10 Years After Napster: Welcome to 1998

by Tony Berman

Imagine a music service that allowed you to search for and download nearly any song for free with no monthly limits or caps. You could burn the downloaded music to a CD, either creating mixes or burning complete albums. This service exists, but it isn’t called Napster, and this isn’t 1998. All-you-can-eat music download services are being utilized by various universities who pay a site license on behalf of their students. While the downloads aren’t exactly free if the students are paying for it in the form of tuition or a technology fee, most college students don’t feel like they’ve paid for anything when it’s wrapped up in their regular tuition bill. Why does this feel an awful lot like what Napster was proposing to the record labels 10 years ago? Because that’s exactly what it is.

Ten years after Napster tried to make a deal with the record labels to digitally distribute their content, the record labels have found themselves dragged kicking and screaming into the late 90s, offering exactly the same thing Napster proposed. DRM for music has come and gone, having shown that it created hassles and limitations for paying customers while remaining a triviality for infringers. The recording industry’s cry of “we can’t compete with free” has been proven false, with the iTunes Music Store selling billions of dollars of digital music. These sales all happened while P2P traffic remained significant, thereby discrediting the notion that file sharing and digital music purchases are a zero sum game; that an illegal download is a lost sale. In fact, several studies have shown that heavy P2P users are among the biggest music buyers. Consumers have proven that they pay money when there is a good value for their money, even if they have a free alternative.

In fairness to the record companies, it is true that digital download sales have not replaced lost CD sales. But it is unclear to what extent that this is related to piracy. Consumers, especially young ones, have many more forms of media—games, internet, DVDs----  jockeying for their attention than at any time before. Perhaps the era of the long form CD has simply run its course.

Much like a doomsday cult’s members have to figure out what to do when their prophecy fails to come true, we are left to envision the future of the music industry now that the bogeymen of technology have failed to materialize. The recording industry is free to innovate without the fears of the past impeding its imagination and vision. Novel distribution models such as blanket site licenses, new relationships between artists and labels such as three-sixty deals, new forms of product packaging such as the iTunes LP are all indications that the music industry has hope for the future.

What will that future look like? Technology has driven down the cost of recording and producing a professional-quality album or single, making the dream of creating music more accessible than ever before. The internet, with social networking, YouTube, and internet radio make marketing and distributing that music equally accessible to aspiring musicians. Without the need for their recording studios or distribution networks, what is the value proposition of the major labels? How will the labels take advantage of these new tools and incorporate them into their businesses?

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