Sonic Boom: Napster, P2P and the Battle for the Future of Music

NAPSTER, MP3 AND THE NEW PIONEERS OF MUSIC

JOHN ALDERMAN

Foreword by

EVAN I. SCHWARTZ

Preface by

HERBIE HANCOCK

DEDICATION

Dedicated to Ernest S. Alderman,for many years of support.

CONTENTS

Cover

Title Page

Dedication

Foreword

Preface

Introduction

Chapter 1: Wave of Change

Chapter 2: New World Order

Chapter 3: A Culture of Mutation: The Rising Infrastructure

Chapter 4: Big Breaks and Windfalls

Chapter 5: The Established Order

Chapter 6: A Star Is Born

Chapter 7: No One to Blame

Chapter 8: Out of the Bottle and into Your Ear

Chapter 9: A Pyrrhic Victory?

Index

Acknowledgments

About the Author

Notes

Copyright

About the Publisher

FOREWORD

BY EVAN I. SCHWARTZ

My first epiphany over MP3, Napster, and the like happened in the Bulldog Café, a smoky bar-cum-Internet joint on Amsterdam’s Leidesplein. I had deposited six guilders into the machine and was deleting spam and trading dotcom stocks when a young British bloke pulled up next to me. We got to talking about the Net, and the guy, named Darren, told me that he has six gigabytes of music files on his hard drive at home. I was instantly impressed.

Turns out, Darren was a drummer in an indie rock band, and this is how he exposes himself to new music, especially tunes from his favorite band, The Presidents of the United States of America, a Seattle trio that he feels has a particularly amusing song called “Peaches.” Just then, his buddy, the guitarist and singer in his band, stepped forward and joined him, harmonizing with their authentic English rock accents: “Moving to the country, gonna eat a lot of peaches. Moving to the country, gonna eat a lot of peaches.”

The two also use the Net to distribute and promote their own music. As a result, they have developed a modest following around their hometown in Devon, in the southwest of England, and have used their online status to get gigs, including one playing at the Cavern Club.

“The Cavern Club?” I asked, “Isn’t that the place in Hamburg where the Beatles got their start?”

“No, no,” said Darren, “The original Cavern Club was in Liverpool. Now we have one near us.” The guitarist nodded his head in agreement.

“I thought it was in Hamburg,” I said. “Why don’t we just look it up online?”

Not sure where to start, I just typed in www.beatles.com. Up came a notice that this site was reserved for future use by Apple Corps, Ltd.

“Wow,” I said. “That’s interesting.”

“Apple?” said Darren. “What does a computer company have to do with the Beatles?” The guitarist had a similarly puzzled expression.

“You guys can’t be serious,” I said. “You’re musicians from England, and you don’t know the relationship between Apple and the Beatles?”

Now, I’m not one of those 1960s guys. I was swishing around in a uterus somewhere when the Beatles played Ed Sullivan. But I am old enough to have spent a part of my youth watching apples spinning around turntables while memorizing the lyrics to Sgt. Pepper’s. Even my Beatle CDs have the little Apple logo on it. But then it struck me: Not only have these guys never probably owned an album, but they probably don’t even think in terms of CDs or albums. Songs to them are listed on screens, then downloaded and played. It was different than what I was used to. And when I ran this theory by them, they agreed that while they are keenly interested in music, they weren’t much interested in knowing which song was on which album or about record labels at all. They had a new way of thinking about music.

This, to me, was an even bigger revelation than the news nearly a year earlier that one of my favorite bands in the world, They Might Be Giants, would post MP3 files on Yahoo and thus become the first major label band to offer a new album for initial release on the Internet. Like everyone else, my question was: How are they going to make money from this?

But since then, I’ve concluded that such artists are probably going to gain more from these new online and wireless formats than they will lose due to so-called copyright infringement. Listening to the new TMBG songs only made me want to go see the band play those songs.

Then it occurred to me that what is just as valuable as copyright—if not more so—is an artist’s trademark. They Might Be Giants was savvy enough to file for a trademark on their name, protecting the identity of their performance services, way back in 1990, around the time of their classic CD release, Flood. The Beatles, by contrast, didn’t have their first U.S. trademark registered until 1993. (It was filed, incidentally, by Apple Corps, Ltd.) Anyone can check whether favorite artists have filed for trademarks, simply by searching the official trademark database at www.uspto.gov.

My point is this: Artists who grumble about copyright infringement but fail to trademark their own names don’t know the value of their own work.

If you want to understand the rising importance of trademarks and the sinking importance of copyright, just talk to William R. Bradley, a partner with Glankler Brown, the Memphis law firm that represents Elvis Presley Enterprises, Inc., which was created by the late singer’s estate to make money from his intellectual property. “The Net poses a real challenge to copyright,” Bradley says. “The rights to protect against unauthorized reproduction are simply too hard to enforce. You’ll be chasing everybody.”

To better protect and serve Elvis, the estate in recent years has been on a trademark tear. It first trademarked the name Elvis Presley and his Graceland mansion in the mid-1980s. Then the company moved to trademark Elvis’s hit songs, even though Elvis didn’t actually write any of them. In the mid-1990s, the company trademarked “Heartbreak Hotel” for a licensed restaurant chain, then for use on pants, shorts, shirts, sweatshirts, jackets, hats, and socks, and then on shot glasses, martini glasses, goblets, and tumblers. Turns out, there is money to be made in such officially licensed stuff.

So now, the estate is moving to trademark “All Shook Up” for use on key chains, cigarette lighters, Christmas tree ornaments, float pens, and snow globes. Also in the works are “Love Me Tender” spoons, bumper stickers, and golf balls, as well as trademarks for merchandise bearing the marks “Don’t Be Cruel,” “Hound Dog,” “Jail-house Rock,” and of course “Blue Suede Shoes,” which alas may eventually be used to brand everything except navy leather footwear.

All this has symbolic significance because copyright law affords no protection whatsoever to song titles, album titles, book titles, or movie titles. Remember, a copyright simply protects a unique expression. I can release an album tomorrow called Sgt. Pepper’s Lonely Hearts Club Band. I can market a movie called Gone with the Wind. I can publish a book called Harry Potter. And I can record a song called “Margaritaville.” As long as I’m not copying someone else’s unique expression, no one can stop me. However, if I wanted to make Sgt. Pepper’s cocktail sauce, Gone with the Wind foot powder, a Harry Potter magic wand, or “Margaritaville” brand tequila, I may encounter some serious legal turbulence.

More importantly, if I wanted to advertise my performance services—give a Harry Potter reading or a Sgt. Pepper’s concert—I’d probably also encounter some legal roadblocks. This is how trademarks can work to protect copyrights and extract additional value from them. And this is why trademarks are so important to artists, writers, musicians, and other producers of intellectual property, even though most are only now coming to realize this. Sgt. Pepper’s was never trademarked by the Beatles, but Harry Potter is vigorously trademarked in several categories of goods and services. And Jimmy Buffett is already kicking back and collecting royalties from officially licensed tequila. Nowadays, trademarks are simply much easier to enforce than are copyrights.

Once you begin to feel the power of trademarks, you’ll see that something like Napster can actually help generate income. If you’re an artist whose intellectual property is being swapped around for free online, then every download can potentially enhance the awareness of your trademarks, including your name and the titles of your works. This is precisely why so many unestablished artists are fully supportive of Napster. They know that any increased awareness of their songs might lead to interest not only in purchasing their CDs but in their trademarked performance services, their brand.

A former Grateful Dead lyricist, John Perry Barlow, likes to say that intellectual property is a misnomer, that it’s not really property at all, but should be thought of more as an intellectual relationship between the artist and the audience. As a writer, I don’t think I’d go so far as to renounce all of my property rights. But I do believe strongly in the relationship thing. And I believe the two can coexist.

And so John Alderman’s book couldn’t have arrived at a better time. In addition to being a great story in itself, Sonic Boom details the new rebellion in rock, defines the raging conflicts posed by new technology, and points the way toward striking a new balance between property and relationships. Hopefully, established artists will be able to adapt to this new music environment. The up-and-coming ones already seem to be well on their way. Those blokes from Devon, wherever they may be right now, are recording and have already played at their local Cavern Club. Maybe they’ll even make it to the original one—in Liverpool.

PREFACE

BY HERBIE HANCOCK

I’m deeply concerned about the outcome of the online music conflict, and with good reason: playing music happens to be my livelihood. Now the Internet comes along and offers not only wonderful promise and incredibly seductive dangers, but it also is helping to inflame long-running conflicts within the current music distribution system. Sonic Boom documents both the possibilities and the pitfalls, as it points to the tough choices facing all sides of online music players. Like others in my profession, I make the best music I can, drawing from experience, years of practice, and plenty of dues paid. In return, audiences seek out and listen to my recordings or attend live performances, mostly paying for the privilege. In the middle of that relationship stands the record company, hopefully making sure that listeners get a chance to hear me, so that I am able to continue my career doing what I love.

For the hard work involved in being a middleman, the label is certainly entitled to a decent profit. But not a killing. To make huge amounts of money on the backs of artists who are not fairly compensated sours the relationship and creates bad will that lasts a long time. Believe me, I’m not happy about the business model that the record companies have been running until now. They have proven again and again that they are far from angels, far from having even a casual interest in giving artists and songwriters a fair share. They have been ripping off artists, writers, and the public for close to a century, to the point where I can honestly say I don’t trust them at all. Knowing what they do about past bad faith makes artists bristle when the industry says it’s just trying to “defend artists’ rights.” Who wouldn’t resent being used as a pawn this way?

Napster, on the other hand, is no solution. So far, it’s even worse than the labels. On the way to making millions for its owners and investors, Napster has yet to give anything to artists other than the chance to spread their music, for free, and whether they like it or not. Its supporters hide behind claims that labels misuse artists and consumers, as if that entitled them to take everything they want absolutely free. Excuse me, but just because record executives give artists a bad deal doesn’t mean that everyone else can then go and do worse. Although the appeal to consumers is obvious—who wouldn’t want free music?—the law, and common morality, forbids stealing. I’m not afraid of technology, and I hope that a system can be worked out that enables consumers that would also reward artists. Maybe this is even the beginning of what might grow into something great. I’m still a little worried. Looking at the past behavior on either side of RIAA vs. Napster makes it hard to get behind any new industry plans for the future.

I understand that the RIAA’s idea is to shut Napster down, or force them into legitimate business deals, such as Bertelsmann has proposed. What I’d like to know is what these deals will mean for musicians, singers, and songwriters—the people without whom there would be nothing to fight over, nothing for these multinational companies to make money from, and nothing for music lovers to enjoy. I’d feel like a fool if Napster were shut down or forced into a deal, and the courts gave millions to the record companies but the artists received zilch.

If the RIAA gets some kind of injunction or other legal action supported by the courts that will allow the artists and writers to have a choice regarding how their music is distributed on the Net, then that is a great and positive step. If there is a great deal of money to go to the record companies and the RIAA has no idea how those labels will compensate artists, then a big gaping hole is left to fester. Who represents artists in this picture? So far, it seems like no one.

INTRODUCTION

The advent of the Internet has been a relentless series of wrenching headaches and embarrassing mistakes for the music industry. It has also allowed unprecedented worldwide distribution of music and unparalleled communication among fans and musicians—unambiguous blessings for music itself. But such success is still set against the backdrop of an industry struggling to maintain control and remain relevant. Over the greater part of the last century, the entities that would come to be the big five record labels—Warner, Universal, BMG, Sony, and EMI—crafted elaborate distribution pipelines to generate and safeguard hefty revenue by combining street smarts, cultural savvy, tough-guy tricks, and crafty legal maneuvering with keenly developed business sense. It’s only recently that they were settling into the more regular life of multinational corporations. Now these companies and a few others confront the greatest challenge of their history. They find themselves in an environment in which their chief commodity is not just easily converted into digital code—ripe for limitless copying and dissemination—but also is spread via a worldwide network that dwarfs anything that came before it. While innovators speculate about the benefits to human progress a free-flowing pipeline of information brings, the music industry has plenty of reservations: It was banking on its control of songs that have now become seductive little packets of freely traded digits.

Visit a college campus almost anywhere in America, and you’re sure to find two things: computer networks with high-speed, high-bandwidth Internet connections, and music fans who have amassed large collections of music without ever buying tapes, CDs, or records. Instead of trips to the record store, many simply download the songs they want from a school network, or hook up with fans elsewhere, trading songs with Napster or its many clones. Go to a record company in Manhattan or Los Angeles, and you’re likely to find two things: executives with great resistance to technological change and someone in the IT department who avidly follows online developments and may have even accumulated a collection of MP3s. This situation seems so pervasive that it has replaced the old stereotype of the A&R staff asking the mailroom clerk for tips about which new bands are hip.

The big-record-label-dominated music business that developed in the last century is now under assault by successive waves of young techies such as Napster’s Shawn Fanning and Gnutella creator Justin Frankel and their tsunami of followers. These arbiters of innovation share several traits, namely technical ingenuity and priorities that fall polar opposite to traditional business. A half decade ago, when the Web was in its infancy, it was popular to say that programmers were the new rock stars. Despite a few renegade cyberpunk coders sporting leather pants and mirrored sunglasses, the notion quickly faded as the reality of a high-tech workforce became more mundane. But looking at the innovation and bravado of the young people who have brought such a dramatic crisis to the music business, it’s easy to see some truth in the old statement, particularly when these visionaries are contrasted with the current crop of top-selling artists. The challenge to the old guard that the young coders present seems more fundamentally unsettling than most rock and roll these days, and their rebellion seems more genuine and more compelling than the packaged and exaggerated posing of record industry poster boys.

Technology brings power, and the level of technology now in the hands of individuals will present challenges to everyone with a vested interest in the status quo. In response to those challenges, government and corporations may overstep acceptable boundaries and seek to infringe on the rights of individuals whose protections as citizens should come before their roles as consumers. Music distribution on the Internet is interesting because it is showing, to anyone paying attention, how things might progress in many other industries, particularly those with a product that can be digitized. That the MP3 format is a subset of a standard meant for the compression of movies is a glaring clue as to the next big industry likely to be touched by the mercurial hand of the Net.

The music industry has a long history of legal skirmishes with the inventors and builders of new music players. The audiocassette and digital audio tape (DAT) are two recent examples that seemed to work out advantageously for the music business. In the 1980s, when cassette tapes were the latest threat to copyright holders, legislators granted music labels a portion of every sale of blank tapes. The industry later that same decade worked to kill DAT as a consumer format with threats of lawsuits. Digital tape was able to record at higher fidelity than CDs and wouldn’t degrade with each generation, so it was feared as the perfect medium for bootlegging. But because of high cost resulting from fewer machines, demand for DAT never spread much beyond dedicated concert tapers and musicians.

With the right software, personal computers are now able to do anything that DAT players can, and they have proven very hard to regulate. Software and hardware makers have the economic and growing political power to compete with the music industry, so they’ve been able to stave off most of the industry’s legal assaults. But when the makers of new technologies are only sometimes corporations—and are often just a kid in a dorm—the equation changes remarkably. Because new players, and new methods of distributing what’s played, exist as code, manufacturing and retailing are un-needed. That leaves ample room to innovate without some of the traditional business, financial, and legal obstacles (and without their protections). A good new product, especially if the creator is not so interested in remuneration, could be released in one day, and by the next week there might be a million copies in circulation worldwide. The MP3 world is filled with software that has been distributed in such a way. On the music side, legally or not, a popular song follows the same lightning path. Bootlegged songs from Radiohead’s Kid A were downloaded by millions of Net users before the album was officially released. Smashing Pumpkins broke with its label, Virgin, and gave away the group’s final album for free distribution on the Net. It met a similarly massive response.

The groundbreaking ability of people across the planet to freely share information is changing the world and our culture, and this presents a scary prospect for those hoping to make money in exchange for the time and resources invested in producing and marketing to that culture. If a band and its producer are accustomed to spending a year and several hundred thousand dollars recording and touring to promote a record, it’s easy to see how they might fear the new ability of anyone to send a copy of whatever they like, for free. Unlike illusionary changes in styles and personae, or even corporate acquisitions and mergers, this fundamental shift changes even the form that music takes. Digital distribution means that music is no longer tied to an object such as a record, tape, or CD, but becomes, as it is being shared and consumed, something more ethereal. Depending on how you look at it, in the online world, music has been either stripped or liberated from its body; only its soul remains, its digital code. If a record company has spent millions to develop and control the works of musicians, banking on their value as consumer goods—marketable, singular objects—company officials might be shocked to discover what they hope to sell and control has become pure information, flowing freely around the globe.

While the record companies and the Recording Industry Association of America (RIAA) dominate media reports and courtroom dramas, musicians themselves have been polarized by online music. Metallica’s Lars Ulrich raged against online traders. But archly anti-establishment bands like the English Chumbawamba have seized the moment to air long-standing grievances: Despite their high-minded talk, most record companies “wouldn’t recognise art or artistic integrity if it bounded over and bit them on the arse,” Chumbawamba vocalist Dunstan Bruce said on his band’s Web site. “The real truth is that record companies have been screwing the public for years and they’re now terrified that they might lose the odd dollar here and there.” Nor is it simply the outsiders or the more usual publicity seekers like Courtney Love who have found something to say. Elton John struck a tone similar to Love’s anger at the industry at a press conference. The Who’s Pete Townshend (also using his own Web site to send a message) wrote that the first thing that struck him when he went online with Napster and found “such a lot of stuff” when he searched on his name was “hooray—at last I might as well say fuck BMI.”

If it looked as if the labels were paralyzed by a financial interest in the status quo and were ignoring a larger, developing picture, other businessmen followed the money to seek common ground with Napster, the most feared, most popular of the online predators. Just as urgently as most music industry executives sought to kill their online adversaries, or at least subdue them as they did the cassette tape, other business leaders were stalking something much bigger. For a mere $50 million, the same amount he invested in 1994 when he struck gold with a budding AOL, Bertelsmann’s Thomas Middelhoff helped out an embattled Napster, hoping to buy into the future. Going over the head of its music division to cut a deal with the global Napster phenomenon, can Bertelsmann find a way to make the new world work for the suits as well as the pirates? As youngsters come home from college infecting their families with the joy of instant, unfiltered access to all the songs they can remember, turning back the clock not only becomes virtually impossible, taking away the music sounds to almost everyone like a really bad idea. This book is about the battle for that cultural soul that is being fought by college students, entrepreneurs, lawyers, moguls, programmers, and of course, by musicians themselves.