You can’t stop Rock and Roll…

By Chris Gledhill, Managing Director PDMS

As I write in the aftermath of the consumer electronics bonanza, more commonly known as Christmas, listening (slightly furtively) to my daughter’s new iPod, I am struck once again by the fascinating interaction of technical, commercial, legal and marketing forces competing to shape the future of the entertainment industry.

In the ‘olden days’, before the advent of cassette tapes, the music industry had it easy; if you wanted a record you bought it, end of story! Cassettes upset the apple cart by allowing naughty (young) people to record music onto blank tapes from records or the radio and distribute them to their friends. After much huffing and puffing the music industry got used to this and, although we were reminded from time to time of the heinous criminality of such practices, there was a tacit balance between the value in marketing terms of music sharing and the perceived impact on sales revenue. This was particularly true when CD became established as the gold standard for quality and convenience.

For a long time the CD was the main stay of the industry, a digital format which could not easily be copied at home; far more convenient for the user with instant track selection, consistent quality and no wear and tear in use. CDs are also seriously cheap to mass produce, cheaper to transport and store than vinyl and, for a long time, commanded a price premium as well (this is still the case with DVD versus VHS for movies despite the fact that DVD is cheaper to manufacture).

But then it all started to go wrong again. From the mid nineties CD drives started appearing in peoples home PCs and at the same time new highly compressed digital music formats such as MP3 started to appear to meet the needs of relatively small hard disks and slow internet connections. Then along came the Internet file sharing phenomenon. This is most commonly associated with the name Napster which was the first widely-used peer-to-peer music sharing service. Its technology allowed music fans to easily share MP3 format song files with each other, thus leading to the music industry's accusations of massive copyright violations. Although the original service was shut down by court order in July 2001, it paved the way for decentralized P2P file-sharing programs, which have been much harder to control.

The music industry responded to the opportunities offered by the internet, post napster, in a most half hearted manner, launching subscription services such as Pressplay and MusicNet which were user-unfriendly, restrictive, and mutually incompatible. Meanwhile, they continued to fight the proliferation of peer to peer file sharing systems such as KaZaA through the courts with limited success.

Then along came the Digital Audo Player (DAP) or MP3 player as they are usually called. One of the first DAPs,, the Rio PMP300 from Diamond Multimedia, was a big success during the Christmas 1998 season (how important is Christmas in the development of consumer electronics!) spurring interest and investment in digital music. The Recording Industry Association of America rather predictably filed a lawsuit alleging that the device abetted illegal copying of music, but Diamond won and digital audio players were ruled legal devices.

Nowadays almost any portable gadget with a bit of memory can double as an MP3 player including laptop computers, PDAs, mobile phones and even digital cameras. Meanwhile dedicated devices such as the iPod have become almost as ubiquitous as the mobile phone itself. In the summer of 2004, Rolling Stone magazine came out with its list of the 50 Moments that Changed Rock and Roll. In chronological order Napster is in there at number 46 and the invention of the digital audio player is item 49.

In April 2003 Apple stepped into the vacuum left by the demise of napster and the lack of any credible offering from the music industry itself and opened the iTunes Music Store. The iTunes store uses digital rights protection software to protect against unfetered copying and distribution of songs and charges per song or per album, with prices typically 40-50% lower than the equivalent CD. As a vaguely amusing aside there is virtually no music by the Beatles on iTunes because the Beatles' record company Apple Corps is currently in a legal battle with Apple Computer over the name "Apple".

By the end of July last year over half a billion songs had been sold, establishing beyond doubt the viability of commercial online distribution of media content. The iTunes store is now diversifying its offering to include podcasting, in which radio-like programs are automatically downloaded into the device to be played at the owner's convenience.

In October 2005 iTunes added video support, by early last December they had already sold three million videos, and whilst digital video players such as the Archos are not yet in every school bag, I reckon Santa will be putting in a bulk order pretty soon.