Indie Labels

How Record Labels Screwed Up The Music Industry, And How Spotify, Apple Saved Them

1ALTERNATIVE TAKE: Mike Masnick explores the sordid history of how the record labels' behavior in the early days of the internet literally brought the music industry to its knees, and how these same labels have been saved by the tech industry led by Apple and Spotify.


By Mike Masnick from Techdirt

If you've been following how much the record labels stumbled around the internet for the past couple of decades, then you know the basics here. But time has a way of erasing some of the nuances of history, and I find it incredible to watch the RIAA and the record labels these days walking around proudly acting as if they were the ones who "saved" the music industry by embracing streaming services that now make up the bulk of the recording industry's revenues. Indeed, as we've pointed out for years, the recording industry has a very long history of overvaluing the music and undervaluing the services that people want. They've spent so long insisting that the music is the sole source of the value of what they produce, that they always downplay (or entirely erase) the rest of the equation: getting the music to fans in a manner that is convenient, reasonable, and non-burdensome. Instead, they always focus on killing the golden goose – insisting that any successful music tech service pay them more and more until they're squeezed dry.

2Over at Motherboard, Ernie Smith, has a good history of how the recording industry screwed up streaming in the early days (unfortunately he does what most people do and refers to what's really the "recording industry" as the "music industry" — and also simplifies the history to be just one round of mistakes, rather than many, many mistakes leaving a graveyard of dead tech companies in its wake — but the overall article is still excellent). It's a very instructive piece in detailing exactly how the record label bosses were so focused on making sure that they had control and limits, that they didn't care at all about providing a service that people actually wanted. Much of it focuses on the two idiotic music label-approved streaming services that the industry tried to launch MusicNet and PressPlay (which we dubbed MusicNot and PressPause way back in 2001). Smith details how both services were built entirely focused on "how do we protect our revenue stream" rather than "how do we serve the customer." Thus, you had lots of DRM and lots of stupid limits:

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.

Incredibly, inside the industry, executives so believed their own bullshit that they really thought these consumer-unfriendly services would win over piracy:

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.’”

If you don't remember Doug Morris, he was the guy who, back in 2007, gave a stunning interview where he insisted that the reason why the labels missed the boat on the internet was… because they didn't know anyone who understood technology and then blatantly admitted that he didn't know how to hire someone who would have understood technology. To me, that seemed like evidence for why the board should have fired him and brought in someone who actually understood the market. For Morris it just meant he remained a revered leader of the recording industry.

But really the thing that screams out through Smith's piece is the same old thing: the record labels seem to believe that the only thing that matters — the only thing that provides any value at all — is the music (which, coincidentally, is the one thing they have some element of control over thanks to copyright). And thus, the idea that the technology or service matters, or that making a service that people actually want is considered barely even worth considering.

Indeed, reading through the article, it basically shows how the tech industry– in the form of Apple and Spotify– more or less rescued the recording industry from their own incompetence. And the incredible thing today is that the record labels still whine and complain that the tech industry that saved them is "taking advantage" of them, rather than showing them the way forward.

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  1. I must disagree with just about all written here.
    The music industry does not “overvalue” music. It’s not a commodity; it’s a luxury product. It has the value that the seller sets on it.
    As for DRM, there should be DRM for music, to prevent thievery, bootlegging, piracy. And there should be serious consistent enforcement and penalties against those who pirate. Note how the tech industry (‘information wants to be free”) protects their own patents, algorithms, software. Note how the film/TV industry use DRM. Why is music industry not allowed to protect itself?

  2. ” it basically shows how the tech industry– in the form of Apple and Spotify– more or less rescued the recording industry from their own incompetence.”
    So the tech industry provides the “cure”…for the disease it created. It’s the tech industry which enabled the widespread piracy that wrecked the music industry, from CD-rippers to MP3 players to file-sharing. The tech industry got rich….by exploiting the mere “content” and enabling its widespread thievery. So yes, the music industry is right to push back and demand its “content” be valued. Who would want to the tech industry’s toys if there were no ‘content’ for them?

  3. I’m sorry but who are these 2 stooges that replied? Tech made the record industry in the first place and the major record industry was too drugged up to know how to deal with piracy. Music is not a luxury item and never has been. It thrived on teens and kids buying the product so the price point had to reflect that demographic. Music streaming has been a success but SHOULD be run by the industry and not 3rd parties. Allowing others to dictate how you distribute your product is a sign of your your stupidity and in the early days of the Internet and still to this day the industry (record companies) still do not grasp this. It’s a no brainer for the BPI and other bodies to form a global delivery network but they were drunk on CD money and all the badness they were doing behind the scenes. Now streaming is established we shall see how it pans out but the end result is simple. Spotify and Apple will buy record companies and show how it should be done.

  4. Most obnoxious title ever. Further proof that this blog has financial ties to Spotify.

  5. Masnick. What a shit show. Yes, the labels blew it. They allowed themselves to be bribed by Spotify and the hooligans from u-torrent. And they got their pay day. Make it last boys, because the world is not embracing paying for subscriptions, yet Spotify continues to insist on having a free program.
    You’d think after they cashed out, they’d be interested in building a profitable, sustainable business, but apparently not.
    Eventually, someone will tell them how to pivot and use their subscriber base to build a “new” business and music will be left in the tracks, like the road kill it was always considered.

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