It’s safe to say the music business wasn’t prepared for what happened in 1999. The emergence of file-sharing program Napster hit record labels like a ton of bricks, rocking their then-comfortable, $18 CD-selling worlds. The next few years weren’t so great either, even after Napster’s demise and the emergence of the iPod and iTunes. Let consumers buy just one song instead of an entire album? Woof, there go the limousines and gigantic expense accounts.
If reliving this thrillingly terrifying era is your thing, BBC music journalist Matt Everitt has put together an oral history dubbed “The Pirate Ship” featuring interviews from the execs who were there: UMG’s Rob Wells, RCA’s Korda Marshall, WMG’s Roger Ames and EMI’s Jay Samit, to name a few. Part one (highlights below) focuses on the end of the CD and how the industry reacted to illegal file-sharing phenomenon. Part two will zero in on legal streaming services.
By the late 1990s, the CD was still king…
Daniel Glass (founder/president, Glassnote Entertainment Group): “There was a moment when we would sell a 100,000 albums a day on Vanilla Ice, 60,000 albums a day on Wilson Phillips, 15-30,000 albums a day on Blur. This is one distributor! It was unbelievable.”
Korda Marshall (former head of A&R at RCA Records): “CDs were a lovely point, what’s the Smiths song, ‘re-package, re-promote, re-market… re-exploit’ [referring to ‘Paint a Vulgar Picture’]. The CD coming in transformed the value chain in the business and all those companies could re-sell their old catalog on new carriers for a vast amount of money.”
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Rob Wells (former head of digital at Universal Music Group): “Glory days. The CD was… there was a lot of money for the business back then. Yeah, and the beauty of it was, I went in at the peak. I joined BMG at the peak of the industry’s powers… I was in a planning meeting and it became prohibitively expensive to mail postcards to Take That fans, and I said ‘well, can’t we send them an email?’ there was a deathly silence…. I think a lack of understanding, vision for what we were actually doing. You know, the power of owning the relationship with the consumer is still something the major labels are wrestling with right now.”
And then Napster happened…
Roger Ames (former CEO of Warner Music Group): “I sat in a New York cigar bar with an analyst and he said ‘My nephew just showed me this service.’ And I said describe it to me. ‘All the music in the world is gonna be for free, and… I went, well that’s the end of the record business.'”
Jay Samit (former evp of new media at EMI): “You know the Napster guys came and visited me almost day one. I said what’s your business model and they didn’t have one. They just figured they would crush everybody. You had billions of songs being stolen, you could see the traffic on the peer-to-peer sites. How do you combat that? That was the challenge — there was no legitimate store to buy things. So they were uncharted waters.”
Hank Barry (former Napster CEO), on a 2000 meeting between labels and Napster: “The meeting probably lasted an hour… Yes, many spreadsheets, many economical models about how we could make it work on a monthly fee basis before they decided to break off the discussion… you have to believe that that meeting was super crucial, that the people in that room had power, and I’m not so sure they did. There was no deal with Napster that was going to be palatable to the record executives.”
Brian Message (artist manager, Radiohead): “I would say it was a mistake at the time. But the policy from both sides of the Atlantic, from Napster going forward even to today tends still to be driven from a position of fear rather than opportunity. There’s definitely a mindset driven by the corporate lawyers who wanted to protect their rights and copyrights.”
Jeff Taylor (CEO of BPI): “There are many who will say that the music industry was hopelessly slow, and there’s some truth in that. But Napster’s view was that they were perfectly entitled to build a business off the back of music without paying anything to the music industry. And I think the music industry was right to stand up for that, because there was absolutely no way the industry was going to be able to invest the extraordinary amounts of money it does every year into artists if something like Napster went unchallenged.”
After Napster’s collapse in 2001, Apple introduced its first MP3 player, the iPod.
Mark Mulligan (industry analyst): “When Steve Jobs came to the record labels, he actually had a bit of a problem. The iPod actually wasn’t doing that well until the iTunes music store came along. It was like putting fuel into the engine. It just made it make sense… even though the record labels did not realize it at the time, Apple was their perfect partner.”
Samit: “The moment you could just buy one song instead of an album, it went from a $15 purchase to a $1 purchase meant that you lost most of business. Then when you take the fact that the only things that people are stealing is the one song they wanted, you now go from everything to zero. Or from a $40 billion industry to a $20 billion industry, so it was devastatingly quick.”
Peter Mensch (artist manager, Metallica): “My only personal feeling is that Steve Jobs didn’t give us the option to keep our albums tied together. The record business didn’t think to ask him that. I would’ve like the option that if you wanted to buy a Metallica album, you couldn’t buy its component single you had to buy the album… The record business back then just said, ‘Oh it’s an add-on business to the CDs. Who cares. He wants us to just sell the tracks? Okay.'”
But even with Napster’s demise, piracy didn’t go away. So the RIAA launched a wave of lawsuits against file-sharers. The BPI soon followed in the U.K…
Ames: “But the seeds were already sown. Volume fell as a result of price going down, piracy coming up, reduced marketing budgets because of less money coming in. There’s no god-given right for the record business to always be luxuriated in Rolls Royces and limos. It is what it is.”
Debbie Southwood-Smith (former vp of A&R at Interscope): “My travel requests were starting to be denied. And then I brought in TV on the Radio in for a meeting and at that point I saw the writing on the wall but I didn’t want to believe it. I wanted to believe I had a job in the record industry for the rest of my life and it was just going to go on forever.”
Listen to the BBC’s “The Pirate Ship” here.