Technology in music series; (part 9) the internet – friend, foe or just a tool? (IV)

Some wonder if the record business can come back from these mistakes. Many fear that a decade of free downloads, coupled with the sense of entitlement that brings, may have killed any intrinsic market value of recorded music.

One of the major problems for the record business that led to this situation was that even at the turn of the millennium, over a decade into the internet age, it was still far easier and certainly cheaper (as in free) to get digital music from the “pirate to pirate” sites than it was to deal with anything legal the music business had set up. A Red Herring Research study on the topic concluded:

The only successful companies will be those that can license a database of digital music, that can successfully syndicate online music technology or that can develop a subscribership whose monthly remittances to the online music firm are great enough to cover both the demand for profits from the recording industry and music artists, and the cost of operations… . They must get users to pay for the content, and as we know, there are very few internet entities that have been able to make that successful.

Meanwhile nearly all the major record companies, and some independent firms, tried to get the pay service right. Ultimately, it took Apple Computer founder Steve Jobs to do the job. First Apple introduced the hardware, a player called the iPod that could hold upward of 10,000 songs. The device took off, the hot electronic gadget of 2001.

Then Apple introduced a place to buy songs for the iPod, one at a time, for 99c each – iTunes. Jobs had managed to convince the major record companies, many independent labels, and even some unaffiliated artists to put their music onto Apple’s iTunes music service. Unleashed on the public in April 2003, by the end of its first week iTunes had sold a million downloads at 99c each. And that was only to the 5 – 10 percent of the computing public that used Apple computers. The chief downside to iTunes initially was that PC users couldn’t use it.

By October, Apple programmers, no doubt holding their noses the whole time, had come up with a Windows version of the program so the 90+ percent of humanity subservient to Microsoft’s software whims and wiles could use the iPod and iTunes. They came into a market that suddenly had a bunch of competitors: Real Network’s Rhapsody, MusicNet, BuyMusic, a relaunched Napster (in name only – you couldn’t share the files this time, only buy them), the dreaded Microsoft itself, and even Wal-Mart (which, in typical fashion, undercut everyone by selling its downloads for 88c). Apple partnered with AOL, did promotions with Pepsi, and soon iTunes became the most popular online music store in the United States.

Another answer came from sites that allowed users to subscribe and stream music to computers and devices (albeit not the iPod) – more like the model Red Herring suggested. For $5 – $10 a month, these sites offered access to millions of songs, with the record companies’ and music publishers’ blessings, provided the sites paid royalties. The customer could stream nearly any song he or she could name, and recent initiatives made even long-out-of-print music accessible to the music fan.

By February 2006, iTunes had sold a billion songs – the billionth being Coldplay’s “Speed of Sound.”

Now, as early as 1997, people had predicted that the death of the CD to the digital domain was inevitable. A generation that grew up downloading MP3 files might feel about going to a store to buy music the same way people in their 20s feel about vinyl – it’s a pleasant little anachronism that older people enjoy. However, this same generation that gave up the object fetish item of the musical hard good like CDs also grew up in a “mall culture.” They meet and mingle in malls and bring a significant social standing to shopping, especially shopping for entertainment software. So even if accessing music via the internet ultimately becomes easier than going to the store, it might not be as much fun.

“It’s like saying home shopping networks will keep you out of the stores,” said Phil Ramone. “It’s the old story about dancing. People will never stay home and dance. They go out to dance, so you have to have a club with personality. I think that’s what makes the musical world tick.”

“Human nature requires interaction with other people,” concurred Sony CEO Michael Schulhof, “the kind of interaction which specifically occurs in record stores. I believe people will still want to experience firsthand the emotional aspect of stores, malls, etc. It’s a destination as well as a social experience.”

However, after years of threats and lobbying, the retail community finally joined the digital fray. In a way, you could hear the sighs of relief all up and down the record industry grotto on Sixth Avenue. Now the manufacturers didn’t have to worry about any aspect of distribution of digital files except getting paid – business as usual.