Playback and Payback series; (part 18) panic in the Suites – Napster, Grokster, the Last Kazaa (IV)

The record companies were in the middle of a period of marked decline, with a brief respite in 2004. They saw CD sales dip from a 1999 high of 942.5 million units to a 2003 low of 745.9 million units. Once again the record business started wringing its collective hands and claiming that the downloading activity would put them out of business – what University of Texas economics professor Stan Liebowitz calls “Annihilation Theory.”

Despite this, companies did actually try to sell songs over the internet. MCY.com, before it crashed and burned, offered downloads that could be bought and played on most portable file players, although it used its own proprietary compression protocol. Former GRP Records president Larry Rosen and Grammy-winning producer Phil Ramone started N2K Encoded Music and the Music Boulevard website, offering both hard goods and downloads.

Rather than use MP3, they opted for the easier-to-control (for them) Liquid Audio compression. Both sites offered limited access to music, however, as the major record companies were still suspicious of the internet. They would not trust what they regarded as their major asset, their catalogs, to this wired devil. Ever the visionary, Ramone saw it differently: “We’re standing on the precipice of a generation of technology and work.”

“Traditional music distribution has grown over-burdened and outdated,” said Tony Stonefield, the CEO of another pioneer internet music distributor, the General Music Outlet and Electronic Records. “Electronic distribution is clearly the next step for the industry.”

That next step, that precipice, loomed nearer with alarming speed. Not only were music consumers defecting to the internet in droves, but so were artists. Prince, in the midst of major disagreements with his longtime record company, Warners, gave up on record companies altogether. He began using Rundgren’s model, making his music available online both as soft and hard goods. Perhaps if a record company asked nicely and gave him a lot of money, he might  make some of the music available via conventional outlets.

Who guitarist Pete Townshend, who made much of his solo output available as hard goods via his own site, concurred: “For new artists, it’s a direct line to the general mass of the population so they can get some early response to their finished work.”

“Record companies stand between artists and their fans,” said Courtney Love. “We signed terrible deals with them because they controlled access to the public. But in a world of total connectivity, record companies lose that control.”

Not every artist felt this way about the new technology. Metallica, a band that encouraged the trading of live concert tapes among its fans, felt threatened by its commercially recorded output being available for peer-to-peer trading online, and submitted a list of the email addresses belonging to a third of a million of its fans who had downloaded album tracks off Napster to the RIAA.

“Why does Metallica, like so many other musicians, focus on control?” asked the editors of Rock and Rap Confidential.

When a band starts out, it owns all its own music, but that music is virtually worthless. The record industry alone has the capacity to turn it into something worth millions. But the price for this alchemy involves an assault on the ownership of music, on its representation to the public, on the money that it generates, on every single aspect of its postproduction circulation. Famous musicians do not become rich except by continually battling the system that wants to keep everything for itself and give the actual creators barely enough for subsistence.

“Artists standing up and saying, ‘Don’t download our music,’” said Wharton School of Business professor David Fader, “is really the same as movie stars saying ‘Don’t watch our previews.’”

Between the high-visibility campaigns of the RIAA, Metallica, and others, the case against Napster went to appeals court, where, in summer 2002, the gorilla’s full weight landed on the Napster kitty and flattened it totally – the central hub of the Napster network would not permit certain “unauthorised” songs to pass through, essentially removing the core of the music people were downloading.

As the major record companies’ music suddenly vanished from the service, Napster faced the same problem as Music Boulevard and MCY.com – it offered music with a limited audience. Ultimately, it closed up shop and sold what assets it could. However, before its first iteration was shuttered, users had downloaded 1.72 billion songs over the course of a month.

Of course, this didn’t matter much to anyone but Fanning and the RIAA. In Napster’s wake, dozens of “hubless” P2P networks took its places. Unlike Napster, which had a central nexus through which the music had to flow, the hubless P2P software accessed the user’s computers via tens of thousands of shifting “nodes” on the web. Most really didn’t have “owners” per se – Gnutella, for example, had been set free on the world by a small team at AOL’s Spinner radio. Only available for about 18 minutes before AOL realised what it was, the company removed it, but Frankenstein’s was already at large and amok. The program spread virally.

The RIAA aggressively pursued its anti-MP3 course. Not content to just shut down sites that trafficked in MP3s, including a self-described “pioneer in the indexing, searching and linking of music-related sites and files on the internet,” MP3Board. The MP3Board position was that it served as merely a guide to where any MP3, legal or “pirated,” could be found. It did not distribute any actual music.

If most of the sites it pointed to happened to house “illegal” files, well, whose fault was that? The site pointed right back at the RIAA and its client companies for not getting with the program online. Beyond that, the MP3Board attorneys suggested that rather than going after the pathfinder, maybe the RIAA should follow the path and go after the actual infringers.

These infringers proliferated at a rate the record industry found alarming. Whereas a high-traffic evening on Napster had featured a quarter of a million users, some five years after the service got ridden out of Dodge on a rail it was not unusual to see five million users at a time logged in to the hubless P2P sites.

This phenomenon was due partly to the fact that music fans felt entitled to their newfound ability to get music online, and partly to the growing penetration of broadband internet in homes via cable modems, fiber optics, and DSL. Where even the fastest dial-up modem might take 15 minutes to download a song, a really fast broadband connection might finish in less than a minute. By 2004, of the more than 75 percent of Americans connected to the internet, over half of them took advantage of access to broadband connections, and that number continues to grow.