How the Music Industry’s War on Sharing Destroys Markets and Erodes Civil Liberties

Denial and isolation: CD’s “original sin” and the rise of MP3

1 Leave a comment on paragraph 1 0 According to Kübler-Ross, the first stage of grief is denial, which can be followed or accompanied by an increasing sense of isolation from one’s peers or surroundings. One could argue that the recording industry was in denial about the potentially transformative capacity of digital technologies from the very moment it introduced the compact disc (CD) as a new commercial music distribution format in 1982. This format, which was thoroughly vetted by all of the major labels and successfully won out over several competing digital prototypes,[1] was endowed with a kind of technological “original sin” – namely, the fact that its digital information was unsecured by encryption or other means, and therefore available to be copied freely by anyone using a computer equipped with an optical media drive, then copied and redistributed ad infinitum without any loss of quality.

2 Leave a comment on paragraph 2 0 Although we may think of CD “ripping” and “burning” as a uniquely 21st Century development, the plans to use compact discs for data storage and transmission were already in the works when music CDs were first introduced into the marketplace, and the first CD-ROM drives were available to consumers as early as 1985. Both music CDs and CD-ROMs reached market maturity in the 1990s, and by the time the CD had ascended as the dominant music format, pioneering CD-ROM publishers such as the Voyager Company were shipping millions of titles per year. Thus, while not every record label executive in the early 1980s necessarily had the expertise and the foresight to realize that the CD format betokened the end of their cartel’s control over music distribution, it was hardly beyond the horizon of possibility for their in-house technologists even in the earliest years, and would have been increasingly obvious to all interested parties well before the market transition from cassette to CD was complete. The problem, as I will discuss further in Chapter 5, is that CDs also yielded an unprecedented amount of revenue for the music industry, and inaugurated the longest and steepest rise in total market value in the industry’s century-long history. With an upside that large, why worry about the downside?

3 Leave a comment on paragraph 3 0 The industry exhibited similar degree of willful blindness when it came to the potential market impact of digital distribution formats and the Internet. As music industry journalist Steve Knopper relates in his excellent book Appetite for Self-Destruction, Fraunhofer, the developer of MP3 technology, “tried to warn the industry in the early 1990s” of the potentially volatile combination of unsecured CDs and its new encoding format, “but didn’t get anywhere. ‘There was not that much interest at the time,’” Knopper writes, quoting a Fraunhofer employee.[2]

4 Leave a comment on paragraph 4 0 As the 1990s wore on, CD-ROM drives became ubiquitous, and MP3 became an increasingly popular format on the Internet. Yet the industry appeared ever more isolated from its own artists and customers, continuing to operate its still-thriving CD business as though nothing much had changed. By the end of the decade, many industry analysts including myself were clamoring publicly for the industry to embrace new formats and distribution models, and to proactively release music in online digital formats before control over distribution eluded its grasp completely. Even the popular and trade press caught on, and took the record labels to task for their inaction. As PC Magazine columnist John C. Dvorak lamented in 1997, “While the music industry moans and groans, it obviously isn’t doing the job needed . . . This concept is not going to disappear, and the record companies should look at this as a new form of distribution.”[3]

5 Leave a comment on paragraph 5 0 To be fair, many in the music industry paid lip service to what was then known as “digital distribution” in the mid-to-late 1990s. At virtually every meeting or conference I attended in the presence of record executives from 1997-1999, I was assured that a proactive digital music strategy was right around the corner, and that the industry was excited about the possibilities presented by new technologies. As Cary Sherman, then a senior vice president at the RIAA, told Businessweek magazine in 1998, “We think digital distribution and the Net provide great opportunities, and we love that.”[4] Yet very little in the way of actual digital music distribution materialized, and for online music fans, “pirate” tracks distributed on MP3-hosting websites were the only downloadable source of digital music during these years.

6 Leave a comment on paragraph 6 0 The hemming, hawing, promises and procrastinations continued until the sudden rise of Napster in the Summer of 1999, when the online explosion of MP3 content fueled by peer-to-peer file sharing would force the major labels to acknowledge that digital distribution had arrived without them. Yet even this sudden confrontation with reality would not be enough to bring the industry to its senses and encourage it to embrace a viable digital distribution strategy.

7 Leave a comment on paragraph 7 0 [1] Immink, K. A. S. (1998). The Compact Disc Story. J. Audio Eng. Soc. 46(5); pp. 458-465.

8 Leave a comment on paragraph 8 0 [2] Knopper, S. (2009). Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age. New York: Free Press; p. 118.

9 Leave a comment on paragraph 9 0 [3] Dvorak, J. C. (1997). Talk about pop music. PC Magazine, 9/23/97, p. 87.

10 Leave a comment on paragraph 10 0 [4] Brull, S. V. (1998). Net nightmare for the music biz. Businessweek, 3/2/98.

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