How the music industry blew it

"As Sonic Boom" emphasizes, this utopian vision of ubiquitous peer-to-peer computing inspired the emergence of a new youth subculture in the late 1990s. Exemplified by the founder of Napster, talented school kids and university students wrote many of the pioneering P2P programs. Their contemporaries were the first to realize the potential of this code -- and were the people who turned peer-to-peer computing into a global phenomenon. Napster was the icon of this new generation. As John Alderman points out, the music business has long prided itself in its skill at spotting the latest trends and its ability to make money out of the most subversive forms of youth subculture. Back in the 1960s, the hippie generation had called for political revolution -- and broke almost every aesthetic and social taboo. Yet the music industry was still able to profit from its cultural creativity. Compared to their predecessors, the ambitions of the Napster generation seemed much more modest: sharing cool tunes over the Net. Ironically, it was this apparently apolitical youth subculture that, for the first time, confronted the music industry with an impossible demand. Everything is permitted within the wonderful world of pop with only one exception: free music.

Unlike earlier forms of youthful rebellion, peer-to-peer computing is a direct threat to the economics of the music industry. Despite the rapid changes in musical tastes over the decades, the fundamentals of its business structure have remained the same. Musicians are contracted to make recordings. Music is sold on bits of plastic to consumers. Copyright laws ensure that no one can distribute recordings without paying their owners. Everyone supposedly benefits from this arrangement. Fans are offered a wide choice of many different types of music. Musicians are able to earn a living -- and a few can become seriously rich. Small companies can survive by selling niche styles of music. Large corporations can own profitable music companies as part of their multimedia empires. Having survived successive cultural revolutions, this business structure appeared to be immutable. It took the arrival of P2P to prove otherwise.

The author of "Sonic Boom" argues that the collapse of the traditional economics of the music industry wasn't inevitable. If different decisions had been made at particular moments, it might have been possible to preserve copyright within cyberspace. For instance, in the mid-1990s, it seemed obvious to some dot-com pioneers that the music industry would quickly embrace the Net. Up to then, the business had thrived on technological innovation. The electric guitar had inspired rock music. The CD had given new life to old tunes. Like these earlier inventions, the Net was simply another improvement in the production and distribution of music. Learning from experience, these dot-com entrepreneurs were convinced that old economics would inevitably be replicated in new technologies. All that would happen is that music would be sold as digital files over the Net rather than as bits of plastic through record shops. Encryption would prevent any unauthorized copying of these music files.

As John Alderman relates, these dot-com start-ups were surprised when the music industry fiercely opposed their plans. Despite the Net hype of the period, many executives still hoped that the digital future implied nothing more serious than producing more sophisticated bits of plastic: CD-ROMs or DVDs. They were worried that online distribution systems would wipe out their substantial investments in disc pressing plants. Others feared that a virtual music marketplace would lead to the "disintermediatization" of the industry. The Net might allow musicians to sell tunes directly to their fans across the world without needing to sign with a major record label. Either way, these dot-com schemes sounded dangerous. It was much easier to ignore the Net and hope that it would go away. The music industry was determined not to "get it."

According to John Alderman, this failure to create a virtual marketplace for selling music was a fatal error. Deprived of a legal method of obtaining music over the Net, people began swapping digital copies of their CD and vinyl collections with each other. Since payment wasn't required, these music files were usually formatted in MP3 -- an open standard without any copyright protection. Like other Net obsessions, sharing music soon developed into a fun way of meeting people online. Fans could chat about their favorite musicians while giving away tunes. This underground scene was given a massive boost by the invention of Napster. Written by an MP3 collector, this program created a virtual meeting-place where people into swapping music files could find each other. From the moment of its release, the popularity of Napster grew exponentially. Early adopters recommended the program to their friends who, in turn, passed on the good news to their mates. What had begun as a cult quickly crossed over into the mainstream. For the first time, rebellious youth were identifying themselves not by following particular bands, but by using a specific Net service: Napster.

A new generation gap had emerged. Each youth subculture achieves notoriety by antagonizing its elders. Just like hippies smoking dope, the users of Napster were united through a minor form of civil disobedience: breaking the copyright laws. As in the past, their youthful cool was confirmed when out-of-touch oldies tried to stop them from misbehaving. But what was different this time around was that the music industry was leading the persecution of the new subculture. Outraged at young people getting music for free, its down-with-the-street rebels quickly mutated into tight-arsed corporate conservatives. They compiled long lists of names of fans who had to be prevented from sharing music files with each other. They hired expensive lawyers to scare the youth into obeying the law. Rock 'n' roll had declared war on the Net.

"Sonic Boom" takes the reader through the twists and turns of the celebrated court case against Napster. Having persuaded the political establishment to tighten the copyright laws, the music industry decided to close down the most prominent threat to its profits. Since the Napster service had become a dot-com company, it was an easy target. Here was a commercial operation hoping to benefit from the theft of intellectual property by its users. The music industry eventually won its case. Napster was ordered to prevent its users from sharing tunes without paying their owners. However, winning a battle isn't the same as winning the war. Crucially, Napster was an underdeveloped form of peer-to-peer computing. When it was disabled, people were forced to move their music file-sharing to more sophisticated P2P programs: Gnutella, Aimster, Morpheus, Freenet. Ironically, the court case has provided the opportunity to fix the social and technological flaws within Napster. A proprietary program requiring a central meeting place was being replaced by open-source software directly connecting users with each other. One court case couldn't destroy the high-tech gift economy.

In his book, John Alderman remembers attending one of the first online music conferences in the mid-1990s where an industry executive declared that the Net should be immediately closed down. Copyright protection had to take precedence over technological innovation. In contrast, the author of "Sonic Boom" -- then and now -- does get it. The music industry has no veto over the future. Its lobbyists and lawyers can only slow down the spread of peer-to-peer computing. Sooner or later, file sharing over broadband networks will become as unremarkable as making a phone call, watching television or using a computer today. The utopian vision of the Napster generation is technically feasible: every tune -- ever made -- for free. Quite rightly, what worries John Alderman is how anyone can earn a living from making music in such circumstances? While almost every other sector of the economy will be profiting from peer-to-peer computing, the music industry will have lost its major source of revenue: selling bits of plastic. Who then will pay the piper?

Next Page: But how will musicians make a living?

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