Digital Music

31 Digital Music Execs Sound Off On How P2P Battle Led To Music Industry Demise

File-sharing-networksA fascinating new report from Associate Professor Michael A. Carrier at Rutgers University School of Law, entitled “Copyright and Innovation: The Untold Story”, interviews 31 CEOs, company founders and VPs who have worked in digital music over the past 10 years. It illustrates the digital music landscape in the aftermath Napster’s shutdown, demonstrating how the battle between P2P and the music industry has stunted innovation, discouraged investment in the music technology sector, and ultimately led to a complicated copyright law-dominated environment that has widened the gap between technologists and music.

Among those interviewed include Hank Bank (former Napster CEO), Dalton Caldwell (Imeem founder), Kasian Franks (Seeqpod founder), Rob Glaser (Real Networks founder), David Hyman (former Gracenote CEO), Michael Merhej (AudioGalaxy founder), and Michael Robertson (founder of MP3Tunes), Hilary Rosen (former RIAA CEO) among others, as well as several other venture capitalists and label executives.

Carrier illustrates in the 63-page report, which was first spotted on TorrentFreak, that once Napster had lost the battle and was forced to shut down, venture capital funding for digital music “became a wasteland.” Some interviewees called the scene a “scorched earth kind of place” that housed a “graveyard of music companies,” as some go on to say in the report. Major labels began suing rampantly, so naturally, funding was hard to come by.

Some continued onward despite the lawsuits floating around, but those innovators seeking to get label approval found themselves in situations that were a bit tricky. Labels wouldn’t license if a startup didn’t have much traffic, but as soon as they would have solid numbers behind them, “they want to get paid for ‘infringement’ and the longer it takes to license you, the larger the ‘infringement’ number they can justify charging you,” as one interviewee mentions.

Interviewees also go on to mention how litigation could be described as a “Ponzi scheme”, as the money from settlements and other fees pulled from startups were used to fund the labels’ ongoing litigation strategy. The report notes more corruption from labels, as they would take “big, up-front fees” of “10, 20 million bucks” from startups they knew would fail.

Greed continued to plague the labels, even as those services that went to great lengths to avoid copyright issues and had millions of users with interest from high-level VCs were ordered to be shut down by the labels, rather than accepting “literally an offer of a blank check,” as one interviewee says.

The report goes on to describe the “very scary” scenarios labels presented with “multiple inch lawsuit for a couple billion bucks”. Things even became personal, as threats were extended to the families of innovators. One was even told it was “too bad” he had children “who are going to want to go to college and you’re not going to be able to pay for it.” Some threats even apparently became violent, with one interviewee speaking about “people being physically intimidated” and “being hung out of windows.”

For a download of Carrier’s full 63-page report, click here

Hisham Dahud is a Senior Analyst for Additionally, he is the head of Business Development for Fame House, LLC and an independent musician. Follow him on Twitter: @HishamDahud

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  1. This report was funded by Google to create a smoke screen to cover the fact that they are making billions in advertising revenue by directing their users to illegal download sites. Something they don’t want to be forced to give up doing.
    And, of course, many of the people interviewed have negative reactions because THEIR business models were unworkable. You don’t build something without considering the rights of the suppliers who own the product you are trying to sell.
    Ever since Napster most of the models that have failed have used the Napster template: ignore the law, built it any way, try to survive the incoming and eventually go down in flames. Shear stupidity.
    Almost as stupid as this ‘report’ because you don’t write a meaningful ‘report’ without trying insert just a tiniest bit of objectivity… unless, of course, you are engaging in yet another display of Google doublespeak.
    Associate Professor Michael A. Carrier has branded himself, forever, as just another useless Google lackie.

  2. The attacks against Google, launched in the wake of the SOPA protest, are becoming howlingly funny and predictable. (Hey, Google, where’s my paycheck!)
    For some guidance on where Google makes its serious coin, have a look at:
    The list of big keywords starts out with “insurance,” “loans,” “mortgage,” “Attorney,” “Credit.”
    “Music” and “movies” don’t make the top 20. Surprise: a lot of us use Google for a lot of research on non-entertainment topics.

  3. The whole saga is howlingly funny and kinda heartbreaking, but overall, I’ll be damned if I can find any easy answers, clear-cut bad guys or reliable narratives in terms of the decade long shitstorm the music industry just survived.
    So far this report has been very interesting. All reports are funded by someone and most opinions have sponsors — still, there’s a lot of interesting brainfood here.
    Most technologists are to happy to be apologists for piracy, and yet resent having their sophisticated and nuanced views stated so crudely. Meanwhile, most defenders of the humble musician excel at complaining in detail, and yet resent the technologists nagging point that they don’t have anything better to replace the current system with.
    Fingers get pointed, feelings get hurt and there is much LULZ to be had. Overall, a very entertaining time to be in the biz.
    Thanks for the reading material.

  4. @ Justin Boland : “they don’t have anything better to replace the current system with.”
    sure they do… it’s called “the law” which is why Google is on a tireless crusade in an attempt to change it… as they say in NJ, “no body, no crime.” Or at Google, “No Law, No Crime.”
    Unfortunately for Google, it appears unlikely copyright is going to be repealed, even if for the time being enforcement is delayed…

  5. This is an interesting but heavily loaded study. Essentially, Carrier interviewed a bunch of tech entrepreneurs who complained that the music industry had stopped them introducing fair and legal digital services. Well, they would say that, wouldn’t they? We only have their word for it, and Carrier doesn’t provide enough detail about their proposals for us to judge. But we do get an indication of what some of the participants consider reasonable (see page 19): the offer made by Napster of a legalised service in which users could make unlimited downloads – not streams – for $4.95 per month. On this basis the only practical limit to downloading would be the users’ download speed and their patience in pressing buttons. Within a month they could download thousands of albums, for less than 5 dollars in total, then cancel their subscription. Hardly surprising that the labels didn’t go for that one.
    Incidentally, no-one claims to have been dangled out of a window, or to have any first-hand knowledge of such incidents: it is just a rumor from the world of rap (page 49).


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