How the Music Industry Messed Up Legal Streaming the First Time Around
Lessons from the music industry’s initial consumer-hostile reaction to the Napster saga. Going from $16 CDs to unlimited streaming is really hard.
A version of this post originally appeared on Tedium, a twice-weekly newsletter that hunts for the end of the long tail.
It wasn’t always this way, but life is pretty good for the music industry these days on the streaming front.
The industry, for the first time in more than two decades, is seeing significant growth, largely off the back of streaming technology such as Spotify, Apple Music, and Pandora.
Good for them—and possibly also for consumers. But it’s not hard to forget that the music industry, caught off-guard by new technology in the late 1990s, tried to force the issue of getting paid through the launch of forgotten services like MusicNet and PressPlay—and despite the similarities to the way we stream music now, it got burned, badly.
Perhaps that was a foregone conclusion, but the response to Napster is still very much worth analyzing. Why did a very similar spin on today’s streaming services crash and burn, anyway?.
The year that CNN first reported on the existence of the Internet Underground Music Archive, one of the first services that existed for distributing online music. The service, essentially the SoundCloud or BandCamp of its day, allowed independent artists to distribute their music over digital means. IUMA was a hugely influential idea, but struggled as a standalone company, eventually falling by the wayside around 2001 after a failed acquisition by the similarly noble digital music company eMusic. The service's music was brought back to life via the Internet Archive.
Why Primitive Radio Gods is the perfect band to explain the Napster-induced downfall of the physical music industry
Before the music industry failed to rebuild the digital music industry in its own likeness, it pulled a fast one on bands like Primitive Radio Gods.
You probably don’t remember the band, but you most certainly remember the song—if not its title, “Standing Outside a Broken Phone Booth With Money in My Hand,” which, let’s face it, is a title only Fiona Apple could love.
Popular in the summer of 1996, the song, best known for its inclusion on The Cable Guy soundtrack, represents a low point of a trend that came to define the music industry in the pre-Napster era. It was a good song, to be completely fair to its creator, Chris O’Connor, and the tune drew the attention of Columbia Records thanks in no small part to its use of atmosphere and a particularly effective B.B. King sample.
The problem was, the rest of the album was effectively old demos produced on the cheap and rushed to release by Columbia before O’Connor had a chance to properly record them in a studio. And this fact was obvious to reviewers.
Allmusic reviewer Stephen Thomas Erlewine described the album as such: “At its core, Rocket sounds like a demo tape with one promising song.”
(Their second album, for what it’s worth, got better reviews.)
To be fair, the album was more symptom than diagnosis. The real problem was that Columbia would not sell “Broken Phone Booth,” a top-10 hit on the Hot 100 Airplay charts, as a standalone single. Because of how the label made its money on rock music at the time, they needed an album—and rather than buying time for Primitive Radio Gods to record one, like a buzzy single might allow for nowadays, the song required the band to immediately release whatever they had lying around.
This was a great way to make money— Rocket, which cost $1,000 to record, went gold—but a horrible way to treat customers. When you’re a teenager, stuck paying $16 for an album featuring one good song and nine demos, something like Napster seems hugely appealing.
Primitive Radio Gods were far from the only band to momentarily glimmer based on the kind of bad music-industry calculus famed producer Steve Albini, best known for his work with Nirvana, could see from a dozen miles away, but their trajectory highlights nearly all of its downsides. The band didn’t even get a chance to release a legitimate album on a major label, because their label shut down!
If you’re an “old millennial” music fan, you know what happened next to the music industry: In 1999, programmer Shawn Fanning created Napster in his Massachusetts dorm room, his idea quickly swept the internet, free music was had by all, Sean Parker found his calling, people downloaded that one Primitive Radio Gods song they liked without the other nine demos, the band Dispatch became one of the first digital-only success stories, Metallica growled publicly, and the music industry sued the service into oblivion, all in the span of three industry-disrupting years.
By the time the original Napster was gone for good in mid-2002, lots of alternatives, like KaZaA and Gnutella, had appeared. But the music industry, being the music industry, wanted to protect the good old days—the days in which they could sell their $16 CDs—as much as possible.
Enter MusicNet and PressPlay.
“What we underestimated was that the pivot to digital would be a two-step pivot. First there would be downloads, then subscriptions. We’re clearly on the right side of history on this one.”
— Rich Glazer, the founder of RealNetworks, noting in a 2016 interview with VentureBeat how his company’s RealPlayer service, the basis of the MusicNet offering, was ahead of its time. The company, founded in 1994, played a key role in the launch of the music industry’s fledgling attempts to create a legal music service. RealNetworks is still an active company in 2018—that big settlement from Microsoft helped buoy them during the lean years, as did some more recent patent sales—though the company is a minor player compared to what it once was. The firm has found success in Asia in recent years, particularly China.
The music industry’s first attempts at legal digital music were confusing, user-hostile, and kind of sucked
In the roughly 24 months between the time Napster shut down its popular free service and Steve Jobs announced the iTunes Music Store to the public, the music industry tried to create legal replacements, but the lack of precedent was a problem. Nobody could figure out exactly what a legal digital music industry was supposed to look like, or how it was supposed to work.
All the music industry knew is that it wanted the golden goose to be secured from the arms of digital thieves, so the solutions they gravitated toward were instilled with digital rights management, which was starting to come into its own around this time, thanks to both the growing sophistication of the technology, which I wrote about last year, and the 1998 Digital Millennium Copyright Act, which infamously made strides to prevent the technically inclined from attempting to legally break this technology.
“No person shall circumvent a technological measure that effectively controls access to a work protected under this title,” Section 1201 of the U.S. Code states.
And with the appearance of Napster, the music industry suddenly had a reason to use these rules they pushed for. The problem? The music industry was stuck in a format war of sorts. With five major record labels at that time—it was six until 1999, when PolyGram merged with Universal Music Group—it was hard finding any common ground on a complicated issue like digital music. The short-term result of this discomfort was that the music industry effectively split the digital music industry in two.
On one corner was Universal Music and Sony Music, the two of which backed PressPlay, which was built with DRM technology from Microsoft’s Windows Media Player. In the other was MusicNet, which had three labels at play—Warner Bros., Bertelsmann Music Group (BMG), and EMI.—and the backing of RealNetworks, whose streaming technology came to define the early internet.
Their offerings were slightly different—for a $9.95-per-month fee MusicNet allowed for 100 temporary downloads and 100 on-demand streams at launch, according to Billboard, while Pressplay allowed for 300 streams and 30 downloads and offered limited CD-burning capabilities at higher price points—but the tissue tying the two approaches together was DRM.
It certainly wasn’t music, as the services made no effort to collaborate with one another. In the post-Napster era, the combination of limited libraries and competition from peer-to-peer file sharing services put the companies at a major disadvantage. As Billboard’s Brian Garrity put it:
The big concept of 2001 has been that in order to compete with file-sharing services that offer a virtually limitless universe of free content, music companies must curb pirate peer-to-peer networks in the courts while at the same time develop similar secure music services of their own. But their offerings have two main differences: Consumers pay to access content rather than receive it for free, and content is primarily rented to consumers instead of accessed on a buy-to-own basis.
Complicating factors significantly was the landscape of the technology that separated the two services. Microsoft and RealNetworks (which was founded by a Microsoft alum) had become major rivals on the streaming front, with the conflict playing out between the two not unlike Netscape and Internet Explorer, with Microsoft’s market power coloring the business conflict. (Microsoft’s Justice Department settlement loomed over the situation as well.) In 2003, this would lead to a lawsuit that RealNetworks would eventually score a $761 million settlement from.
The result of this conflict for the digital music industry was that the services weren’t compatible, effectively limiting the amount of music that was on each service—some major labels on one, some more major labels on the other. By the end, neither service had each of the major labels. The conflict between the two tech giants bled into the services they sold the music industry on.
"It's a crying shame that the Microsoft-RealNetworks rift has spilled over to the major labels," Jupiter Media Metrix analyst Aram Sinnreich told CNET in 2002. “The end result is that it will be a longer time before consumers will have access to a music-subscription service that offers them enough music."
It’s not a dissimilar situation to the mishmash of availability we see with our streaming video services today, where pieces of content come and go like passing trains through the night, but in contrast to Napster or Audiogalaxy, it was a tough sell, especially given the artificial limitations the services imposed on users.
The music industry tried to strong-arm a replacement for Napster in the market, just as it strong-armed gold records out of artists who had a single and nine demos. And they were convinced that the strategy would work without any issues.
But the skepticism engendered toward both the music industry at large and DRM as a controversial new technology ensured its efforts immediately drew scrutiny. In August of 2001, just a few weeks after the free version of Napster was forced shut by court order, the US Justice Department opened up a fresh antitrust investigation into PressPlay and MusicNet.
The concern at the time was less that PressPlay and MusicNet were dominating the industry conversation without making room for third-party players. Sites that looked like potential competitors, like MP3.com and eMusic, had been recently snapped up by Universal Music and turned into affiliates of PressPlay, bastardizing the MP3-friendly approach the services originally took. (Both companies were later sold off: eMusic is active today; MP3.com is a content site that hasn’t been updated in about three years.)
Meanwhile, other firms with competing DRM technologies—like InterTrust, the company that held most of the important DRM patents and would soon win a big settlement of its own from Microsoft—were suddenly competing with the major labels, that wouldn’t even share with one another, let alone a third-party service.
It was clear to outsiders, and even some insiders, that what the music industry was trying to do wasn’t going to work. (It was also clear that it was costing the labels tens of millions of dollars they would never get back.) The technology was too restrictive, the approach too stacked in favor of the record industry. There was too much distrust and bad blood in the air after what happened with Napster.
Stephen Witt, in his 2015 book How Music Got Free, portrayed Universal Music’s then-CEO, Doug Morris, as being overly excited about PressPlay, to the point where Recording Industry Association of America President Hilary Rosen, frequently portrayed as an “enemy combatant” of the Napster era during this time, had a hard time talking him off the ledge. (Rosen, it should be said, was simply sharing the company line because it was her job.)
“On several occasions he told Rosen to stop talking to Napster, to stop negotiating with the Fannings, to stop worrying so much, because he had something that would ‘make it all go away,’” Witt wrote. “In later years, PressPlay would be a reliable starting point for listicles of the ‘Top All-Time Tech Busts.’”
Really, the only person who was able to talk the music industry off the edge was Steve Jobs.
In a 2011 article after Jobs’ passing, Warner Music’s then-VP, Paul Vidich, explained to Billboard that Jobs quickly cut through the music industry’s BS (“‘I don’t want to talk about what you guys are doing,’ he said. ‘You guys have always had your heads up your expletive-deleted,’” Vidich recalled of their first meeting) and came up with a solution that every label could agree to—a situation where the technology people were in charge of the technology and the record labels got out of the way.
"We did our deal, closed it in October 2002, they then pitched it to each of the other, who signed on and they launched it on April 28, 2003,” Vidich noted. “Within a month they sold a million downloads, which startled everybody.”
Soon enough, the Justice Department closed its investigation into PressPlay and MusicNet. It wasn’t necessary anymore.
The year that Napster relaunched as a pay service, effectively a rebranded version of the former PressPlay service. The company had been purchased by Roxio after its bankruptcy and had no connection to the original service. The Napster brand, which has existed for more than 15 years outside the purview of Shawn Fanning and Sean Parker, is so strong today that in 2016, the music service Rhapsody rebranded itself as Napster.
So, it’s worth pondering: Why were MusicNet and PressPlay such bad ideas, and why, in contrast, is Spotify seen as a much better one?
Clearly, if you break it down, the approaches are similar minus the download limitations put on use of the older services—especially with the paid subscription model that’s common today.
But the key difference may be the intent of the offering. Spotify is clearly a service that was built for music listeners first and music labels second. This gave the company some headaches as those labels complained about things like mechanical reproduction, and it’s had to change up its approach a few times as a result, but the fact of the matter is, the service has always favored the listener over the label or the artist.
Certainly, the fact that our phones made the technology more portable played a factor as well.
But it’s worth suggesting that perhaps we, as consumers, changed, with some distance from Napster. We spent years in a content free-for-all, with little in the way of concern about who was going to get paid. Not because it was the right way—but because it was the path of least resistance.
In 2003, as he was announcing the iTunes Music Service, Jobs called subscriptions “the wrong path,” an avenue that became the path of most resistance.
“These services treat you like a criminal,” he said at the time.
As Apple Music came to life from the purchase of Beats and emerged as Spotify’s most robust competitor, the line was heavily scrutinized after the fact, but it’s possible that the wrong path became the right one for a single, simple reason.
We stopped treating music fans like criminals.
Correction: This article originally stated that Steve Jobs passed in 2010. He died in 2011. Motherboard regrets the error.