The IFPI (International Federation of the Phonographic Industry) [get a hint about the contemporary nature of the organization?] sees the digital music market taking off in 2005. I don’t think anyone would disagree after looking at a few key facts. The number of legitimate music download sites quadrupled to more than 225. The number of tracks of music available soared to more than one million. Purchased downloads increased by more than tenfold and exceeded 200 million.
The IFPI says that “Music on the internet and mobile phones is moving into the mainstream of consumer life, with legal download sites spreading internationally, more users buying songs in digital format and record companies achieving their first significant revenues from online sales”. It should be no surprise that the supply of music available digitally is proliferating and the fact that that consumer attitudes about digital music are changing should have been anticipated not just reported. The remaining question is whether the music and video industries yet understand what is going on.
Even before Sean Fanning, the nineteen-year-old wiz kid who created Napster, appeared on the cover of Time Magazine five years or so ago, it was clear that something big was happening. On the surface it appeared that Napster was a tool for getting digital music over the Internet without paying for it. The reality was and is much deeper.
Music downloading got started via “Peer to Peer”. Peer to Peer (P2P) is not a new idea but using it for music downloads put it in the limelight. The Internet has always enabled one computer to communicate directly with any other computer but not typically as equal participants or “peers”. The preponderance of communications on the Internet is more of a “client-server” model. The servers tend to be powerful computers with very large storage capacity. The “clients” are mostly PC’s (although that is changing fast). The client goes to the server and requests information. P2P is empowering to people to exchange information directly without the need for a server in the middle. (Note: In reality servers play many key roles even in a P2P environment). Today’s PC’s are hundreds of times more powerful and have thousands of times more storage than they had less than twenty years ago. This expanded capability plus the widespread availability of high speed Internet connections means that large amounts of information can be stored, searched, and distributed directly from PC to PC. This is a new and important model. It won’t replace the client-server model but it represents a big complement to it. Over time its significance will grow and people will be increasingly empowered.
Back to Napster. One of the types of files that can be shared from PC to PC over the Internet is an MP3 file. It is one of many forms of digital music. What is digital music? Most of it starts as analog music and ends up on a PC. Take a look at the companion story, Digital Music, for how this works. The high fidelity and relatively compact size of music files was a natural combination for peer-to-peer file sharing.
MP3 has changed how millions of people think about digital music — whether they are consumers, artists, producers, or broadcasters. The recording industry, understandably, reacted very negatively toward Napster and other music sharing programs on the Internet. They viewed it as stealing and have been aggressively trying to shut down web sites they view as contributing to theft in any way.
Other people say that intellectual property “wants to be free”. There certainly is an argument that artists may choose to give away their music over the Internet, generate a lot of interest in it, and then charge $100 per ticket for their concerts. That is a valid model but not the only model. If an artist or music company wants to protect their music they should be able to do that too. There are various ways to do so. For example, IBM has a digital media solution that includes “watermarking” technology that enables music to be encoded with a digital “watermark” that identifies the owner of the music. Attempts to copy or distribute the music without proper payment are next to impossible. But the real issue isn’t just whether and how to protect the music. The real issue is the evolution of new business models for the distribution of music. Napster caused a lot more visibility of this issue.
People are fundamentally honest — not all of them but most of them. Most things in the world get bought not stolen. The Internet has provided a new distribution channel for music. Music is particularly well suited to digital distribution because it can be played immediately after being received in essentially its original fidelity. The PC can be easily connected to good quality speakers or connected as an input to your home audio system just like a CD or DVD player and the sound quality is as good or better than FM Stereo or original CDs. Some audiophiles claim they can tell the difference but most of us can’t.
In July 2001 I wrote, “The distribution model has evolved from record to tape to CD but the business model of the music business has changed very little. I have a collection of Mozart CDs. Someone decided how to package them. One CD has Symphonies 40 and 41. Another has String Quartets 17 and 19. Why can’t I buy just the 40th Symphony and the 17th String Quartet? A rock star CD has ten songs on it. How about if I only want to buy two of those songs? If a CD costs $15 for 10 songs why can’t I buy two songs for $3”? Steve Jobs and Apple provided an answer.
More of what I wrote in 2001 included, “Would people be willing to pay for a custom CD or a custom “play list” of their favorite music files? Is it possible the music industry could actually expand by offering more choices than have previously been available? How about a model where I get to download ten of my favorite tracks for free if I agree to send them to ten friends. Each friend receives an email from me with link in it. They click on the link are taken to a server that allows them to download the music. When they first try to play the music a small dialogue box appears on their PC that says ‘These selections were recommended by your friend John. Click here to enter your credit card number to purchase them. You will receive a ten percent discount if you agree to forward the invitation you received to ten of your friends’. Yes, people have the power to steal music. But the music industry has the power to create brilliant new business models, subscription services, music tips, and marketing relationships and if they do so they can take the music industry to new levels and people will gladly pay for the value created”. Steve Jobs figured all this out and took my thought to a higher level with the introduction of “Celebrity Playlists” where you can buy the tracks of music that your favorite performer is listening to.
The bottom line is that most all people like some kind of music. Composers like to compose, musicians like to perform and conductors like to conduct. Business models that embrace rather than fight technology are finally emerging. The music pie will get bigger — it surely will get shared differently — but I am confident that it will get bigger.
Meanwhile, there are many interesting new things with regard to music. A five-piece band may soon have a live jam session with each instrumentalist on a different continent and thousands of fans listening. Musical instruments are going to be changing in the digital world too. Ever play a hypercello?
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