1999-2019: rekkid biz before the fall?

What does the recorded music business in the Anglosphere of 1999 look like from a viewpoint of 20 years later? Big CDs sold millions, maybe, of copies the first week at a cost of $16.99 or so, music video directors spent loads of do$h ( hargef against the band's account, match) on elaborate music videos, promo copies everywhere...If you could take a trip through time to that Prince of a yeat...what would you do? Say to the folks (in the music biz, I mean).back then?
No time paradoxes or investing in ______, but what would you think? Would you have a Pompeii.pre-volcano/Joe-El pre-the rocket/Wall Street June 1929 " You fools! Can't you SEE?!! inner reaction? Tell me about it. Let it all out.

 

The wheels were already in motion. You need to go back another decade before the CD. When CDs were sold as a premium product over LPs and cassettes, they set a precedent, the paradigm shifted. A cassette sold for the price of an LP. If you wanted the CD, you paid $3-$4 more.

Now let's go forward to the time you suggest. How do you market the new medium of choice? There is a parallel push for SACD and DVD-A to replace the redbook CD. Gen-Xers are now the targeted demographic for spending. Unlike the BetaMax/VHS battle for dominance in the movie rental business, there is a fallback position. Gen-Xers didn't want to pay more for the new medium. And they didn't have to, they could just kept their CDs. Behind the scenes, the kids with no money (the Millennials) are just downloading the stuff at a lower quality for free. Meanwhile the iPod is on the horizon where singles would be favored over full album sales over iTunes. Mistakes were made.

There were those that tried. The Rolling Stones released the Decca catalog on hybrid SACD without a markup. Pink Floyd and Roxy Music did too. The new up and coming artist Norah Jones released a Hybrid SACD without markup. But Sony balked. Sony had control of Pink Floyd's releases after Dark Side of the Moon. There wouldn't be an SACD release of Wish You Were Here until it was released by record store in Kansas. If you recall (maybe you don't), there were issues with the technology of multi-layer optical discs. The technology upon release wasn't fully mature. Sony could release a hybrid SACD with a redbook layer. But they didn't want to. Instead they pushed for Multi-Channel. They had a choice go Stereo Hybrid or go full DSD with both Stereo/5.1. Sony opted away from the Stereo Hybrid. In a world where people are choosing to listen to lossy stereo through earbuds, Sony thinks pricey high definition multi-channel is the right direction. Sony couldn't have been more wrong.

 

Great post - I learnt a lot I didn’t know. Sony were pushing multi-channel when the iPod broke big? That’s just bizarre.

 

I know it’s slightly after 1999 but, when Napster went bankrupt, how would music buyers have reacted if you told them about a thing called Spotify? And how would Metallica have reacted?

 

The same thing I was saying to them in meetings, and in things I wrote back then, when people were skeptical of the impact the internet was having on the music business -- embrace it, work like hell to find a way to make it work for you, because it's going to change your business forever.

People were skeptical, or scared. I understood why the music industry guys were scared. They were making money hand over fist and had a vast legacy business to protect. By '99 I'm not sure they were as skeptical as they had been a couple of years before, but they were constrained by their companies. When a friend of mine who ran a catalog department at a major label had me -- then an entrepreneur in the media business -- in for a meeting. All he wanted to do was set up a website devoted to all this old R&B that he loved and did all these catalog releases on. But the label's legal department would allow him to link to outside sites that had X, Y, Z content on it, they wouldn't let him post audio. It was like the movie business when home video tape came along -- he was so hamstrung, he basically couldn't use the internet to do anything but publish the company logo, the company address, and press releases. We did nothing. That was maybe '96.

In April 1998, I wrote a business section story for a major newspaper about kids doing MP3 file sharing in college. "Internet CD Copying Tests Music Industry," the editor headlined it. I remember the guy scoffing incredulously, "These kids aren't really going to bring down the record industry!" It was like pulling teeth getting him to run the story. In they end they cut the thing in half and ran it way in the back of the business section. There was an old guard at the time in the media business that absolutely was whistling past the graveyard and refused to even consider the impact of what was happening. And then there were young turks and true believers who were declaring revolution. I was kind of caught in the middle. I was reporting on the industry and running my own internet start up, I was a little older than a lot of the start up kids and inherently skeptical of a lot of their beliefs about "better living through technology," but I was also younger (and definitely on the outside looking in) than a lot of the big, old line media guys. But by 1999, if you didn't see the tsunami coming, you were being willfully ignorant.

By 1998, cable systems and phone companies were offering high speed, always-on internet connections at home, that was the last straw, before that music online was online really practical in college where students were on college T1 lines, or at work. 14.4 baud dial-up was state-of-the-art for home users.

By 1999, Napster arrived -- the celestial jukebox that a lot of folks in the tech biz had been dreaming of, was here.

I wouldn't say it was too late at that point for the record companies to right the ship, but the ship certainly had sailed and most of them were just standing on the dock waving goodbye. Of course shutting down piracy was a first priority. But they were still slow to race to make music available for digital network delivery, and definitely loath to invest in network delivery technology or embrace a direct-to-consumer ethos. They basically waited for Apple to come along and create iTunes in 2003, then handed the keys to pricing and distribution and delivery to Steve Jobs.

But I sympathize. While the industry certainly could have been much quicker to embrace digital networked music delivery and subscription models for music, in the end I'm not sure there's anything more the industry could have done to forestall the giant contraction that the file-sharing era brought about. Back in the mid 1990s and early 2000s, people just weren't willing to pay for content online.

In the post-Netflix world, in the age of high speed cellular data and smartphones, here, now, 25 years after the first commercial explosion of the consumer internet (which is basically and entire generational turnover), paying subscription fees for content and services delivered online line is old hat. Everyone does it. No one resists it. It's just the normal course of business. And so, now, the music industry is growing again for the first time in a generation because people are adopting paid streaming at an enormously fast rate.

But it wasn't like that back at the turn of the millennium. Nobody was willing to pay for content then. Paid streaming schemes have been around forever. Rhapsody launched as a paid online music streaming service in 2000 or 2001. Pandora too around the same time. Hell, Spotify launched in 2006. Emusic, remember that, a subscription service for downable music. I was a subscriber for quite a few years, launched in 1998. But it took nearly 20 years for those kinds of services to start growing and generating revenue sufficient to offset declines in physical media sales.

A big part of that was the profound impact of Netflix on consumers, the Netflix Effect that's been heavily discussed in business lit, people becoming willing to pay online for content in a way that they hadn't been a generation before. But another big part of that is the rise of the smart phone and all-you-can-eat high speed data plans. Not only was there no bit torrent file sharing on the phones and the cell nets, but everybody had a device in their pockets that functioned like their transistor radios or their Walkmen or their iPods had.

In the end, I'm not sure the industry contraction and pain of the 2000s was entirely avoidable.