ARCHIVAL (ABC, GOOD MORNING AMERICA, 3-31-15):
NEWS ANCHOR: Millions of people right now get streaming music for free. Jay-Z is betting that you’ll pay for it.
NARRATION: The brave new hope for the music industry always seems to be right around the corner.
ARCHIVAL (CNN, 7-3-14):
NEWS ANCHOR: Songza.
ARCHIVAL (KTVU, 10-10-12):
NEWS ANCHOR: Groovebug.
ARCHIVAL (BLOOMBERG WEST, 3-21-15):
NEWS ANCHOR: Rhapsody.
ARCHIVAL (KPIX, 9-23-14):
NEWS ANCHOR: Beats Music.
NARRATION: How did music go from an industry that was thriving to one besieged by piracy, file sharing and streaming?
ARCHIVAL (AMERICAN MUSIC AWARDS, 11-23-14):
TAYLOR SWIFT: Music is valuable and albums should be consumed as art and appreciated.
NARRATION: It all began with a pesky start up in the late 1990s that got the music business all riled up.
ARCHIVAL (ABC, 2-27-00):
REPORTER: College students are making good use of the Internet.
ARCHIVAL (ABC, 3-9-00):
REPORTER: Students in their dorm rooms turning the record industry on its ear.
ARCHIVAL (ABC, 9-3-14):
JARED LETO: They had this wonderful platform, Napster, sitting in their laps. They could have made a deal. They bleeped it up.
GREGHAMMER (MANAGING DIRECTOR, RED BULL RECORDS): You have a generation of people now who expect their music for free. It’s very difficult to change.
ALI AYDAR (PROGRAMMER): The main challenge was, can this thing scale to a massive number of users. And I just thought, OK, if this piece of code works this is going to be huge. And I had a moment there where I asked myself ‘is it morally correct?’
NARRATION: In 1998, at Northeastern University — a freshman — Shawn Fanning, began developing a computer program called Napster in his dorm room.
He asked for help from Ali Aydar — a veteran programmer he knew through his uncle.
ALI AYDAR: And my response to him was, “You need to just concentrate on your studies.”
NARRATION: Fanning didn’t follow Ali’s advice. He dropped out to focus on the program, and partnered with fellow teenage programmer Sean Parker to release a beta version. As it started to spread through chat rooms, they traveled to the Bay Area to grow the business.
ALI AYDAR: Initially, I was skeptical that, gosh, I’m sitting across from two 18 or 19-year-olds. I changed my tune once I learned that there are already 40,000 people using this thing.
NARRATION: It was one of the first large scale peer to peer file sharing programs. It allowed users to access music files stored on the hard drives of fellow Napster users.
ALI AYDAR: 40,000 wasn’t a big number, but it was bigger than what I thought it was going to be initially, which was zero because people weren’t willing to open up their hard drives. What I realized was, that people’s emotional ties to music, their general interest in music, was more than enough to overwhelm any kind of security or privacy concern.
NARRATION: And in the ‘90s, consumers’ emotional ties to music equaled big money — no one batted an eye when Puff Daddy’s record label made two music videos featuring elaborate helicopter chases in consecutive years.
STEVE KNOPPER (CONTRIBUTING EDITOR, ROLLING STONE): The CD boom was from ’84 to 2000. You actually had to drive your car to the Tower Records and buy a CD for $18 to get the one song you liked. And so that was a good model. It made the industry tons and tons of cash.
ARCHIVAL (CHUMBAWUMBA VIDEO):
I get knocked down, but I get up again…
ALBHY GALUTEN (V.P. MEDIA TECHNOLOGY STRATEGY, SONY): Selling millions of Chumbawumba albums with one good song was an economic boom.
GREG HAMMER: That was pretty much the end of that era, because very soon afterwards, Napster really took hold in the public’s consciousness, and the consumer realized that they could get the music that that they wanted to hear for free.
NARRATION: It was on college campuses — with high speed internet that Napster really took off in the fall of ’99.
ARCHIVAL (MTV NEWS, 3-31-00):
REPORTER: How many MP3’s on your computer.
STUDENT: About 600.
STUDENT: Maybe like a hundred or something.
STUDENT: Uh, 6 or 7 thousand.
Napster, Napster, Napster.
It’s called file sharing, seen by some as the wave of the future.
ALI AYDAR: It was very exciting, we knew we were building something that was going to be big.
ARCHIVAL (MTV Music Awards, 9-27-00):
Ladies and gentlemen, creator of Napster, Shawn Fanning …
VIVIEN LEWIT (DIRECTOR, MUSIC CONTENT PARTNERSHIPS, YOUTUBE): When I first heard about Napster, I recall my impression having two different elements. One being, “This is incredible. It’s revolutionary and things will never be the same again in the music industry.” And the other being, “This is going to destroy the recording industry.
ARCHIVAL (ABC, 3-9-00):
ED POTTER: No longer do you have to go a store and plunk down money.
NARRATION: And so, months after Napster’s rise, the recording industry began a long legal battle to stop it.
ARCHIVAL (CBS, 7-27-00):
REPORTER: They are waging a war in the courts over who controls what artists create.
SHAWN FANNING: We’ve heard that we couldn’t survive before, when we had 700,000 members and when we had 17 million members.
ALI AYDAR: We felt pretty strongly that digital distribution was going to bring the industry closer to its customer and instead of killing it, they would take advantage of the value that it brought.
ARCHIVAL, (NBC, 7-11-00):
NEWS REPORT: But to record companies whose artists range from Tony Bennett to Metallica, this new technology in the wrong hands is simply stealing.
HILARY ROSEN (PRESIDENT AND CEO OF THE RECORDING INDUSTRY ASSOCIATION OF AMERICA): A business model based on infringement is not only morally wrong, but legally wrong.
NARRATION: At the time, the Recording Industry Association of America was reporting about 15 billion dollars a year of revenue in the US alone.
GREG HAMMER: Anybody with enough money could go and make a record. But that didn’t guarantee you getting into stores, which is the only place that you could actually buy that record. That was the power of the music business — the distribution.
NARRATION: The issue made its way to Capitol Hill.
ARCHIVAL (NBC, 7-27-00):
LARS ULRICH: Napster high-jacked our music without asking.
ARCHIVAL (NBC, 7-27-00):
HANK BARRY: A chorus of studies show that Napster users buy more records as a result of using Napster.
NARRATION: Hank Barry, a lawyer, came on to act as CEO as the fight intensified.
HANK BARRY (NAPSTER CEO, 2000-2002): We were trying to negotiate with the labels, we were trying to fight the court case, and we were trying to keep the system working all at the same time. We had a limited amount of time to make that happen and we just didn’t get that done within the period of time we had.
ARCHIVAL (CBS 7-27-00):
DAN RATHER: The free music service run by Napster was ordered to stop the music.
NARRATION: In July of 2001, after more than a year of legal battles, the Internet start-up – which at its peak had about 70 million registered users — shut down its entire network in response to court orders.
ALBHY GALUTEN: We accurately estimated that the courts would say, “You just don’t have the right to give away all this stuff.” And so we were perhaps a little smug and confident in the belief that the courts would say it’s not that and people would stop doing it. We didn’t really factor in the consumer adoption, the youthful lack of respect for copyright, and the anonymity would combine to make it pretty unstoppable as a model.
NARRATION: The industry may have crushed Napster, but the idea had taken hold and a flurry of other downloading services took its place
ARCHIVAL (NBC NIGHTLY NEWS, 9-1-04):
STUDENT: It’s free and it’s easy and it’s wrong yeah but a lot of people do it — pretty much everybody does.
NARRATION: Desperate to stem the tide — the labels upped the stakes and sued almost 20,000 people for using illegal downloading software.
BRITNEY SPEARS: Illegally downloading music is the same thing as going into the CD store and stealing the CD.
NARRATION: But CD sales continued to plummet, shuttering record stores across the country. So when Steve Jobs came to the table with plans for a new online music store, the major labels finally surrendered the thing they had fought so hard to maintain — the distribution.
ALBHY GALUTEN: You had only two choices. Either you don’t do a deal with Steve, in which case people continue to just email the MP3’s to their friends. Or you do a business with him, and he has a store, and then you can sell things.
ARCHIVAL (CBS, 5-03-03):
NEW REPORT: This week Apple computer launched its iTunes music store.
ARCHIVAL (CNN, 7-05-03):
NEWS REPORT: And they are hoping this is an answer to some of the piracy that is going on online.
NARRATION: Over the next several years, digital sales boomed.
ARCHIVAL (CNN, 7-31-07):
More than 3 billion songs…
NARRATION: But today even the Itunes model is threatened by the shifting sands of music distribution. Download sales are declining and online streaming services like Spotify have gained so much popularity that Apple has decided to launch its own streaming service.
GREG HAMMER: Who knows five years from now if anybody’s going to buy music anymore? But maybe they are streaming it, which you see on the Spotifys and-and the YouTubes of the world, those-those numbers keep going up and up and up.
**NARRATION:**A recent study found the most popular way for 12-to-24 year olds to discover new music is the online video website YouTube, where consumers upload and share music - some of which they don’t own the rights to.
ALI AYDAR:When YouTube first started, my view of YouTube was that it was actually worse than Napster. This should be easy to shut down.
NARRATION: But after legal challenges, the company emphasized its efforts to try to stop infringement, offering the copyright owner the chance to take a video down or run ads against it.
ALBHY GALUTEN: Many, many records are made by people in their garages, basements, their bedrooms. And the distribution is there. They’ll make a video. They’ll stick it on YouTube. And if it’s good, people will find it.
ARCHIVAL (MACKLEMORE AND RYAN LEWIS VIDEO):
I’m gonna pop some tags, only got $20 in my pocket…
VIVIEN LEWIT: You have an artist like Macklemore who was able to reach millions and millions of fans before getting to radio. He would have had a very difficult time achieving that if you were to rewind back to the ‘90s.
NARRATION: And while the industry has largely embraced online platforms – and their communities – as a form of distribution that can’t be ignored, the moneymaking potential has yet to pay off for most artists.
ROBERT ELLIS: I haven’t seen much money from record sales. Spotify and Pandora and all that stuff is great. But again the amount of money I receive from that is very small.
NARRATION: Robert Ellis is a singer songwriter who’s released critically acclaimed albums, and tours with the likes of Willie Nelson and Emmy Lou Harris.
ROBER ELLIS: In the last few years, we’ve been on the road pretty much non-stop. I think we did 290-something days last year. I would say touring represents probably 100% of my income. When I was a kid, if I had told myself what I was doing now, I would think I would be making a lot more money than I am, yeah.
NARRATION: But convincing a generation of consumers raised in a culture of free to begin paying for recorded music will be a tall task. And, just like Metallica 15 years ago, some of the industry’s top artists have their reservations about the new business model.
ARCHIVAL (ABC, GOOD MORNING AMERICA, 3-31-15):
NEWS ANCHOR: The artists are now the new co-owners of Tidal a music streaming service Jay Z bought in January with one major goal…to put control back in the hands of the artists.
GREG HAMMER: Music is as important, if not more important, than it’s ever been in people’s lives. I think the challenge is of finding ways to monetize that importance.
ARCHIVAL (FOX 29, 3-31-15):
NEWS ANCHOR: Not everything that Jay Z touches turns to gold… it appears the rapper’s tidal wave is crashing..
ARCHIVAL (CNBC, 6-9-15):
GUEST: Most of the listening on Spotify is for the free version. The amount of money that funnels back to the artist is nowhere near as much as they would otherwise get.
ALI AYDAR: Napster might have hurt recorded music sales. But it’s the responsibility of the industry to figure out how to extract their value out of each generation. This happens in every industry.
ARCHIVAL AUDIO (NPR, 2-27-09):
The Rocky Mountain News published its final edition…
ARCHIVAL AUDIO (NPR, 11-9-13):
Blockbuster Video is no more…
ARCHIVAL AUDIO (NPR, 7-19-11):
Borders is going into liquidation…
GREG HAMMER: Music was the first industry that really had to confront the idea of free content. Music was at the forefront of it, whether it liked it or not.