Last week I discussed the rebirth of vinyl and with it, new opportunities for album art created by artists like Flournoy Holmes, famous for the Eat a Peach cover and the cover art of many other Southern Rock bands. But let’s not get too carried away celebrating the return of vinyl. As I said last week, sales of vinyl are but a tiny fraction of all music.
How did we get to where we are? As much as we love the sound of vinyl, not to mention album art, the vinyl record album was under attack long before MP3s. Consumers embraced 8 Tracks, cassettes and CDs, all with their deficiencies, because of the convenience they provided. The rise of the CD corresponded with the demise of the independent record store, as big box providers became the leading merchants of music. By the beginning of the new millennium, WalMart became the leading music retailer. For a sad reminder, check out these images of closed record stores [http://www.buzzfeed.com/mjs538/40-sad-portraits-of-closed-record-stores].
At the turn of the new millennium, Napster and other file sharing programs challenged CDs. Napster allowed people to share their MP3 files with other participants, easily and for free. With 26.4 million verified users worldwide in February 2001, Napster demonstrated how the Internet could be used to deliver music.
Needless to say, the threat posed by Napster was readily appreciated by artists and record labels. A&M Records and several other recording companies, via the RIAA, sued Napster for contributory and vicarious copyright infringement under the US Digital Millennium Copyright Act (DMCA). After a series of losses in court, Napster declared bankruptcy in 2002.
The problem with shutting down Napster and fighting other free music sites, like Kazaa, is that the industry did not provide an attractive digital music alternative.
The solution came from an unlikely source, Apple. Apple conquered digital music with the iPod, which provided a convenient way to manage and access music; iTunes, which provided a way of managing music; and the iTunes Store, a convenient online store for purchasing music. (Note that the information in the following summary comes primarily from Walter Isaacson’s recent biography, Steve Jobs.)
In the early years of Napster, music fans would download music onto their computers and then burn their playlists onto CDs. At first Steve Jobs thought Apple had missed the boat on the digital revolution because the iMac lacked a CD burner.
But he soon recognized that the marketplace needed a simple and legal way to transfer music from a CD, manage the music on a computer and then burn playlists. To accomplish this, Apple acquired and adapted an existing Rio MP3 player, transforming Soundjam into what became iTunes, a simpler, sleeker, more elegant solution.
Contemporaneously, Jobs expressed his desire to create a portable music player that would work in tandem with iTunes. The theory was that the device could be simple, with the “heavy lifting” taking place in the iTunes software. The Apple team thought that the other music players “sucked,” with limited capacity and overwhelming complexity.
Apple introduced iTunes and the iPod in 2001. The iPod became a cultural phenomenon. In 2005, 20 million iPods were sold; this accounted for 45% of Apple’s revenue. Concerned that competitors would start including music players in their mobile phones, Jobs prompted Apple to design the iPhone, which was introduced in 2007.
Apple unveiled the iTunes Store in 2003. According to Wikipedia, since April 2008, iTunes has been the most popular music vendor in the United States since April 2008, and the most popular music vendor in the world since February 24, 2010. It now offers over 28 million songs, videos and apps. The iTunes Store’s revenues in the first quarter of 2011 alone totaled nearly US$1.4 billion; by October 4, 2011, the store had sold 16 billion songs.
Many have argued that Steve Jobs saved the music industry. At a time when free file sharing threatened to erode intellectual property rights and rob the industry of profits, Jobs introduced the iPod, iTunes software and the iTunes Store. Without the initial support of the music industry, Jobs introduced singles-based pricing at a standard price of 99 cents per song and eventually negotiated licensing agreements with all of the major labels. Jobs understood the importance of protecting intellectual property, to give artists incentives to create and investors incentives to invest.
Ed Nash argues that iTunes was “not only a legal alternative, but also a more convenient alternative. Jobs understood that people would pay 99 cents a song if it were easier than stealing, and of equal importance he understood that the vehicle — the iTunes application itself — would need to be free. iTunes didn’t just carry Jobs’ vision to fulfillment — it built a commercial superhighway and saved the music business.”
In the absence of the iTunes store, what forces would have slowed the inexorable rise of illegal downloading? Would another single platform have emerged that would have worked for the sale of music by all record labels and artists?
But nothing remains the same in the technology world. Apple and Jobs may have saved the music industry, but that won’t stop others from presenting an alternative technology, platform or business model for music.
Perhaps the most promising challengers are streaming services, such as Spotify. Of course, streaming raises the question, will consumers be comfortable not owning the music? In Part 3 next week, we will explore streaming alternatives.