The Negative Impact of mp3 Technology on the Music Industry

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If the online music world at the turn of the millennium could be summed up in one word, it would be “Mp3”. Mp3 technology is a new one that has created waves in the world of music – ushering in both benefits and disadvantages. The advent of MP3 technology has changed the way individuals listen to music and also the way music is sold and how new bands are being discovered and how music is being packaged.

The new technology has allowed music lovers to do many things they could never do before. Almost anyone can enjoy Mp3 technology as long as they have a modern computer with an Internet connection. The advancement of Mp3 music technology has allowed consumers to gain access to very low-cost music. Music sharing among friends is an acceptable practice, although profiting from online music sharing is illegal.

There are many free song downloads online, and they are available at highly affordable rates, never costing more than $1 to download music per song. As a direct outcome of MP3 technology, many websites are offering both legitimate and pirated music. Music fans with access to high-speed modems have been swapping songs over the Internet ever since the MP3 technology arrived. And with the advent of the iPod and other Mp3 players, music has become mobile.

When the tape was discovered, the LP records suffered a setback, and later came the CDs that replaced the tapes. According to Nielsen SoundScan, with the introduction of Mp3 music, audio album sales have fallen 18 percent between 2000 and 2006, after accounting for paid digital downloads from online stores like iTunes. With the Mp3 format, not only the medium of music is affected but also how it is packaged, distributed, and launched. Thesis: Mp3 technology has impacted the music industry negatively by cutting into its sales, creating conflicts between artists and recording companies, changing its distribution pattern, and endangering copyright issues.

The German company Fraunhofer-Gesellschaft developed Mp3 technology and has licensed its patent rights to the audio compression technology – the United States Patent 5,579,430 for a “digital encoding process”. The inventors named on the Mp3 patent are Bernhard Grill, Karl-Heinz Brandenburg, Thomas Sporer, Bernd Kurten, and Ernst Eberlein. However, two names are particularly important in the context of the development of Mp3 – Dieter Seitzer, a professor at the University of Erlangen, and Karlheinz Brandenburg, often called the “father of MP3” (Bellis, 2003).

According to Karlheinz Brandenburg, it took several years for Mp3 technology to fully develop, and even then, it almost failed. Fraunhofer Gesellschaft explains as follows: “Without Data reduction, digital audio signals typically consist of 16-bit samples recorded at a sampling rate more than twice the actual audio bandwidth. So more than 1.400 Mbit is used to represent just one second of stereo music in CD quality. By using MPEG audio coding, it is possible to shrink down the original sound data from a CD by a factor of 12, without losing sound quality” (Bellis, 2003).

Mp3 is the common name for MPEG-1 (Motion Pictures Expert Group) (Audio Layer 3, a form of sound compression approximately 12 times smaller than a CD file. It is also a relatively fast compression program). Mp3 files can be sent and downloaded at a rate of 128 Kbps. Mp3 technology allows the driver to play compressed music files that have been pre-recorded on a CD-R. The Mp3 compression process offers the advantage of storing more CD-quality music files on a single disc without noticeably compromising the sound quality. In 1998, Winamp became a free MP3 music player boosting the success of MP3 and no licensing fees were required to use an MP3 player (Bellis, 2003).

The Mp3 can be defined as an electronic music file that delivers clear, lifelike sound at a high rate of data compression. It is the first of several technologies to shake up the music industry. By making it possible to transmit and store music cheaply, Mp3 technology makes it possible for music to be freely copied. This file format is exceptional because it can deliver the service of music without the supply chain that goes along with the hard-good (Garland, 2003).

The success of the MP3, however, has been further promoted by other technological advances such as greater digital storage, including hard drives and RAM, and Internet bandwidth–technologies that have been disruptive for the music industry. Hard drives and Internet connections have been around for years, but before the advent of the Mp3 technology, CDs were the most efficient way to deliver music to the consumer. Now with digital storage reaching a tipping point, small, easy-to-copy Mp3 files could be trafficked easily between consumers. There is no longer a need to store recorded music on plastic discs that must be mass-produced, trucked to distribution centers, and delivered to retailers.

It is becoming impossible to justify charging $18 for a compact disc when much of the expense is from an infrastructure designed to push plastic. And Mp3 swappers aren’t the only ones to recognize it. In April 2003, Apple Computer launched iTunes, a service that allows Macintosh users to browse a catalog of over 200,000 Mp3 songs and download them for 99 cents each (Garland, 2003). The Mp3 technology has brought different kinds of music to a global audience through the internet. With a click of a mouse, people can download their favorite music either for free or for a small cost through mp3 files. This easy downloading feature of Mp3 technology has lead to a spate of illegal downloading across nations via the internet.

The mainstream recording industry response to the Internet challenge is best represented by Hilary Rosen, Chief Executive Officer of the Recording Industry Association of America (RIAA) who claims, ‘Right now about 95 percent of the MP3 downloads on the Internet are illegal downloads … unauthorized use of these MP3 files is creating a problem for artists in the music community (CNN, 2000). According to Strauss Zelnick, of BMG Entertainment: ‘Piracy is not a way to encourage artistry.

People create and they have to be compensated for their creation. Right now, the music available on the Web is largely pirated’ (CNN, 1998). Through Mp3 technology, consumers can download best-selling music directly through the Internet and play it back using a kind of software.

Many of the holdings of major music companies are already traveling the Internet as files compressed into manageable size via MP3. Independent labels and individual musicians have made their music available in the MP3 format, but the major labels are alarmed by Mp3 because the technology allows files to be copied without restriction. The vast majority of MP3 songs circulate free of charge. Some musicians encourage this practice; some like Metallica, openly oppose it, and others simply tolerate it.

MP3 technology, with its ease of downloading, threatens the stability of long-established markets where intellectual property protection was previously assured. This new pattern of piracy in part explains the ferocity with which music companies have fought the battle for copyright over Internet music formats. RIAA and the International Federation of Phonographic Industries (IFPI) maintained a confrontational stance on the development of MP3 technology as part of their wider anti-piracy campaign, viewing it as a threat to the integrity of copyright properties held by member corporations (Connell and Gibson, 2002).

RIAA Senior Executive Vice President, Cary Sherman, in an address to the 1999 MIDEM Music Industry conference, expressed the political position taken by the Association concerning MP3 technology: “To the mostly young people caught up in the MP3 phenomenon, it means: Cool technology! Free stuff! What it also means, of course, is breaking the law. What it means is knowingly or unknowingly, the cyberspace equivalent of lifting a palette of CDs from the loading dock at Tower Records or FNAC and handing them out on a street corner. What it means is taking money out of the hat of an up and coming musician” (Sherman, 1999b).

More specifically, from the point of view of RIAA, illegal downloads also mean taking money from the coffers of its corporate music publishing members. In a speech presented to another gathering of computer and music industry executives in the following month, Sherman equated the MP3 format with music piracy, clearly identifying the format as the target of its legal and political strategies for intellectual property reform: ‘Our copyrights are as important to us as your patents and trade secrets are to you. They are the lifeblood of our industry’ (1999a).

The Record Industry Association of America, the chief lobby group of major recording labels in the United States, is filing hundreds of lawsuits against avid music lovers. The reason is that these music lovers are swapping downloaded music files instead of buying CDs and thereby violating copyright laws. Such music lovers also pose a major threat to the record industry’s business model. But with 57 million (and counting) Americans already using music file-sharing services such as Kazaa, Morpheus, and Grokster, Mp3 technology is here to stay. Mp3 technology has increased the vulnerability of music to theft. Mp3 files are easier to carry off in licensed or unlicensed form; they can be photocopied or pirated.

It has also made music cross boundaries with ease; its transmission cannot be centrally controlled. It is routinely consumed in ways in which technical qualities count for little; its market is both big and disorganized enough to make its illicit production and distribution financially viable on both a large and a small scale (Talbot, 2002).

Record companies and collection societies were initially hostile to this first generation of music hardware technology not controlled by the music industry or its allies in consumer electronics. The hostility took the form of legal action as copyright was articulated with technology and some owners of Internet music sites were sued for promoting copyright infringement in the services that they provided to consumers of recorded music (Talbot, 2002).

The courts found in favor of the music rights owners, and the site owners were ordered to make payments to the transnational music companies (Talbot, 2002). Crucially, however, these, in turn, have sanctioned the business practices of such sites, on the understanding that copyright royalties will be paid regularly. The most significant of these legal actions concerned the Napster Company, which had introduced a more radical version of the Mp3 system, one that facilitates ‘swapping’ or ‘file–sharing’ recordings among individual consumers without permission from, or payment to, copyright owners.

During 2000 and early 2001, an estimated sixty million consumers used Napster and downloaded billions of files each containing one recorded music track. The successful legal action against Napster left untouched other similar Internet sites, and technical experts believed that it would be impossible for copyright owners and their lawyers wholly to eradicate file-sharing of this type. In addition, there was evidence of a legal counter-attack designed to persuade US legislators to extend the definition of ‘private copying’, one of the exceptions or limits to copyright, to include file–sharing.

Mp3 technology has changed the relationship between creator, producer, distributor, retailer, and consumer in the music industry (Burnett and Marshal, 2002). As a result of the new technology, artists have found new ways to interact directly with their audiences and also sell their CDs.

An increasing number of bands today have their Web sites that are easily accessible and loaded with lots of information regarding the artist such as tour dates, personal information and band history, lyrics, discography, as well as links to associated sites (Burnett and Marshall, 2002). Thus the internet has facilitated the return of a sense of control to the artist – control which is generally lost when the artist is forced to enter into contracts with large record companies.

Through Mp3 technology, it has become easier and less costly for musicians to reach their audience. It brings hope to struggling musicians and delights music lovers with greater choice and lower prices. However, this is a scary proposition for record company executives and copyright lawyers. Traditionally, the way most record contracts are set up, musicians only receive payment after every link in the supply chain has extracted its wage.

To sell an album on CD, the master disc is pressed into thousands, if not millions, of plastic cases, loaded on trucks, coordinated at massive music warehouses, then trucked to local stores, unloaded, shelved by stock clerks, chosen by customers, and finally rung up by a cashier. Every person paid in that chain makes money that did not go to support musical creativity. With new information technology and economic pressure, however, consumers are increasingly bypassing these extraneous costs with MP3s. This results in a loss of general compensation from artists to music companies to music distributors and hence is opposed by the RIAA (Recording Industry Association of America) which is fighting the spread of digital music on the Internet.

It might seem that for the unsigned or unknown artist, MP3 is creating opportunities (CNN, 1998). Through Web sites, stars of the future can offer their music for sample or sale to a potentially global audience. But then, this is generating an ever-expanding circle of competition for already established recording artists. Jim Sonefeld, of Hootie and the Blowfish fame, says, ‘It can hurt the artist, and it’s not just a money issue, it’s a control issue … being able to control what you put out and market it properly’ (CNN, 1998).

There is also a problem for the retailer in the music industry through Mp3 technology. If a person chooses to store all of his or her music on the hard drive instead of on shelves, the record stores are going to be impacted. Major retailers are reluctant to speak about the digital future and Mp3 and its related hardware are creating a major shift in the music industry. Music distribution is no longer taking place across traditional channels through CD retail stores.

There seems to be a difference in attitude between artists and record companies. At a recent music industry panel discussion examining the ‘MP3 syndrome’, one official described the RIAA’s efforts as ‘killing ants with a hammer,’ while others said that artists care more about reaching a broad audience with their music than the short-term worries of record companies. Thus, one finds that Mp3 technology is leading to an ever-widening gulf between the artists and the record companies which does not augur well for the music industry.

The recording companies are intent on developing software coding standards that would specify what consumers can do with the music they download. Some songs may be available to be copied at will, or copied once, or not at all; some may be listened to for a day, or a week, or forever. Other codes would direct royalties to the appropriate recipients – a particularly tricky process when the global Internet meets contracts that change at national borders.

Thus, Mp3 technology has created new technical problems to be solved for the recording companies. The recording industry has begun selling music CDs designed to make it impossible for people to copy music to their computers, trade song files over the Internet, or transfer them to portable MP3 players.

This strategy has provoked strong reactions in Europe and America from music lovers who fear that they will be unable to play the CDs on their computers, burn their CDs to copy music, or make MP3 files for their portable players of music that they have legally purchased. The new protected CDs are drawing the wrath of several consumer electronics manufacturers, including Sony Electronics and Philips Electronics, who argue that they cannot guarantee the audio quality of the CDs on their machines (Burnett and Marshall, 2002).

It is also opposed by manufacturers of portable MP3 devices such as the Diamond’s Rio and Apples’ iPod who have legal backing ensuring that their devices do not violate copyright law because consumers had a right to ‘space shift’ music they owned. Politicians such as US Democrat Representative Boucher have also raised concerns that the record companies ‘were seeking to use their copyright not just to obtain fair compensation but in effect to exercise complete dominance and total control of the copyrighted work’ (Greenfield, 2000).

The Rap group Public Enemy released several new songs on their www.public-enemy.com site in late 1998. The group’s record label Def Jam owned by Polygram demanded that they remove the tracks and a legal battle followed. The group’s spokesman Chuck D explains some of the thinking behind the strategy. He notes that ‘the major labels are like dinosaurs … they move slowly” and that is why artists are choosing to release their songs on the internet. In this case, the conflict between the artists and the record label is due to Mp3 technology.

In the realm of music, Napster is the best-known file-sharing tool. Napster is based on a central directory containing the data offered by registered users. By entering a search query, the user receives a list of other participants offering the data she is looking for. A direct exchange can then take place. Gnutella, Freenet, or MojoNation are true P2P file sharing systems and do not use a central server with a central directory. In this case, each computer is both a client and a server.

Search queries are made directly to another computer which relays the query further to other computers until one is found which can answer the query directly (Burnett and Marshall, 2002). P2P essentially abandons the networking notions of separate ‘clients’ and ‘servers’ and instead allows every networked machine to connect to another machine. P2P networking and the Napsterization of the Internet, both based on Mp3 technology have decommodified commercial music through websites such as Napster, Gnutella, and FreeNet (Burnett and Marshall, 2002).

This is posing to be a powerful new threat to the music industry. Ian Clarke, the founder of FreeNet, a P2P network, commenting on the Napster court case: “The music industry did not win this. They may have won the battle, but the collateral damage – in terms of fan loyalty, etc. – was substantial, so much that I doubt they’d ever do something like this again …”

Technological development in the digital realm, aimed at making recording gear more powerful for studio applications has also made equipment cheaper for the home recording and small studio market. This has given way to the rise of new companies specialized in producing recording equipment to produce professional-quality digital information at much lower costs than previous analog technology.

In addition to these specialist units, sophisticated software for hard-disk recording and sequencing meant that all recording and sound-processing activities could be completed through a personal computer. Digital technology meant that producing high-quality recordings became possible for musicians without recording deals and for artists scattered across greater distances. Record contracts previously required major labels to advance production costs to the musicians, who then repaid these costs as an advance against future royalties, a system that meant that production remained capital-intensive.

Record companies have been the providers of capital, giving them de facto control over the promotion of new talent. With the cost of creating a compact disc now within a performer’s reach, record companies are forced to rely more on marketing or distribution to exert market control. The focus is now on amateur musicians, bedroom enthusiasts, and home studios with an emphasis on the ability to produce high-quality recordings without relying on corporate investment.

The rapid emergence of music editing software, Musical Instrument Digital Interface (MIDI) capabilities, and sequencers, along with advances in digital recording gear, meaning that professional recordings were much cheaper and within closer reach of amateur musicians and localized scenes. This has resulted in unexpected competition for established artists.

When one studies the history of the music industry, one finds that change has always been a part of it. From the initial LP records to audio CDs, the music industry has been able to adapt itself in many ways to the changing technology. However, the advent of Mp3 technology has revolutionized the world of music. By making the world easier for new artists to launch their new albums, it has made life more difficult for established artists.

Through its easy downloading feature, it has affected the sales of music on a large scale. As more and more artists find a presence through the internet, the pattern of distribution of music has changed and retailers are at the suffering end. Record companies that earlier used to command huge sums for finding and promoting new talent are now witnessing artists taking on a sense of control over the promotion of music. Moreover, Mp3 technology has lead to serious legal, intellectual, and copyright issues. The negative impact of Mp3 technology on the music industry is quite obvious and can be overcome only by suitable adaptation of the music industry to the technology.

Bibliography

Bellis, Mary (2008). The History of Mp3: Fraunhofer Gesellschaft and Mp3. Web.

Burnett, Robert and Marshall, P. David (2002). Web Theory: An Introduction. Routledge Publishers. London.

CNN (1998). Mp3 Revolution Splitting Music Industry Along Cyber Lines.

CNN (2000). Judge nixes Napster: record industry wins round in copyright infringement suit over music swapping. Web.

Connell, John and Gibson, Chris (2002). Sound Tracks: Popular Music, Identity, and Place. Routledge Publishers. London.

Garland, Eric (2003). Online Music: The Sound of Success; the Online Music Industry Is Turning the Traditional Music Industry on Its Head. The Futurist. Volume: 37. Issue: 6.

Greenfeld, K.T. (2000). Meet the napster. Time Magazine.

Sherman, C. (1999a). Protecting music rights in the digital era: the U.S. experience. Paper presented to the MIDEM annual conference, Cannes, France.

Sherman, C. (1999b). Presentation to the SDMI Organizing Plenary. Los Angeles.

Talbot, Michael (2002). The Business of Music. Liverpool University Press. Liverpool, England.

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The Negative Impact of mp3 Technology on the Music Industry

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