Digital Music Disruption: Consuming Music in a Digital Era
On May 10, 2011, software company and search giant Google, Inc. announced a new service that would allow consumers to upload their entire music collection to a Google server providing access to that music collection from any PC, MAC or Android device- for free. Google Music, still in private beta at the time of the writing, was just a couple of months behind a similar service by another Fortune 500 company. Seattle based Amazon.com had launched a service in late March dubbed the Amazon Cloud Player. Its model was strikingly similar: allow customers to upload their private music collection to an Amazon server so they can play it from anywhere on the web, on any device. It doesn’t stop with these two either, Apple, Inc. is also reported to be working on a similar “cloud music” model called SkyTunes which would involve the company’s existing MobileMe cloud service.
The question here is, so what? We’ve seen the music industry get shaken up before. This really isn’t much different, right? That assertion is correct, but only when looking at how digital music distribution has been disrupted over the last 30 years. I wish to focus this paper on how digital music consumption has been disrupted, and how it continues to be by new technologies and cultural behaviors. Before we look closer at what disruptive technology means, I think it’s important to take a look back in time when music distribution was more controlled and one-dimensional.
The year was 1982, nearly thirty years ago. Sony Corporation had just introduced the first Compact Disc audio CD player on the market with a retail price of nearly $900. Up until then, consumers only had analog playback options like the cassette player, record player and the beta tape player. The technology behind the audio CD (officially Compact Disc Digital Audio or CD-DA) was a joint effort by both Sony and Philips and was introduced two years earlier in 1980. Data stored on CDs were made up of frames that consisted of 33 bytes and six complete 16-bit stereo samples. That only equaled 24 bytes though. The other nine bytes consisted of eight CIRC error-correction bytes and one subcode byte, used for control and display. A byte is one unit of digital information. This information is necessary for establishing the transformation of music distribution at the time.
With the advent of the CD and CD player, consumption of music slowly began to change. For the early adopters, compact discs and compact disc players made it easy for listeners to skip to their favorite songs at the press of a button. Not only was the technology of the CD revolutionary, so were the very features themselves, features like “repeat”, “skip”, and “shuffle.” Now consumers could control what they listened to like never before. Many of the early CD players all came with remote controls as well – putting even more control into the hands of the consumer. There were no remote controls for record and tape players at the time.
As revolutionary as this new way of consuming music was though, adoption rates were exceptionally slow having been hampered by our then-lack of knowledge about digital formats. In their first six years of availability, CD players had only reached 12.4% household penetration (Kipnis, 2003). This is in line with Everett Roger’s Diffusion of Innovations theory, which is a theory that seeks to explain how, why, and at what rate new ideas and technology spread through cultures (“Diffusion of innovations,” 2011). According to Rogers, those 12.4% of the households who bought CD players were characterized as early adopters. We didn’t see much higher rates until a few years later as adoption rates soared and the CD player reached critical mass and became the new de-facto standard for listening to music.
PCs and the 1990s
It didn’t take long for engineers to realize that if compact discs could hold audio data, they could probably also hold other types of data, including computer programs. In 1985, the Yellow Book format, more commonly known as the CD-ROM (compact disc read-only memory), was introduced. CD-ROMs could hold computer software in a read-only format, which meant that once the software was written on the CD, it could not be altered. Since the drives initially cost $1,000, and their performance was somewhat poor due to the slow speed at which they transferred data, it took some time for them to be widely accepted. Again, Roger’s Diffusion of Innovations theory and the rate at which new innovations are adopted played into this. The picture I’m attempting to paint here is on how music was slowly being groomed for consumption and distribution on computers and the Internet.
Beginning in 1986, several other types of compact discs were created. CD-I, or Green Book, was Philips’ interactive multimedia format, and the players could read MPEG (a form of audio/video compression) videos as well as interactive games. CD-I never really caught on though and few players currently exist. Today, DVDs have all but taken over the disc industry for software because of their large storage capacity.
CD recording units first appeared on the scene in 1989, averaging in price around $1,000. The music industry at this time had no idea that a “Pandora’s box” had just been opened with the opportunity to copy CDs. It wouldn’t be until the late 1990s when home PC ownership went way up and Internet use was widespread that these two things – coupled with the ability to “rip” a CD to a hard drive and share it with the world – were profoundly disrupted.
Digital Audio Extraction (ripping) describes the process of extracting and copying audio from a CD to a computer’s hard drive. By the mid to late 90s more and more PC users were listening to their CDs on their desktops and laptops. Ripping entire music collections made it easy for them to store digital files of their music on their computer’s hard drive for playback later. This was done with early versions of audio playback software like Real Player, Winamp, Windows Media Player. Disruption was immanent.
All of this said, digital music clearly emerged on the scene as a result of the indirect collaboration of music and the computer. The development of personal computing in the 1980s and the subsequent drive towards multimedia were integral in making music playable in this new environment provided by the PC. As computers became increasingly valuable sources for handling and playing back sound recordings, music began its complicated migration from compact disc and other older formats to music as a digital file. Music took on the properties of software and got tied up not only with the technologies of computing but also with the discourses that surrounded personal computing. Digital music was more than just music; it was a tool for personal expression and an act of defiance against an out-of-touch music industry.
Winamp was one of the earliest media players to emerge and fill music’s emptied material markers on the PC. It put music in context and made music as a digital file recognizable and useable for users. Winamp provided an interface that bridged past practices with the new possibilities of digital music and helped sell the idea of music on computers more generally. Metadata added crucial functionality to digital music, making it visibly easy to organize. As a result, these technologies and the practices they enabled ignited the development of digital music as a commodity. Winamp made music in its digital form a distinct experience that was substantially different from previous forms of music consumption. It brought enough novelty yet enough familiarity to encourage music’s format shift which was happening right underneath us.
At the time, the music industry all but ignored online activity until the end of the 1990s as their profits continued to skyrocket from CD sales until the early 2000s (Tschmuck 2006). Investment in new technology had little appeal to big companies like Sony and BMG. Big record companies just didn’t get it. In 1997, online music startup MP3.com launched just the sort of new technology we’re talking about with an open model, allowing independent artists to make MP3s of their recordings freely and widely available. The business model was based on ad revenue and was built around a click-through model where they would get paid from an advertiser when a visitor on the MP3.com site clicked on a banner. On July 21, 1999, they went public and raised over $370 million. At MP3.com’s peak, their server infrastructure delivered millions of MP3s per day to some 25 million registered users (“MP3.com,” 2011).
It could be said that MP3.com was the first to execute and launch a cloud-based platform, having done so in 2000 shortly after their IPO. My.MP3.com allowed users to upload their CDs in MP3 format to a server, giving them access to streams of their music from any desktop or laptop. This struck a chord with the record labels and in UMG v. MP3.com, the court ruled that this was not fair use. MP3.com eventually settled for $80 million (Tschmuck 2006). Weakened financially from the suit, MP3.com fell apart during the burst of the dot com bubble in the early 2000s and in May of 2001 they were acquired by Vivendi Universal for $5 a share, $23 below their IPO share price (“Napster,” 2011).
When Shawn Fanning’s Napster erupted on the Internet in 1999, it presented a new way of distributing music to the everyday person. Legacy networks like IRC and USENET that allowed people to exchange files across the Internet were already around, but they weren’t designed specifically for the quick transfer of MP3 files. Important to the Napster story is just how easy it made for people to share and obtain digital files of music for free. The software’s interface and website brought together a community of users bound by an interest in circulation and connection. It was very social by today’s standards with its instant messaging capabilities and song rating system. Napster built a community that, through its practices of sharing, connecting, circulating, and discussing music. This proved that a market for digital music commodities was not only possible – it already existed.
It goes without saying that Napster completely disrupted the entire music industry. Harvard Business Professor and author Clayton M. Christensen coined the term ‘disruptive innovation’ to describe a process by which a product or service takes on widespread popularity and eventually displaces its competitors (Christensen et. al, 2004). This is exactly what happened with Napster. It really wasn’t disruptive early on, but as more and more people adopted its new way of downloading and sharing music, Napster became a disruptive force. This disruptive force almost beat out the music industry altogether, but file sharing was quickly found to be illegal and the Napster battle was lost.
Even though Napster never fully capitalized on the community it built with a broad advertising or a subscription model, it remained a disruptive force that paved the way for a host of other companies and services like it. After Napster shut down in July of 2001 over a failed appeal to the Ninth Circuit Court, Gnutella, FastTrack and eDonkey all profited from Napster’s displaced users and exploited the data generated by their peer-to-peer networks. Record labels to this day still blame Napster for sparking the current crisis in recorded music, and the role its users played in defining and commercializing the experience of digital music.
The iPod Era
After Napster, music seemed as if it might not ever be sellable again. But, when Apple’s iPod was popularized along with its iTunes Music Store to legally purchase music, past stigmas about the MP3 began to wane. Apple’s digital retail music outlet not only brought old forms of presentation and sales into dialogue with new ones, it also combined the act of playing music while shopping for it. With these things integrated, Apple set out a vision for how digital music could be woven into a wider lifestyle of technology consumption.
As Apple established dominance in the digital retail market, we appeared to be on the brink of another shift which is the key focus of this paper. What was it? It was the proliferation of cloud-based music services that I hinted at in my opening paragraphs. Cloud-based services are those that offer to host, stream, store and manage a user’s music collection over the Internet. But it’s not just our music this concept works well for. Sites like Pandora offer a free all-you can eat music streaming buffet of their music with one caveat: you can’t download any of it. This move to “the cloud” represents a new kind of relationship between users and their music, one where the sounds and songs of our social lives are increasingly contingent on the control and technology of music service providers. Our music slowly seems to be moving from our computers to the cloud – that great celestial jukebox.
The evolution of music’s recorded form over the last thirty years is not unprecedented. I believe it’s specifically linked to all its technologies of production, distribution and consumption. From sheet music to vinyl, cassettes to compact discs — there have been industrial waves that are all relatively common in music’s history (Eisenberg, 2005). But, just because it is part of a historical continuum does not mean this current point in time has nothing special to offer us. These are indeed special times for digital music consumption. As Lisa Gitelman (2006) and other new media scholars have argued, “looking into the novelty years, transitional states, and identity crises of different media stands to tell us much, both about the course of media history and about the broad conditions by which media and communication are and have been shaped” (Marvin, 1988, p. 1).
These last two decades have provided us with so much insight. Music’s most recent transformation has been unusually fast and far-reaching, and its impact on business has been much more severe than any other time before it. The digitization of the music commodity is not just an issue for music. As a side note, the migration to digital files and online distribution and consumption has also been happening with books, television shows and movies. Manufacturers of these industries watched the transformation of the music industry and knew full well their fate would be similar (Harmon, 2003). This however is a topic for another paper.
Post iPod Era and Beyond
In February of 2010, CNN described the state of the music industry with an article appropriately titled “Music’s lose decade: Sales cut in half” (Goldman 2010). At the very top of the article, just under the headline, a graph is presented to us from Forester Research. The graph spans ten years from 1999 to 2009. In 1999 we see that music sales were $14.6 billion, but as the graph’s line dips down and down each year we see that by 1999 it had fallen to $6.3 billion. These facts are astounding and true. We just aren’t buying music like we used to. Joshua Friedlander, vice president of research at the Recording Industry Association of America has a different theory. “We’re switching to an access model from a purchase model,” he says (Goldman, 2010).
Now we’ve come full circle. Having started with the compact discs of the 1980s and taking a walk through the Internet and on to peer-to-peer file sharing, we saw how quickly things had changed in less than two decades (1982-1999). It hadn’t ended there though; the iPod would commercialize the MP3 file as we know it today. But again, it didn’t end there. As we see with all of these services being offered today (Google Music and the Amazon Cloud player), people’s behaviors have changed yet again.
What is it that’s changed? We don’t want to manage and store our own music on our local hard drives anymore – but – we want instant access to it from anywhere. So, to “the cloud” we look. But will this be the last evolutionary phase of digital music? Only time will tell.
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