed, convenience, and reliability. But MP3 files, and a competing, commercial format from a company called Liquid Audio, have changed the picture. With a high-bandwidth Net connection, you can have an hour's worth of music on your hard drive in twenty minutes or so. And unlike yesterday's favorite, the popular RealAudio sound format, it doesn't sound like hissy AM radio. Only a very attentive listener can easily distinguish between the authorized CD recording and its compressed counterpart residing on a hard drive.
But why leave it on a hard drive when you could play it on a Discman or in the car? Hook up a 500-dollar CD recorder to your PC (or wait for a better deal, prices are still falling), and burn your own disc. Hell, make fifty copies while you're at it and give them to your friends. Or, if you'd like a little pocket money, make as many copies as you can sell for, oh, eight bucks or so, in which case you'd be undercutting Tower's and Sam Goody's price by thirty, forty percent, easy. Yeah, you'd be breaking the law, but c'mon, this is just a little deal among friends. No one's ratting. No one needs to know.
Methods to thwart these kinds of piracy are hard to come by. "There's no simple answer," says David Stebbings, a physicist and mathematician who heads the New Technology Division of the Recording Industry Association of America (RIAA)."We'll need a whole cadre of solutions to deal with the different situations."
Stebbings is working on methods to slip 'digital watermarks' and inaudible copy-protection ciphers into the music — but before long, hackers might well be able to strip those artifacts. "Obviously, nothing is foolproof for the person who loves to hack," Stebbings sighs. "Smart people can get around anything."
And the billions of CDs that are out there already do not have copy protection schemes hiding in the data. Yes, they do carry non-audio information that may aid industry gumshoes in keeping track of copyrighted recordings on the Net. But it's a long shot, concedes Frank Creighton, the RIAA's chief pirate buster. "Unfortunately, when you digitize most of those discs, you lose a lot of that tell-tale digital information.What is to prevent someone from taking their five hundred CD's, converting them to computer files, and distributing them? There is nothing in place to prevent that, outside of the fear of being caught."
Creighton's problem is exacerbated by the fact that the very demographic that butters the music industry's bread — 15-to-30-year-old males — is the one most likely to be into computers and online culture; the most likely to explore and embrace MP3; the most likely to want to save a fistful of dollars on every new music purchase.
If new home copying possibilities are giving industry bigwigs some Maalox moments, professional bootleggers now have major ulcer-causing potential. In the past, the boldest and biggest pirates could be put out of business by raiding their warehouses and plants. But what if, from now on, the plant and the warehouse are nothing more than a couple of unattended PCs in a Beijing basement or a Bombay bedroom? You could have the hardware confiscated, but if the pirates are just a notch more sophisticated than your average mom-and-pop affair, backups will exist at another location, perhaps in another country; and the illegal copying could resume immediately.
On the other hand, there's irony in the fact that small-potatoes MP3 operators might deal a mortal blow to large-scale bootleggers and counterfeiters. Why pay through the nose for an illegal recording if you can count on MP3 aficionados to make it available for free?
Web Rings
Carmagedn isn't the only one who has artists and labels biting their nails. Internet newsgroups such as alt.music.bootlegs are rife with messages from fans wishing to trade. Most of the offers are for tapes and records, but digitized music files are no longer rare. In fact, there are easily many hundreds of Websites whose sole purpose is the distribution of untold thousands of MP3s. There is even a special search engine (www.mp3search.base.org) that greatly facilitates looking for specific artists and MP3 files. Type Floyd, and within seconds you could be making a selection from a long list of Pink Floyd songs. All you need after you've downloaded the music is a free software player, also widely available online.
"I see collections now with up to six gigabytes of MP3 audio. We're talking thousands of songs per site," reports Lamar Lopez, an MIT student who maintains a more modest MP3 Website of his own, with approximately 250 songs. "Also, people are starting to create Web rings, where one individual takes care of one genre of music and another person takes care of another. Between them, these ten or twenty people will cover every style you can think of, with tons and tons of songs being offered to anyone who bothers to find and download the music."
Want to join the action, create and distribute song files yourself? It' a cinch for anyone who is neither a technophobe nor troubled by a guilty conscience. A regular PowerMac or Pentium PC, a CD-ROM drive, and some special freeware known as CD rippers and L3 encoders allow cyber-Robin Hoods and amateur bootleggers to capture songs off a music CD and save them as ultra-compressed MP3 computer files. Then put them on your Website, or email them to all your music-loving friends. Unless, that is, you're a tad squeamish about breaking the law.
If so, Dorothy Sherman might help keep you honest. A paralegal and private investigator in Brooklyn, Sherman specializes in hi-tech sleuthing on behalf of artists like Nine Inch Nails and record labels such as Warner Brothers and Maverick. She concentrates her efforts on the Internet. The work has become almost overwhelming, she says. "I've seen the number of investigations shoot up, so much so that I have to work faster because there are so many cases proliferating out there. But what helps is that anybody who wants to make money doing this is going to have to make some noise in order to get business, and then we find them."
Sherman, an Iggy Pop fan — pictures of him adorn her cramped office — says she is guided by her passion for the music. "The reason I got into this had nothing to do with the money or the damage done to the labels or any of that stuff; it was the artist's integrity. I wish more people shared that sentiment. It's like, I really respect James Joyce and therefore I'm going to buy his book, instead of stealing it from Barnes & Noble. I'm going to buy it because that's how we interpret having respect for things, isn't it? That we pay for them."
Verbal Thrashing
No argument from Frank Creighton. The RIAA man is not a see-you-in-court kind of guy, but underneath his controlled, businesslike demeanor, you can sense his exasperation, his occasional urge to give guys like Carmagedn a good verbal thrashing. Still, he doesn't want to create a David-vs-Goliath perception of the big bad record industry behaving like a bully toward music fans. So Creighton does a lot of educating before he'll even think of throwing legal punches: "You have a lot of universities and college students involved in these sites, and they need to be told what's OK and what isn't."
He tries to spread the word through speeches and online appearances and printed bulletins. But that's all just drop in the proverbial bucket, and Creighton's concern over the online MP3 archives is mounting. He has recently added full-time bootbusters to his team who do nothing but monitor the Net and online services. How many sleuths does he employ? "You don't want to tell the enemy how big your army is," he grins. "Let's just say it's more people than we had last year."
The RIAA's attorneys crank out a good number of cease-and-desist letters. Those usually do the trick, says Creighton, but he'll know when to stop playing nice. "If we find a site that's particularly egregious and that won't take our warnings to heart, we are prepared to go to court," he promises. "We will litigate."
The 1996 Digital Performance Right in Sound Recordings Act spells it out in detail: owners of sound recordings (mostly record companies) have near-complete say over how their property is used online. But copyright law doesn't mean a lot to Carmagedn and his brothers-in-arms. Swaggering from chutzpah to denial and back again, they insist they're not ordinary pirates, because they don't charge a penny for 'their' wares. Besides, they remind me, this is the Internet, where the reigning doctrine still is that "information wants to be free." Most MP3 sites contain disclaimers that are meant to deflect possible legal attacks, along the lines of 'don't download a song unless you already own it legitimately,' or 'for preview purposes only; discard this file within 24 hours.' "Of course, I can't enforce those requirements," says Carmagedn, laughing.
Lamar Lopez also doesn't see a big dilemma. "If what I do is illegal," he posits, "it's so much on the borderline that I don't consider my actions immoral. I actually consider myself to be at least somewhat of an upstanding guy." Carmagedn thinks of himself in much the same way. "It's like speeding," he explains. "It's bad, and you can get a ticket, but lots of people do it and it's ultimately not that big a deal."
That MP3 pirates don't charge for the songs they offer doesn't mean they can have no self-serving motives. Some of them like the ego boost that comes from having a heavily frequented site; or they like seeing themselves as digital desperados tossing a monkey wrench into the music industry's profit machine. Others dabble in MP3s because they're traders who swap files amongst one another, rather than just giving everything away. Carmagedn, for instance, doesn't let anyone on his site until the prospective visitor has sent him an MP3 file first. He likes to have a wealth of music at his fingertips. "I drag a day's supply of songs into my software player, and I'm all set," he says. "Beats having to change a CD every 45 minutes."
Opportunity, Not Threat
Of course, the news for the industry is not all bad. If record companies and retailers play their cards right, they could beat MP3 pirates at their online game, and make a fortune doing it. As early as this summer, virtual music stores will sell downloads of albums over the Net, completely legal, with revenues going to the retailer and the copyright holders.
Unlike the illicit, barebones MP3s, official files may contain liner notes, lyrics, and cover art. They will also be copy-protected, although home copying for private use may be allowed. Obviously, portability of such files is virtually non-existent until you can burn them onto a CD. On the plus side, a download could be dramatically cheaper than buying a CD of the same music. "Most of the cost of CD's is in the manufacturing, the packaging, and the distribution," says J.J. Rosen, general manager of N2K Entertainment, a company whose activities include commercial music Websites, a record label, and an online music delivery system. "Those things account for up to 75 percent of the retail price. There'll be quite a savings to consumers when selling music no longer means moving boxes around."
When N2K gave away a brand new David Bowie song a few months ago, to test the waters, the response exceeded expectations. Rosen claims the recording was downloaded 300,000 times, boding well for the future of digital distribution.
But could it already be too little, too late? What about the myriad music sites where the goodies are unlawful but free? Stephen Klein, marketing VP at Liquid Audio, the company that makes the player software of the same name, thinks MP3s don't pose a threat to the music industry in the long run. "Nature abhors a vacuum, and right now there's a vacuum on the Web," Klein says, referring to the absence of legitimate music files. "In half a year from now, that will be different. And I think everyone involved wins. Including indie record labels and unsigned artists, who can publish and sell their music on the Web."
Meanwhile, Carmagedn, the MP3 fiend, wonders if next year's technology can give him an edge, and maybe a new hobby. "Now it's Rolling Stone calling me about the songs I make available," he grins. "Next year, maybe I'll get a call from Premiere, asking me about the free Hollywood movies on my site."
© Rogier van Bakel and Rolling Stone, 1997. All rights reserved. This text may not be copied or distributed without prior written permission [bakelblog_AT_n0SPAMgmail.com], though you're welcome to link to this page.
You know, I keep hearing about the death of the music industry, but all I'm really seeing is the death of the major labels and their ability to produce the next Michael Jackson or The Beatles. For years the major labels have been pouring huge amounts of money into a relatively small number of bands. Now they're running into an industry where people have far more choice, where they don't have to choose between the top 40 (or even 4000) albums on the market at any given moment.
I do most of my record shopping these days at specialty shops that offer expert suggestions and music that you simply couldn't find in even the largest of chain stores. If you don't live near a store like that, you can go to amazon (or any of the other similar sites) and find a better selection at a lower price than a traditional store could ever hope to provide.
MP3s aren't killing the music industry. Big companies that can't keep up with demand are.
Posted by: William | Monday, July 02, 2007 at 10:28 PM
Back a yearish ago BoingBoing posted some guy's four awkward questions for the music industry: http://www.boingboing.net/2006/07/11/embarrassing_questio.html
Interesting to glance at again.
Posted by: Jeff the Poustman | Tuesday, July 03, 2007 at 12:59 AM
I agree with William's point. Also, 1997 talk of .mp3s takes me back. I was a freshman in high school, those were the days of FTP sites and download ratios, wading through tons of pr0n to find a pass word so you could sit up all night downloading five songs at 56kbps...man.
These days about half the music I have on .mp3 I paid for, the other half is from bands that really don't give a shit if I didn't pay for it.
Posted by: Timothy | Tuesday, July 03, 2007 at 12:02 PM
I would feel sorrier for the music "industry" if they had not been so dead set on ripping off consumers for so many years, to see consumers’ ripping them off doesn’t bother me at all. Around 1990 I remember reading an article that showed how much it cost to make the different mediums and how much they retailed for it was something like this:
CD's cost .75 to manufacture they retail for $14.95
Cassettes cost $1.25 to manufacture and retail at $7.95
LP's cost $1.50 to manufacture and retail for $9.95
This seemed to go against logic as the cheapest medium to produce was the most expensive and as time has went on and CD's have become even less expensive to produce the cost has not dropped. Sometimes I feel sorry for the musicians, but I think they will be as well off in the long run as they were with these big labels were ripping them off, they just have to focus more on live shows and selling CD's and t-shirts directly to fans, etc. I am an amateur musician and would rather have my fans rip me off than some record label (of course maybe it is easier for me to say that since I don’t make any money from my music and never really planned to).
Posted by: severin | Wednesday, July 04, 2007 at 12:43 PM