The Digital Music Revolution

Digital music first became available to the masses in 1982, when Phillips introduced the CD. Six years later, sales of CDs surpassed those of vinyl records. However, downloadable music and streaming audio have now touched off a revolution that is rapidly and radically changing the way music is distributed and consumed. This revolution is already far more important than when compact discs displaced vinyl records in the early 1980s, because physical media is being replaced by electronic bits that don’t require factories, packages, warehouses, or shipping.

In 1992, the Moving Picture Experts Group (MPEG) released the specification for MP3. By mid-1999, “MP3” had edged out “sex” as the most popular Internet search term—and within 4 years, more than 400 million copies of various file-sharing programs had been downloaded, and billions of songs had been shared without any compensation to copyright holders. Meanwhile, the Recording Industry Association of America (RIAA) reported that music CD sales, which reached a high of $13.2 billion in 2000, were down to $11.2 billion in 2003—with downloadable music (particularly illegal file sharing, which we’ll cover later) at the heart of the losses.


The MPEG committee, which works under the direction of the International Standards Organization (ISO), establishes standards for encoding audio and video in digital format and for interactive graphics applications. MP3 is just a small part of the MPEG family of standards. Thanks to MPEG, we also have standards for technologies such as DVD (Digital Versatile Disc) and DirecTV.

Freedom from the Machine

Music plays an important role in our lives, affecting our moods and making us feel connected to the rest of the world. But finding music to suit our personal tastes requires a lot of time and effort. That’s why we have record labels and radio stations: they act as filters for the music we hear and save us the trouble of sifting through thousands of new songs every year.

However, any student of human nature can easily predict the problem with such filters. Record labels and radio stations decide, for the most part, what we listen to and when. We consumers have little say in this process, other than our ability to vote with our wallets and the dials on our radios. That’s not enough for many of us.

Thanks to the Internet, you no longer have to rely on local radio stations to listen to music you like, and you don’t have to worry about albums being out of stock at the local record store. You have access to a much wider selection of music, and you can listen to radio stations that play music based on direct input from listeners.

Furthermore, with downloadable formats such as MP3, you no longer have to worry about tapes wearing out or about searching through racks of CDs to find one song. You no longer have to program a CD changer or change tapes during parties. You don’t have to spend hours recording new tapes every time you decide on a different order of songs. And in many cases, you don’t have to buy an entire album when you only like one or two songs.

Beyond the increase in choices for consumers, the digital music revolution also gives musicians more control over their music. These days, bands that don’t have record-company contracts nevertheless have access to a worldwide distribution channel. With Internet distribution, much of the overhead disappears. In fact, some online music sites pay royalties of 50%, compared to the 12% to 15% typically offered by the major labels. Many bands are going a step further and setting up their own web sites to promote their live performances and sell music directly to their fans.

A wakeup call

As downloadable music became more popular, piracy became a major concern. The small file sizes and lack of security measures in formats such as MP3 make it easy to illegally reproduce and distribute copyrighted music. Because downloadable music consists of digital bits—which, unlike records, tapes, and CDs, are not dependent on physical media—thousands of copies of a song can be made in mere minutes. College students with fast Internet connections quickly found out that they could download hundreds of songs in less time than it took to make a trip to the local record store.

The popularity of MP3 and the potential for piracy provided a wakeup call to the major record labels, who delayed offering their music as downloadable files until more secure formats and digital rights management systems became available. Unfortunately for them, the genie was already out of the bottle. However, technologies such as MP3 and the Internet are only enablers. The digital music revolution is really about empowering consumers and musicians. Now that both groups have experienced the freedom and reach of the Internet and the flexibility of insecure formats such as MP3, it will be very difficult to turn back the clock. In the meantime, it’s up to consumers to stay on the right side of the law. (See Chapter 17 for information about copyright law, and see Chapter 5 for information on digital rights management.)

The industry fights back

The spark that made the digital music revolution front-page news was the lawsuit filed in October 1998 by the RIAA and the AARC (Alliance of Artists and Recording Companies) to prevent Diamond Multimedia from selling its Rio portable MP3 player. Before the Rio, users were limited to listening to MP3 files on their computers. The Rio provided a way to make MP3s portable and therefore more appealing to mainstream consumers. Suddenly, downloadable music—particularly pirated music—was a serious threat to the recording industry, which had previously not paid much attention to it.

The RIAA argued that the Rio was a digital recording device covered by the Audio Home Recording Act of 1992. A provision of this law requires consumer digital recording devices to incorporate the Serial Copy Management System (SCMS), which prevents multiple generations of copies (copies of copies) from an original. The RIAA also maintained that the Rio was used primarily to play pirated music downloaded from the Internet.

In June 1999, the U.S. Court of Appeals ruled unanimously in favor of Diamond Multimedia, accepting its argument that the Rio was a computer peripheral and not subject to the SCMS requirement. The court also ruled that the Doctrine of Fair Use allows consumers to “space-shift” music by copying it to another device, similar to their right to “time-shift” video recordings. The right to time-shift was established in 1984 by the case of Sony versus Universal City Studios (464 U.S. 417), which concerned the sale of videocassette recorders in the United States.

Diamond Multimedia didn’t just win the lawsuit; they also received massive amounts of free publicity, which helped increase the demand for the Rio to the point where they were selling more than 10,000 per week. The ruling in favor of Diamond Multimedia was also a victory for consumers and the consumer electronics manufacturing industry.

The release of Napster in the fall of 1999 sparked another lawsuit by the RIAA. The original Napster (unlike Napster 2.0) was a peer-to-peer (P2P) file-sharing system, which allowed people to download music directly from other users’ computers. (We’ll cover file sharing in depth in Chapter 5.) By early 2001, according to comScore Media Metrix, Napster had 13.6 million users, and millions of copyrighted songs had been shared. Napster’s Achilles’ heel, however, was that all searches had to be processed by a central server. Shut down the server, and you shut down Napster.

The RIAA’s lawsuit was successful, and Napster was shut down in the summer of 2001—but it was a Pyrrhic victory. By shutting down Napster without providing a legitimate and practical alternative for the millions of people who were hooked on downloading music, the RIAA helped spawn a new generation of distributed P2P networks, which don’t depend on central servers and are therefore almost impossible to close down.

As more and more people learned they could get copyrighted songs for free with little chance of getting caught, the use of P2P technology for sharing music grew at an astounding rate. According to Sharman Networks, the company behind the Kazaa P2P network, their software has been downloaded more than 379 million times since its release in April 2000. Morpheus, the second most popular file-sharing program, has been downloaded more than 129 million times since April 2001, according to

The RIAA responded in October 2001 by suing Grokster and StreamCast, the companies behind two popular P2P systems. When that approach didn’t produce the desired result, in September 2003 the RIAA took the unusual step of suing hundreds of individual users of P2P software. Users who thought they were anonymous were identified by logs subpoenaed from Internet service providers. Many cases were settled for a few thousand dollars, although some were dropped when it was determined that the user was not the same person who signed up for the Internet service. At press time, the RIAA had filed more than 9,000 individual lawsuits.

Too little, too late?

The growth of legitimate alternatives for downloadable music has begun to provide some relief. Launched in April 2003, Apple’s iTunes Music Store ( was the first to offer a wide selection of major-label songs without excessive restrictions. Previous music services such as MusicNet, eMusic, and PressPlay offered legally downloadable songs, but their libraries were limited and, in the case of MusicNet and PressPlay, included complicated copyright-protection schemes (users couldn’t burn a song to CD, for example, or the song “expired” after a certain amount of time). These restrictions limited their popularity.

The iTunes Music Store, however, took off like a rocket—shortly before press time, Apple announced that it had sold more than 300 million songs through iTunes. Following the runaway success of iTunes, a new crop of competing sites emerged. These sites also offer music from major and independent labels, either for a flat fee per song or on a subscription basis. Most of the sites that offer major-label music use “secure” formats, which assign limitations to what you can do—some still won’t let you burn music to CDs, while others simply stream music that you can’t download at all.

Even with secure formats, piracy will always be a threat. As fast as the industry comes up with security measures, hackers will find ways to crack them. And despite the growing number of legitimate sources for downloadable music and lawsuits against people who share copyrighted music, P2P networks are still in use by millions of people. A major setback for the recording industry occurred in April 2003, when a federal judge ruled in favor of Grokster and StreamCast and declared that there is nothing inherently illegal about P2P software. However, the RIAA immediately appealed, so the battles are far from over. The resolution of the P2P situation will most likely require new legislation, such as the Digital Media Consumers’ Rights Act of 2005, which is currently working its way through Congress.

Whatever happens in Congress or the courts, the use of digital music on personal computers and the Internet will continue to grow rapidly. The results will be difficult to predict, but consumers and independent musicians will certainly be among the winners.

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