Thank You For The Music

Thanks to technology, it's practically free these days. But recording companies and the traditional royalties' system are being busted

Whenever people talk to me about the influence of technology on media, I always cite the example of the music business to demonstrate how quickly and how completely technology can transform an element of the media/entertainment business.
To understand the magnitude of the change, you have only to cast your mind back to the early years of the century. Those were great years for the music business - as indeed the last years of the 20th century had also been.
And, oddly enough, the huge profits being made by the music companies were directly related to technology and to demographics - the very factors that would later destroy the industry.
Many people who had been young in the so-called golden years of pop/rock - the Sixties and the Seventies - were now middle-aged and affluent. Some of them had copies of the records that they bought during their youth, but these were scratched and did not sound as good any longer.
Enter the music moguls. They had discovered a new format, they announced. The CD was indestructible. It would never scratch. It would provide high-quality digital sound. Moreover, engineers and producers had worked out how to re-master all old recordings. If you bought a re-mastered version of say, Let It Be or Sticky Fingers, you would hear the sound with a depth and clarity that had been missing from the original LP. Then, the equipment companies got in on the act. They created expensive amplifiers and huge speakers that promised to transform the music into a concert hall experience.
It was a formula that could not fail. The rock fans with scratchy LPs decided to buy the CD versions to replace their old albums. To hear them clearly, they invested in expensive audio equipment.
Everyone made money. The record companies and the artistes no longer had to bother with churning out new material (this is why bands stopped producing an album a year and released one every five years or so) when their old records were selling so well all over again in the CD format.
Plus, the profit margins on CDs were enormous. A CD cost a dollar or two to produce. It sold in the shop for $15. Naturally, the record companies declared massive profits.
But then, the problems began. As Stephen Witt explains in his new book, How Music Got Free, a single employee at a CD pressing plant kicked off the trend. He would steal a copy of a newly pressed CD before it had been shipped to the shops and then digitally compress the music. Within hours, the music would be out on the Internet. For free.
The music industry had faced the problem of piracy before (with cassette tapes) and thought it could handle the threat. It did not realise how the new technology had changed the rules and the nature of the battle. The cassette-based piracy had used the same technology as the legitimate industry. The pirates made their profits by not paying royalties. But now, the threat was from an entirely new technology. The men who ran the record companies simply did not understand technology. When the early versions of the Mp3 players were being developed, the inventors attempted to speak to the music business but were waved away because their inventions were regarded as being inconsequential.
The record companies followed the formula they had evolved to battle the cassette pirates. They hired banks of lawyers and resorted to litigation against any site that provided music on the Internet (Napster, for example), not realising that now that the technology was out there, virtually any teenage nerd could put up his own music site.
For every Internet music-sharing and downloading site the record companies took action against, 10 more sprang up.
Eventually (in just five years or so), the music business took on its present form. This led to the following consequences:
A) Nobody under 40 buys CDs any longer.
B) Nobody is interested in fancy stereo equipment. People listen to music on their phones or devices that are far less expensive than the lavish systems of old.
C) Hardly anyone buys whole albums. People download individual songs that they like.
D) A moderately priced smartphone can keep more music in your pocket than a filing cabinet worth of CDs.
The music companies have adapted by co-operating with tech giants like Apple for iTunes. But in this arrangement, Apple makes the money, not the music companies. And many top bands (U2, for instance) virtually give their albums away on the Internet.
In real terms, what this has meant is that some of the giants of the record business have gone bust (EMI) or are struggling to stay alive (everyone else). Record stores close all the time. And artistes are forced to tour to make money because there is so little cash to be made from recorded music.
The entire transformation - from boom to bankruptcy - took under a decade.
Is that what is going to happen to the rest of the media sector?
Who can say? But I would not rule it out.