History repeats… a bit

There was a gold rush in new music media—new startups appeared almost weekly and patent disputes broke out. Even though the new kid in town spent more time in court than developing the product buyers couldn’t get enough music players and content. This was before World War One—the flat disc was replacing the recordable cylinder.

Berlinner accumulated many patents but history suggests his success was down to ease of manufacture (stamping), flat storage, and louder playback without amplification. (Amplification didn’t hit the mainstream until 1925, the disc was launched 30 years earlier.)

The current music format upheaval is different and although history doesn’t repeat exactly it probably has something to tell us. When Berlinner launched the disc in 1895 he laid the foundations for today’s record industry and defeated the incumbent. Edison made his cylinders until 1929 but never came close to retaking the recorded music industry he had started. Perhaps he hoped amplification would redress the balance but in the 1930s half of all American record production went into jukeboxes where once again discs ruled. However, there is a more important winner in this story—the customer.

The cylinder was perhaps more capable than the early disc, it was recordable and Edison had the resources, a killer brand and marketing power. Nevertheless customers chose the disc, decisively. It’s futile to second-guess the customer, they choose what they want.

In the late 1990s, faced with a new format (MP3) they didn’t control, Berlinner’s descendants made a series of attempts to regain the upper hand. But customers didn’t like what was offered. DRM on downloads, DRM on CDs, Major label web stores, subscription streaming… the verdict of the public has been decisive. Music distribution today can be summed up under 4  headings—CD sales, download sales, file sharing and radio. Overwhelmingly that’s what people want. Of the 2 billion online we know around 1 billion will be music customers. 900 million of them don’t use a big label streaming service and of the 100 million who do less than a quarter pay.

The evangelists of music streaming commerce—who have flogged this particular horse for over a decade—have made little headway. They tell us people “prefer access to ownership”, but quite clearly they don’t. We are told it’s early days but it isn’t—it was early days in 1995 when MP3 became available to everyone with a telephone line. There must be a point when it’s obvious streaming doesn’t sell. For me it was iTunes outselling all the streaming services overnight… in 2003. The Major labels will catch up one day, maybe.

2 thoughts on “History repeats… a bit

  1. I remember going to my brother-in-law in the mid 90s and telling him about these mp3 things. He was a vice president at Novell at the time. I said that he could start an internet based music download service and take over from the record companies. He told me that no one would ever pay for mp3s because they sounded terrible. He had the money, connections and know-how to have started this up by 1997. I always like to remind him of how many downloads ITunes has sold.

    On the other hand maybe the way forward is for ISPs to just pay a fee to the content providers. Some sort of revenue sharing plan. In the US if you play music or have music performed in your business you have to pay a fee to BMI/ASCAP. Why not something similar? ISPs are reaping the monetary reward of providing content free of charge. I think the torrent sites should be made to pay similar fees.

    • In the USA you also have SoundExchange which collects royalties for digital performances like BMI/ASCAP/SESAC do for radio, venues etc. So Spotify, Pandora, and the rest do pay to SoundExchange.

      The ISP levy is a popular idea but the snag I see is this. If the ISPs paid for the content that flows through them that money would have to compensate a heck of a lot of people who are being accessed for free: the record industry, Hollywood, photographers, journalists, writers, cartoonists, etc. So it would get spread very thin. Also, it would only get shared out among a small group of rights holders as ASCAP for example does today. Every venue licensed by ASCAP (including, say, a small jazz bar) pays into the pot but ASCAP only shares that money among its biggest earners—not the small bands that play in the bar. On top of that you have the question of whether using an ISP with the levy would legitimise any piracy that was going on (if so the affected rights holders would certainly expect to get paid).

      So it’s a possibility but with some wrinkles to iron out before it could actually work.

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