How Digital Piracy Shaped Modern Music (Part 1)
9 min read

How Digital Piracy Shaped Modern Music (Part 1)

Hello! On November 9th, I’ll be celebrating the 5th anniversary of the Penny Fractions newsletter in Ridgewood, Queens. The event will be a dual live podcast recording with Money 4 Nothing and Art & Labor along with some special guests. The event is free, so come get some food, buy a Topo Chico, and hang out. I haven’t done a live event in three years so I’m excited to see you folks if you can make it! Now, let’s go back to Y2K.

The music industry boomed throughout the 90s. Inflated CD prices, cable television promotion (MTV, VH1, BET, CMT), the flattening of radio through to the Telecommunication Act of 1996, increased label globalization, the big box store sale explosion, and the continued consolidation of previously fragmented business segments could all be thanked. In the United States, this led to recorded music becoming, adjusted for inflation, an over $20 billion business. However, many of these same factors, along with the first tech crash recession, helped accelerate the industry’s sudden collapse in the 00s. In that wake, rather than look internally, the blame squared on an old scapegoat: Piracy. I’ve written about the problematic narrative of piracy “destroying” recorded music and even spoke about it on the podcast Money 4 Nothing back in 2020. Still, in the next couple of issues, I wanted to explore how labels managed to subdue nearly every illicit online music platform, shape the legal framework for digital music, and still blame the industry’s multi-billion dollar collapse on college kids.

An often untold part of the collapse of the record industry is that the publishing and live music sectors held steady. Peter Tschmuck notes in his blog Music Business Research that the global publishing industry steadily increased from the mid-90s to the mid-2010s. Major publishers grew through acquisitions, so while mechanical royalties dipped down because of decreased CD sales, digital, sync, and performance held up throughout this period. The Death & Life of the Music Industry in the Digital Age by Jim Rogers makes similar observations about the live music industry, as revenue steadily increased during this supposed era of decline in the 00s. (Much of that can be placed on the consolidation under Live Nation, increasing ticket prices, etc.) Little of this is stated when a company like Napster is historized. The company is popularly understood to have been the tipping point that broke the back of the entire music industry. Despite the fact that CD sales in the United States peaked in the mid-90s, sales continued to rise in other markets like the United Kingdom and Japan. The 90s were a thrilling time for music, so let’s look at the company that allegedly ruined the party.

Shawn Fanning and Sean Parker founded Napster in June 1999 and quickly saw a sharp difference of opinion amongst top labels. The website allowed users to share files and amassed a vast library of music that could include the top-selling album in the country or obscurities that would’ve been lost to time. The scope of the music online appeared to be a great concern for labels, so rather quickly a number mobilized against the company. However, there wasn’t consensus on Napster’s impact, as BMG were the first to back away from the lawsuits, while their peers remained committed. (The litigious route didn't originate with Napster, as the RIAA a couple of years prior sued other download sites.) While these matters occupied courtrooms, artists were discovering novel ways of using this new technology to share music on their own terms and often to an online audience demographically receptive to such ideas. (People with disposable income or free time, i.e. often college students with superior internet access.)

Napster reportedly saw over 20 million users at its peak in early 2001 but it would ultimately be brought down through RIAA lawsuits building upon the industry’s traditional skepticism of “piracy” (i.e. producing material that it couldn’t make a penny off of). And by that point, two different groups of major labels were already preparing their own Napster alternatives PressPlay and MusicNet. Both were monthly subscriptions that allowed people to download and stream a limited amount of music. Even though neither effort succeeded, recorded music was not caught off guard by Napster and was already in the early stages of outlining the basic model that’d be forced upon pirate-turned-legit services in the years to come.

The post-tech-boom of the early 00s was a true transitional time. Warner Music Group got bought out by a cluster of private equity firms that produced thousands of layoffs. Label and publisher consolidation and increased financialization, which could be traced back to Thorne’s purchase of EMI back in 1979, continued in the 2000s. In the United States, the cost of promoting songs on the radio could reportedly cost up to seven figures, an absurd amount that put even more pressure on the single, and subsequent album, to succeed. The decision made by labels in the early 90s to eliminate the single format, and thus a lower price for fans to consume music, might’ve boosted album sales in the early 90s but only further justified digital purchases of $1 singles via legal platforms like the Apple Store once it was introduced in 2003. The decision to squeeze the retail options for buying music into only a nearly $20 CD or a hyper-discounted one at a big box store might've accelerated the customer’s complete abandonment of spending and instead opted for endless streams. While the record industry attempted to adjust to these bumpy times, it also vehemently attacked each new download platform that emerged.

The media buzz around Napster only attracted more attention to this space and created a perception that maybe there could be a real way to disrupt the music industry. Kazaa was created in early 2001 and taken over by Dutch company Consumer Empower, which would be taken to court by a music publisher before the year even ended. The lawsuit was ultimately dismissed, but the more attention the platform got, the more trouble arrived, and so the company attempted to pivot towards a for-pay streaming platform. (A proposal that Sony even suggested back in 1997!) That pivot wasn’t successful and the company, along with its customers, received a flood of lawsuits by the Record Industry of America Association (RIAA) that for Kazaa would ultimately end up costing them $100 million to major labels. Not a bad payout for major labels, who at that point just saw a billion dollars of digital music revenue crossed for the first time in 2006.

Grokster, also founded in 2001, saw a similar fate with swift lawsuits and eventually folded by 2005 after the Supreme Court ruled the platform was engaging in illegal file-sharing. LimeWire, launched in 2000, outlasted a number of peers but saw the same legal pushback. The company would at one point end up with a $75 trillion lawsuit by the RIAA in an absurd markup of every alleged bit of piracy on the platform. Alex Sayf Cummings in Democracy of Sound, a wonderful book about the history of American music piracy and copyright that goes back to the mid-19th century, wrote about the case: “It reflects not just the industry’s penchant for exaggerating figures, but the power of new media to make a wider variety music availability at a greater order of magnitude than earlier technologies.”

The model for the RIAA and increasingly for most of the recorded and publishing industry was to sue first and ask questions later. Little room was given to allow for the sharing of non-commercial works or more personal usage – anyone who touched the platform was tarred with the same brush of aggressive copyright infringement that deserved the full weight of the law. Instead, as Cummings writes, the record industry, with publishers and other relevant groups alongside, assumed that each download or stream was a law being broken that must be accounted for, even if such accounting would imply the value of music to be greater than the world's. The policy proposed a legal standard that is beyond anything codified into law in either the 19th or 20th century. And that’s despite the (at the time) low broadband penetration in American households, making it hard to quantify just how much this was directly keeping dollars from being spent on records. Though it's hard to imagine that the record industry would admit leaving potentially many multiples of its own value out there just ready to be absorbed by scoundrel pirates.  

The uniformity of the offensive against these platforms mirrors the global piracy offensive that Cummings outlines in his book. In the late 20th century, the American and British recording industries used neocolonial tactics to establish protections in countries that didn’t already have western-leaning copyright laws. The usage of Interpol and other international law enforcement groups to seize millions of records across the globe might’ve mirrored previous efforts in the United States, but it was far more vindictive. Whereas in the United States there was some leniency given towards less-commercial music production operated in the United States (like New York City’s thriving mixtape culture in the 90s or the self-sustained Grateful Dead tape-sharing culture), forgiveness wasn't given to emerging markets where government agencies were expected to do the bidding of these multinational firms. Even when proving the alleged millions of dollars being lost was hard to demonstrate.

The record industry in the early 00s took a pretty hard stance against these platforms by only seeing them as pure harm, a stance that meaningfully contrasts with how previous forms of illicit physical recordings were treated. Part of that response can be understood as the business was in recession and there was no immediate solution to make money from these new technologies beyond lawsuits. In the next issue, we'll get into the arrival of Myspace and YouTube which offered many of the same concerns about access to unlicensed music, except that labels and publishers were able to sign acceptable deals. So, even before Spotify was founded, the groundwork for digital music was affirmed. Peer-to-peer sharing was a third rail that could never be touched and streaming, though contentious, was now within the bounds. This provided a future framework for the record industry, with publishing riding the coattails, to adjudicate the next fifteen years with its legal and illegal counterparts.

Unheard Labor

The initial agreement announced for Phonorecord IV, between DIMA and the NMPA, caught a number of folks off guard, especially after the years of litigation around the Phonorecord III ruling. The early reaction appeared fairly positive, but Chris Castle at the Music Technology Policy blog continues to the point that in an era of high inflation, these increases should be connected to cost of living increases, rather than the flat increase that was agreed upon by DIMA and the NMPA. This agreement isn’t set in stone yet; I’d certainly expect some more back-and-forth within the songwriter community over this. Remaining in the world of the U.S. government, a senate bill was introduced that would allow recording artists to be paid for radio plays. It’s been introduced many times over the last decade, so we’ll see if the bill can cross the finish line.

A Note of Financialization

A challenger appears in the world of song assets. The blackx Music Fund announced it raised $100 million from Prime Asia Asset Management, a Singaporean family office. No initial deals were announced but the quotes from the former label execs manning the companies said they’d be unsurprisingly eyeing the Asian market. Our friends over at Hipgnosis announced a $700 million debt refinancing plan through 2027 with City National Bank, also known as the “Bank of the Stars”. Even as the market turns down, Hipgnosis cannot help but find itself in the headlines.

Then in the acquisition space, Concord, after failing to be bought, is keeping its pocketbook open by now dropping $300 million on the recording and publishing rights from Genesis. Pophouse Entertainment, who earlier this year picked up the catalog of Swedish House Mafia, bought 75% of the mastering recordings and publishing from the late DJ Avicii. Last, Triller raised $310 million from GEM (Global Emerging Markets), a Luxembourg-based alternative investment firm. None of their other investments are related to music, tech IPOs are at decade-plus lows, and Triller is currently under a lawsuit from Sony and is known for misreporting their own usage numbers. Solid buy!

‘There’s Endless Choice, But You’re Not Listening’: Fans Quitting Spotify to Save Their Love of Music - The Guardian

Liz Pelly interviewed a number of people who’ve backed away from big streaming platforms, and I appreciate the increased reflection on how one consumes music. She is also writing a book on the recent history of music streaming and its impact. Certainly excited to read it!

Working Wherever We May - Dada Drummer Almanach / Musicians are Back on the Road, but Every Day is a Gamble - NPR

A couple of different reflections on the ongoing difficulties with touring during a pandemic and high inflation.

‘It Feels Harder Than Ever’: Independent Radio Stations Under Threat From Rising Bills - The Guardian

A nice story examining the difficulties facing Britain's independent radio, while the country is going through economic turmoil and still recovering from the coronavirus pandemic.

What the Hell is Twitch Doing - Hasan Piker

Twitch, an unprofitable part of Amazon, is right now attempting to figure out how to be less of a money hole. Unfortunately, the solutions appear to just be taking more of a cut of potential revenue from creators, which popular creators like Hasan Piker aren’t taking too lightly. I’ve watched Hasan’s work for years but I always find the candidness of YouTube and Twitch creators during moments of platform changes always worth heeding.

Podcasting is Just Radio Now - Vulture

Remember podcasts? An online audio medium introduced in the mid-00s that every few years got a bit of hype (See: Serial, The Joe Rogan Experience) but then quickly fell back. Nick Quah, a long-time writer on the medium, dives deep into what’s now an obvious malaise that’s set upon this particular industry. I’ve listened to podcasts since 2006, over half of my life, but the medium’s mainstream limits always felt fairly obvious, despite the millions shoved into various startups and spent on inflated acquisitions over the last five years.

We’re in the Era of Creator Culture - Social Media Collective

The summer interns from Microsoft’s Social Media Collective explored a number of insights about “content creators” I haven’t seen much discussed in more mainstream discourses. A few takeaways included reinforcing the different contexts that this labor takes place in, how content creators relate to opaque platforms, and the amount of work really required to succeed that’s often downplayed.