The MP3 Revolution

Digital files would become the biggest disruption to the entertainment industry since the dawn of recorded media. From piracy to a shift away from personal ownership, we look at how the mp3 and other digital file formats have changed the world of entertainment.

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Episode Transcript

Speaker 1 (00:04):
Welcome to tech Stuff, a production of I Heart Radios,
How Stuff Works. Hey there, and welcome to tech Stuff.
I'm your host, Jonathan Strickland. I'm an executive producer with
How Stuff Works and I heart Radio and I love
all things tech. And we have done it. We have
reached the ultimate episode of our relationship with media and

(00:26):
its evolution over the years. Episode seven of that arc.
And uh. When I started down this path, I was
thinking it might be a three or four part series
and here we are at episode seven, so let's get
right into it now. In the last episode, I talked
about the development of the MP three compression format, which
would have an enormous impact on both technology and culture,

(00:51):
as well as business. As it turns out, the MP
three format is a lossy format that means you lose
a bit of the information in the original file as
you compress it down, and that means when you decompress it,
when you expand it back to its regular size later on,
you actually don't have the full file. Some of that
information is just gone now. The goal of the MP

(01:12):
three compression format is to only cut information that doesn't
affect the quality of the ultimate sound, but that depends
not just on the compression algorithm, but also the sample
rate and the bit depth that you select as you
compress stuff. As you use the the encoders, typically you
can set these features and you can use you know,

(01:34):
more compression, which means you're going to have UH files
that are of a smaller size. They're easier to handle,
but they also have more likelihood to have some artifacts
and distortion in them, or clipping or other elements that
indicate that, yeah, you really compress that file. Now, a
few things helped make the MP three and other compressed

(01:56):
audio file formats and enormous success. They weren't huge successes
right out of the gate, but it took a little
time and then once it got to a certain level,
they really took off. The first thing that helped was
that Internet download throughput was slowly on the rise, meaning
it wouldn't take a full day to download a song
or anything like back in the old days when we

(02:17):
were all using dial up and we had very slow modems,
it took ages just to download a small file. You
wouldn't even dream of trying to tackle something like a
raw audio file, even the compressed one would have taken
quite some time. The second element that really helped was
that hard drive storage space was also climbing, so you
could fit more files onto your hard drive because the

(02:39):
hard drives were getting higher in capacity. Some MP three
players that came along later on after the MP three
format had been settled, actually had physical hard drives in them.
They had tiny hard drive platters that actually moved inside
the portable player. Actually had a creative zen player that

(02:59):
was like that is a bit of a brick. It
was heavy and it was a little bulky, largely because
it was housing a physical hard drive. Later on, most
of these players would switch over to solid state drives.
Those are faster, they're lighter, and you don't have to
worry about physical moving components with those. The third factor
that made a big impact on the MP three success

(03:22):
was that the compressed files worked well with both both
of those first two factors. The first two things uh
complimented the MP three the file sizes. The MP three's
were smaller than the raw audio files, so they didn't
take as much time to transfer over the Internet, and
they took up less hard drive space, which meant that
consumers had a chance to carry around an entire music

(03:43):
library on a portable device. You might be able to
have a few CDs in your car and thus have
a selection of maybe a dozen different albums, but on
a portable MP three player of a sufficient hard drive size,
you could have hundreds of songs on there, So it
really changed the game that way. Then there were the

(04:05):
sharing services like Napster and Khaza and lime wire and
numerous others. These were the bane of the recording industry,
and they led to some pretty high profile draconian lawsuits
that I'll talk about a bit later in this episode.
The services enabled users to share copies of files with
each other, and they very quickly became the trading grounds

(04:29):
for copyrighted material, sometimes unreleased copyrighted material, So stuff was
leaking on the Internet before it could get officially published
as c ds. So instead of going out and buying
a CD and ripping it on a computer to put
songs on an MP three player, or buying a song
off an online store like iTunes, which came a little

(04:50):
bit later, people were instead downloading client software to connect
to peer to peer networks and to grab that stuff
for free. And along the way they risked pulling down
some nasty computer viruses and other malware, because not everything
was what it claimed to be on those services. You
might think, oh, there's the new Bruce Springsteen album. I'm
just going to download it, and it turns out that

(05:11):
it's a trojan horse for some sort of malware that
you're completely unaware of. It was not unusual in those
days to download a file and then try to play
it so you can listen to the music and nothing
seems to happen, and you might think, oh, it's a
corrupted file. The download didn't happen properly. It could also
be that it was actually malware, So that was a
risk you had to take um and hopefully you were

(05:34):
at least aware of that risk if you were engaged
in that behavior. Now, some people became obsessed with collecting
music files. They established enormous digital music libraries of their own.
Sometimes they'd even download stuff they never really planned to
listen to, just so that they could have it. And
people were purchasing fewer CDs, and that was a huge

(05:56):
blow to the recording industry. There were multiple reasons for that,
and again I'll talk about that a little bit more
in depth later on, but this was this was a
scary thing for record labels because the profit margin for
CDs was really good. You know, the CDs were cheap
to manufacture, you could sell them for a really good profit,

(06:16):
and companies obviously did not want that cash cow to
go away. So when they started seeing that trend on
the decline, companies really freaked out. And there were a
lot of different reasons that contributed to that decline, but
the company seemed to really focus on piracy as being
the one main reason for that happening. Worse than that,

(06:40):
companies started seeing those albums get leaked, like I said,
before they could even publish them, and they were wondering,
how is this happening? How can these songs that haven't
even published, they haven't played on the radio, they shouldn't
really be outside the control of the company. How are
they getting out to get leaked onto these services? Because
people were downloading the late songs from artists days or

(07:01):
sometimes even weeks before the album would actually drop. The
New Yorker did a profile on someone responsible for thousands
of leaks. He was not the only one, but this
is a representation of what was going on. It was
a guy named Dell Glover. He was working at a
PolyGram c D manufacturing facility in the Carolinas, and Glover
claimed he never personally smuggled any of those production CDs

(07:23):
out of the facility, but he had a network of
employees who would do that for them for him, So
he would, you know, rely on these people to smuggle
up brand new CDs that were being produced but not
yet being sold. One of the ways they would do
this is they would commonly produce more CDs than they
actually needed for an order, because sometimes you know, you

(07:46):
have irregular CDs that are pressed something there might be
some manufacturing error, something is affecting the quality, uh, And
sometimes he would just end up with extras anyway. And
those extras were always meant to go through a shredder
so that the material could be destroyed and then recycled.
But you could just secretly, you know, hide one of

(08:08):
those CDs on your person while you're taking all the
rest of the shutter because no one was keeping track
of the shredded disks. So if you did it and
you were careful and you didn't get caught, you could
stand to gain from that. So Glover would take the
smuggled disks home and then he would rip the music
off of them using his computer and upload the files

(08:29):
to a ringleader of a piracy ring, who then made
them available on various peer to peer networks, well first
on centralized networks and later peer to peer networks. This
also helped start the idea that the content on the
Internet is free. It's a It's an idea that's got
a pretty strong hold on the average Internet users. Psyche
this these days, this concept that if I, if I

(08:52):
go online, I should be able to get stuff for free.
People got used to that idea. They didn't have to
walk into a store and lay down cash for a purchase. Now,
in some cases, artists or companies might allow people to
listen to or even download some content for free. It
actually becomes something they're welcoming. They might think of it
as a type of marketing. But in other cases, people

(09:15):
were just pirating the heck out of stuff. They were
just copying it because they could not because it was
allowed and the thought of paying for content was on
the decline. The revenue model for the web was largely
ad based. Right if you went to a website, chances
are that website was making money by using web advertising.

(09:36):
They were selling space on the web page that advertisers
would pay money to occupy for a certain amount of time.
And uh, this was not ideal for content creators necessarily
because and and for website operators too, because people were
starting to develop what we largely would refer to as
as a ad blindness. People would stop pay attention to

(10:00):
the fact that there even were ads. They're just paying
attention to the content. That led to some pretty irritating
trends and advertising things like pop ups and pop unders
and ads with full sound that just start playing as
soon as they load on your screen. Irritating stuff like
that that would uh decrease your enjoyment of the web experience.

(10:22):
But it also meant that a lot of people would
install ad blockers so that they could not have that
experience and still get the content they wanted. The content
wasn't technically free because it was being paid for by advertising,
but the end user was not directly paying for the experience, right.
It wasn't like it was behind a paywall, So for

(10:43):
the user it felt like everything is free. And when
everything feels like it's free, it then feels like a
huge imposition to be told, Hey, if you want access
to this, you've got to pay for it, and so
it kind of conditioned people to an expectation that intent
needs to be free. Um, that's a huge problem, not

(11:05):
just for music, it's for web content in general, and
I'll talk about that a little bit later too. But
this was also a shift away from owning a physical
copy of a song or a movie or television show,
as those would follow the same path. If you could
get a digital version and it was a good enough

(11:25):
digital version of whatever it was you wanted, there wasn't
much call for buying something that would take up physical space.
There are still people who preferred having a physical copy,
and there still are today. There are people who would
much prefer to go out and get physical copies of movies,
largely because it's a good way to guarantee you're getting
the best uh experience for your money, and that things

(11:49):
like a Blu ray disk. Like let's say you're going
to get a four K Ultra high definition disk and uh,
you want to watch it on a four K television,
You're probably going to have a better experience than watching
a digital version that's gone through compression. In the decompression
that still might be really good, it might be better
than high definition, but it's probably not going to measure

(12:13):
up to the physical copy. So there's some people who
still demand that. They also might want things like the
cover art or liner notes or special features, or they
may just want something physical to relate to with the
music or movies or television that they enjoyed. They might
have a sort of a psychological attachment to that. And

(12:33):
then there's the audio file community. They were largely against
digital files in general, compression in particular, and really lossy formats.
They hated that idea because they were very passionate and
arguing that that approach was decreasing the actual quality of
the music itself. Now, generally speaking, you could tell the

(12:54):
difference between a good analog recording played on a decent
stereo system and a digital file of the same piece
of music played on a comparable sound system, specifically a
compressed digital file. The more extreme the compression, the easier
it was to tell the difference between the two. And
so there was a community of audio files who protested
how the compressed format was ruining the beauty of the

(13:17):
experience of listening to music. But for many people, including myself,
the convenience factor mattered way more than the quality of
the music. While the difference might be noticeable between the
perfect sound system and a portable MP three player, most
people just wanted to be able to hear the songs
they liked in an easy to carry format, and as
long as the compression wasn't really ruining the song, it

(13:39):
was fine. You know, it might not be the best quality.
You might not get the levels of bass or trouble
that you would get with a really good stereo system,
but if the song sounds like the song in general,
then that was good enough. Meanwhile, things would get worse
for audio files because of a trend in music that
was being affected by compression, a front type of compression.

(14:01):
Online music forums were starting to erupt around the same
time period, with conversations about music being louder than it
had been before that the actual recordings being pressed to
c D we're at a volume greater than previous generations
of music. So if you put a CD in and
you set the volume on your CD player, let's say

(14:24):
five out of ten, and you're playing a CD of
older music, then it might be a comfortable listening experience.
But then you put in a more recent album and
it would suddenly be too loud to listen to you
would have to adjust the volume. Well, compression was having
a big effect on the quality of music. See, the

(14:47):
conversation was really about the dynamic nature of sound and music,
and most people refer to dynamic as a range of
sounds and their loudness. It's really kind of a range
of volume. A dynamic song, therefore, would have quiet components
and loud components, and there should be a pretty decent

(15:07):
range between the two, and ideally you should be able
to hear all of it based on the way the
music is constructed and recorded. Now, Emmanuel Derrity actually did
an analysis of music from the nineteen seventies up through
two thousand ten to see whether or not music as
a whole really did get louder and less dynamic. He

(15:27):
published the findings on the website sound on sound dot
com and found that, yeah, music did get louder. The
dynamic question is actually a little more complicated. But he
traced the trends in music, finding that as time went on,
music recordings were getting louder, and that at the same time,

(15:48):
the range between the peak loudness and the median loudness
of the songs was decreasing. So in other words, in
earlier music, you might get a few moments of loudness,
but most of the time the the median volume was lower,
so you had a range there. In later songs, the
peak wasn't necessarily much higher than the median, so the

(16:11):
loudest sound was not that different from the median sound,
and that meant there was less dynamic range, at least
according to this volume approach, and and some people argued
it led to a homogeneous, noisy, less interesting sound overall,
Drudy actually found there was more loudness range than people
typically imagined in that more recent music. But it gets

(16:33):
super technical now. The reason for that wasn't just that
it was a change in taste for music, but that
was part of it. It was also in the nature
of compression and what people referred to as digital brick
walls now. Essentially, to get music that loud, you had
to put a hard upper limit on the loudest noise

(16:54):
because the CD could only replicate so loud of a
noise before you'd start getting a distortion like clipping or
other artifacts. But that compression would also mean that it
would square off the peaks in sound. It would create
a digital version of distortion that would only appear in
the recorded version. If you were able to listen to

(17:16):
the original decompressed version, it would sound very, very different.
So you could do that to create an effect on purpose,
but a lot of people just found that it was
having a negative impact on the quality of sound overall. This,
by the way, it's not the same thing as m
P three compression. With this recording compression, we're talking about

(17:36):
compressing the upper and lower limits of a sound's loudness.
We're not talking about compressing a digital file size. Now.
I mentioned this because you'll often hear music fans talk
about how compression has had a negative impact on music,
but they are frequently talking more about the production side
of music and not necessarily on the end digital file format.

(17:56):
But for the record, both processes can have a negative
impact on the final quality of a sound. And the
loudness wars were largely brought about because the CD form
factor and the trend to push the limits of the
levels of loudness that CD s and CD players could handle.
It wasn't on the digital file side at all. But
let's get back to those digital files. That's really what

(18:17):
I was talking about in this episode. Anyway, the recording
industry tried lots of different tactics to try and stop
the flood of leaks and downloads. As album sales began
to decline, and the industry had been on a trend,
enjoying a decade of incredibly robust sales. As soon as
the CD had premiered, it was starting to already gain momentum.

(18:40):
It would overtake cassettes, and then it would eclipse previous
sales figures of cassettes and vinyl, doing gang buster business
for the recording industry. It was and and a great
time to be the head of a recording label. But
after that, once those hayed a years had passed, the

(19:03):
industry started looking at these declines and it was a
really harsh wake up call to see those numbers go
the other way. And the companies were not just gonna
take this lying down. Many tried various digital rights management
strategies to protect the music under their labels. They tried
to protect c d s, the famous one being Sony
when it backfired on them, uh, But there were others

(19:25):
that tried different methods as well in an effort to
limit how people could use digital files. But typically that
would just mean hackers would find the d r M
and strip it out of the music files and share
it anyway. The other big move that organizations like the
Recording Industry Association of America or r I double A
that they took was was legal action, and boy hawdy,

(19:48):
did they go all out in that realm. The targets
didn't just include services like Napster that enabled file sharing
on a grand scale. They also included regular folks who
were engaged in some illegal file sharing and some people
who probably weren't, and the stakes were really high. I'll
talk about that more in just a second, but first

(20:12):
let's take a quick break. The r I double A
sued Napster in December. The service had only gone live
in June of n r I double A did not
waste time about this, and like many legal processes, this

(20:34):
one took a long time to reconcile. And it was
tricky because the d m c A did establish that
service providers are not responsible for how their customers use
their service as long as the service itself is in
fact legal and pure to pure distribution is a perfectly
legal process. The problem wasn't with the method necessarily, but

(20:57):
the content that users were uploading and sharing. It's it's
legal to use peer to peer networks to distribute files,
that's their purpose. It's not legal to use peer to
peer to distribute files without the authorization of the owner
of the intellectual property. To use an analogy, it's perfectly
legal to use the road system to transport stuff from

(21:20):
one city to another. We do it all the time.
That's what the road system is for. But it is
illegal to smuggle contraband. However, if someone were caught smuggling,
the law wouldn't go after the Federal Highway Administration in
the United States because it's not the f h W
as fault that someone was transporting illegal goods using the

(21:41):
highways that the agency actually oversees. The same concept was
meant to apply to online providers, but there was a
caveat The providers had to be willing and able to
take action against people who are using the services illegally.
If a copyright holder, such as a music label were
to contact a service like Napster, that service was supposed

(22:01):
to help clamp down on illegal behaviors, and in return,
the service would receive the protection of safe harbor. So
part of the lawsuit was alleging that Napster was willfully
turning a blind eye to illegal behavior on the service. Now,
for the record, Napster did try to comply with this,
but they were only able to demonstrate that their their

(22:21):
ability to prevent illegal file sharing was point four percent effective,
and the prosecution argue that that wasn't good enough. It
had to be a hundred percent effective, which led some
people to say, this isn't actually an attack on Napster,
this is an attack on peer to peer file sharing

(22:42):
as a strategy in the first place. Um, And so
it led to a pretty ugly fight. The lawsuit also
led to Napster shutting down its existing service in two
thousand one. The lawsuit kept on going at that point.
The following year, a judge and an appeals court both
found that Napster was liable for numerous copyright copyright violations

(23:03):
in separate lawsuits with artists like Dr Dre and Metallica.
Napster would settle out of court, paying handsomely to do so,
and Napster would go bankrupt. They would eventually re emerge
in a very different format as an online music store.
It was not really the same entity as the original company,
UM that, like I said, that company had gone bankrupt.

(23:25):
Another company came in and bought up all the assets. Uh.
And in fact, there's actually been a couple of different
music related services called Napster since the original shut down,
and Napster wasn't the only entity the r I Double
A and music artists went after. As I mentioned earlier,
individuals who used these services were also targeted. UM And,
as my colleague Ben Bolan might say, here's where it

(23:48):
gets crazy, because the industry went thermonuclear against people, and
not only did it hurt a lot of people, it
didn't actually achieve the goal that the industry had set
out to do, which was essentially to scare off pirates
so that they wouldn't copy and share music files. As
it turned out, the actions didn't curtail that behavior at all.

(24:13):
So to go into all the different lawsuits would take
a few episodes all by itself. So I'm just gonna
hit a few highlights, or you might want to call
them low lights. Now. I'm pulling a lot of this
information from a white paper that was published in two
thousand eight by the Electronic Frontier Foundation titled r I
Double A versus the people. Five years later, in April

(24:34):
two thousand three, the r I Double A sued four
college students. The students would ultimately settle out of court,
not necessarily because they felt they had done something wrong
were illegal, but because going into the court system would
be very expensive, much more expensive. Even if they won
the fight, they might end up having to spend way

(24:55):
more money in legal fees than if they settled off court,
and in at least one of those cases, the amount
of the settlement was exactly the same as the amount
the student happened to have in his bank account, and
it effectively wiped out his college fund. The reaction against
the r I Double A was mostly negative, with many
people saying that this was an overstep, that it was

(25:17):
being far too cruel in its pursuit of pirates, and
the the payments the penalties people were facing were far
greater than what was justified. On September eight, two thousand three,
the r I Double A would sue two hundred sixty
one Americans, alleging that those people were illegally sharing music

(25:39):
on peer to peer networks, and, as many have written
in the years since, it was a particularly aggressive and
confrontational and ultimately stupid move. After all, the industry was
attacking music fans. The very consumers that supported the industry
were the ones that the R I double A were
going after, so in hindsight it seems pretty ere. Then

(26:00):
this move would alienate a lot of people, even those
who had never illegally downloaded a song, and industry that
sues its own customers is not likely to see a
sales jump as a result. That's not how you build
customer loyalty. And not only was it aggressive and ineffective,
it was a faulty process. The R I double A
was collecting IP addresses by joining the same file sharing

(26:23):
services that pirates were using, and then searching for people
who are uploading music that was in the represented record
labels directories um in the R I double A, but
an IP address doesn't automatically tell you the physical address
of a device. To get that information, the I double
A actually had to go after Internet service providers or

(26:46):
I s p s. So the I s p s
have an incentive to withhold that personal information of their customers,
because the handing over customer data is a great way
to to lose your customer ors confidence. The R I
double A leverage the rules of the d m c
A to force the hands of the Internet service providers.

(27:07):
If the I s P s didn't comply, they wouldn't
be protected under the rules of the d m c A. Now,
at first, the r I double A tried to subpoena
I s P customers names and addresses from the I
s P s just with allegations of copyright infringement. So
in other words, this wasn't as the result of a
lawsuit or even they didn't even present evidence to support

(27:31):
their claims. They said, we suspect the person using this
I P address is committing piracy. We want their name
and address. So they weren't coming forward with any stronger
request than that. That tactic ultimately failed, as various public
interest groups and the e f F challenged that practice
in court, and the court agreed, saying no, you need

(27:52):
more than just an allegation to get the hold of
that information. There was a period, though, when the court
was still deciding this, where the practice was effectively legal,
or at least it wasn't illegal, and in that period,
the r I double A issued subpoenas to various I
s P s. Now, some of those two d sixty
one people that the I R A A sued in

(28:15):
September two three. We're probably fairly active in copyright infringement.
They may very well have been the appropriate people to
go after, at least from the perspective of these people
were actively committing this infringing behavior. But there was someone
that list who won a lot of sympathy from the public,

(28:36):
like Brianna Lahara. She was twelve years old and the
R I double A came after her like she was
some sort of evil super genius. She was living in
a public housing development in New York City, and her
mom was a single mother raising this kid, and they

(28:57):
were targeted by this initial blast of loss, and her
only real option was to sell the case out of
court because there's no way she could afford going to
court and defending herself. That settlement would include a two
thousand dollar fine and the requirement that she apologized publicly.

(29:17):
So here's the thing. Turns out, having a massive multibillion
dollar conglomerate of companies come after and force a young,
poor girl to apologize publicly isn't the best PR movement
in the world. It seemed pretty clear that Lahara wasn't
some sort of existential threat to the r I double A,

(29:38):
and this was a real abuse of the legal system.
And then there were all the people who were targeted
who clearly had nothing to do with illegal downloads. Sarah
Ward was one of those people. She was accused of
using Kaza to download hardcore rap music, but this grandmother
probably didn't do that, seeing as how the only computer
she owned was a Mac computer and Kaza was only

(30:00):
compatible with Windows machines. She wasn't apparently running a virtual
Windows machine on her computer, so chances are she was
not the right person. The r I double A did
eventually withdraw the lawsuit, but did not apologize for making
that mistake. And it wasn't the only mistake. The list
of people that was sued by the R I double
A also included a family in Georgia then not only

(30:22):
didn't have an Internet connection, they didn't have a computer
at all. There was no way for them to commit
the crime that r I double A accused them of.
There were even people on that list who were actually deceased,
so clearly the r I double A was using a
very wide, very inaccurate net to try and catch a
few big fish. As a message to pirates everywhere, and

(30:45):
the two sixty one lawsuits were just the beginning. Over
the course of several years, nearly thirty thousand Americans were
targeted by the r I double A in an effort
to create an environment that would discourage illegal file sharing.
So why did that accomplish? Mostly they made the r
I double A look like a vicious, uncarring group of
greedy corporate jerks who are willing to financially ruin the

(31:07):
lives of people who are already vulnerable in an effort
to secure their own bottom line. So it didn't win
them a whole lot of goodwill, and piracy continued unabated,
And there's no big shock there. We've seen time and
time again the more extreme punishments do not discourage crime,
but for some reason, we keep trying that approach. Anyway,

(31:29):
while the industries were able to shut down services, you know,
they were able to target the actual services and not
necessarily the users. Other services would pop up, and some
were operating in foreign countries, which made it more difficult
for the r I double A to go after them
because they were outside the jurisdiction of the United States
legal system. It would lead to the industry lobbying for

(31:50):
new legislation in the US to force I s p
s to block access to those services that were outside
the US. But I've covered some of those efforts in
previous episodes tech Stuff, And as I mentioned before, the
r I double A wasn't helped by claiming piracy has
a demonstrable, calculable effect on diminished sales because it's impossible

(32:11):
to equate every download as a lost sale. It's quite
possible that the person who illegally downloaded a file would
have never purchased an album or song. Otherwise, it's just
as possible that after they downloaded it, they would go
out and buy the song legally. There were people who
did that too. They might just download it to listen
to it to determine whether or not they wanted to

(32:32):
go buy the album, so it worked both ways. There
was no way to say a a any single pirated
instance would lead to a loss in revenue. So the
justification the R I double A was using when it
was deciding what damages it should be receiving from people
was completely unjustifiable. Is based on faulty logic. You can't

(32:55):
say you owe me X dollars because you cost me
x dollars when you can't be sure that that's the case.
So it was a huge issue. Ultimately, the music labels
that fund the r I double A began to withdraw
their funding, and this was for a lot of different reasons,
but one of them was that the country was entering

(33:15):
a recession and that, coupled with the already established trend
of lower record sales, was starting to put the squeeze
on record label company budgets, and there was the possibility
that our I double A would just dissolve completely due
to lack of funding. So the industry organization stopped pursuing lawsuits,
not because it suddenly had a change of heart and said, oh,

(33:37):
you know what, we've been real jerks about this. Instead,
they stopped it because they ran out of cash to
keep doing it. They did maintain more lawsuits against the services,
but they stopped going after people. Now, let me be clear,
I don't think theft is good. I don't think it's
a good thing to share copyrighted material without authorization. I

(33:57):
do think that artists should be compensated for their work,
and that if you want to access something that's behind
a paywall, you should either pay for that access or
you just do without. You don't work your way around it.
You don't try and get to the content without paying
for it. Otherwise, if you do that, then you have
removed the monetary incentive to create something. And there are

(34:20):
creative types who want to create no matter what, you know,
but most of them also want to make a living.
They have to pay bills, have to be able to eat,
so they need to earn money. And it's not really
fair to ask someone who is making the stuff you
love do it for free and then supplement that somehow
through numerous other jobs so that they can make a living.

(34:42):
So I understand where the disconnect is because it's really
easy to look at mega successful artists and say, well,
that person is rich. You know, they've got to they've
got multiple houses, they're always in the headlines for having
these extravagant parties and stuff, so stealing music doesn't hurt them.
And that's probably true for those folks, But there are

(35:03):
a lot of creators out there who are doing what
they love and they're either barely scraping by or they're
not even able to live off of that art. So
the attitude is ultimately really harmful. To those artists. Now
that being said, the R I double A wasn't exactly
looking out for the artists, So they're not the good
guys in this either. That really wasn't part of their equation.

(35:26):
The R I double A was looking out for the
record labels. And record labels make their money by exploiting artists.
Now that's a word with negative connotation. It doesn't necessarily
have to be negative. It doesn't necessarily mean an unfair exploitation.
But record companies frequently did unfairly exploit artists. So if

(35:47):
the artists create the music and the record labels produce it,
publish it, market it, promoted, arrange for distribution, all that
kind of stuff you see where there's this relationship there
where if the artists didn't and go through a label,
they'd have to do all of that on their own,
and that's hard there. They don't necessarily have the infrastructure
to deal with that and do it themselves, and the

(36:09):
record labels handle all that. So you understand why the
record labels deserve a cut. But the record labels had
most of the power in most of those situations, unless
an artist got so popular that it was a detriment
to the record label if they lost that artist, and
the artist had enough leverage to negotiate a really good

(36:29):
deal for themselves. Most artists weren't in that category. So
while the R I double A was going after all
these file sharing entities and the people using them in
the name of preserving copyright, the money the R I
double A was actually getting from those settlements, uh didn't
make its way to the artists whose work was being
freely exchanged. So you had artists who are like, my

(36:53):
music is being shared for free, and I know you're
getting money from settlements, but I'm not seeing any of
that cash. So the people downloading music were engaged in
harmful behavior, the R I double A engaged in devastatingly
harmful behavior, and artists were caught in the middle. And
we're starting to get really frustrated now. Some of them
didn't see the harm and file sharing, and they genuinely

(37:15):
wanted as many people as possible to hear their work,
So they were in favor of this. They thought, oh,
this is disrupting the industry. The industry is filled with corruption.
I'm cool with it. But some such as Metallica, saw
piracy as a direct threat to their livelihood. They said,
how are we supposed to sell our music online? If
the guy next to us is giving it away for free,

(37:37):
no one's gonna buy from us. They can just get
the songs for free right next door. From an internet perspective,
most artists fell somewhere in the middle of that spectrum.
You know. They weren't necessarily as extreme as Metallica, but
not as uh lack of daisical as those who were like,
let's disrupt the system. And they weren't getting much help

(38:00):
either way. But while the record labels were worried that
piracy was going to be the end of them, another
shift was coming that would change things up. It was
an approach that would dramatically shift behaviors and do away
with the idea of owning copies of music in the
first place. It would be streaming services, which I'll talk
about more in just a second, right after we take
this break. Alright, So, year after year, the music industry

(38:30):
was facing huge cutbacks due to flagging revenues. And it's
hard to feel much sympathy if I'm being really honest,
because the industry was also known for not just being
insanely profitable for many years, but also for a rather
hedonistic approach to business. There are legendary stories about parties
and drug use, and lavish offices for record label executives

(38:52):
and crazy bonuses that they enjoyed, mostly at the expense
of the musicians who are creating the stuff the record
labels were selling. And there were some artists who likewise
enjoyed comparable lifestyles. But for every Madonna, you had hundreds
of artists who were making maybe a decent living, but
they were not not getting rich, or some people who

(39:13):
weren't even able to get by even as being assigned
artists with a record label. So generally speaking, artists weren't
being paid anything until an album published, and then they
would get some money. And in order to make serious money,
to really make back enough money to justify the amount
of time you spent recording the album, the album's sales
had to do really, really well. Then the artists would

(39:36):
get royalties, which are a percentage of each sale. And
I think I need to give you a quick word
on how royalties typically work so you understand how this
model tends to to work in the entertainment business. So,
in the negotiation phase, an artists and a label or
a publisher come to an agreement, and that agreement typically

(39:58):
includes a guarantee payment on delivery or publication of content.
So in this case, we're talking about the an album dropping.
So the artist comes up to the record label and
they say, all right, when the album drops, the record
label is going to pay the artist fifty dollars. That's
a decent chunk of change. Fifty grand is that's nothing

(40:19):
to sneeze at, but it's not gonna make anyone rich, right,
it's not gonna make them shop for a brand new
house in Beverly Hills or anything. Now, along with that
negotiation is the royalty rate. So let's just say, for
the purposes of an example, that the rate is five
cents per copy sold. Now, does that mean when the
first copy of the album is purchased that the artist

(40:40):
gets a shiny new nickel. No, because that nickel typically
actually goes to pay off the fifty thousand dollars that
the publisher initially paid the artist. So, in other words,
you have to pay off that fifty guaranteed payment before
you start accumulating royalties after that. And there are one

(41:00):
million nickels in fifty thousand dollars. So the record label
would need to sell a million copies of the album
before the artist would start to see any money in royalties,
and then from that point forward they would get a
nickel off of every sale. So if an album does really,
really well and stills sells millions and millions of copies,
and artists can make some serious cash through royalties, And

(41:24):
as long as the album is in print, the potential
to earn those royalties continues. You know, as long as
the album is still available to purchase as new, then
you could still be making money off a classic album
or a remaster years after you first publish it, depending
upon the contract negotiations you went through before. But if

(41:44):
the album only receives modest sales, then the artists won't
get any royalties at all. Like if they don't sell
a million copies, they never pay off that fifty grant. However,
they also don't have to pay back the difference to
the publisher. It's not like, oh, well, we only sold
thirty thousand dollars worth of the album. If we look
at your royalty rate, you don't have to return twenty grand.

(42:06):
You keep the fifty. After CD sales started to decline
in two thousand, the record label companies began to face
some pretty harsh realities. Things got worse year after year.
They had to start laying off employees. It was a
very drastic change from the days where it looked like
there was no end in sight to all the parties

(42:27):
and all the drugs and all the bad behaviors. UM
I never occupied that world, so I don't know if
all of that behavior stopped once things started getting more
real for the record labels, or if they just kept
doing it in the hopes that maybe that would help
ease the pain. I wasn't there, so I don't know.
But the years from two thousand to two thousand ten

(42:48):
we're really really rough on the industry in general. Now,
in two thousand eight, the streaming service Spotify launched and
it would become one of the most important players in
the streaming game. At the time, it wasn't seen as
the savior of the music industry, but things have changed
since then. The streaming model pays record labels a royalty
fee per stream, and it's typically a fraction of a

(43:11):
fraction of a penny per stream. So let's say a
a play of a recording is a stream. Now, according
to a survey by Digital Music News in eighteen, the
royalty rate range from point zero zero three nine seven
dollars that would be on Spotify to point zero zero

(43:31):
seven eight three dollars on Apple Music. And it's not
a one size fits all rate. Record labels could negotiate
those rates on behalf of artists and influential artists sometimes
have the clout to demand that their work remain off
the server services entirely if they think the royalty rates
are too low. Lots of artists have done this Adell
for example, um They've said, no, I'm not going to

(43:54):
allow my music to be on those services because the
royalty fee they're paying is are too low. A lot
of artists, however, don't have that cloud and they don't
really have any option. But what became really clear later
on was that these tiny fractions of a penny really
do add up when you start looking at them collectively.

(44:14):
And the big reason for that is it's not a
one time occurrence per customer. So the profit margins on
c d s were great and the royalties were more
profitable per sale at first glance, But when you go
out to buy a CD as a customer, you buy
it just the one time. You aren't going to go
buy a new copy of the same c D. Every

(44:36):
time you want to listen to the c D, you
just listen to the one you've got. So CD sales
had a natural curve to them. It would peak often
right around release or if a single from the album
got a lot of radio play, and then sales would
drop off gradually. But with streaming, a payment goes through
with every stream, so every time a person listens to

(44:57):
the same song, it triggers a payment, a royalty payment.
So if you put a song on repeat. Let's say
that you've got a song that you particularly like and
it's just stuck in your head and you gotta you
gotta listen to it, like twenty times in a row.
This happens to me all the time. Well, that's actually
twenty royalty payments. They end up going to that record
label and to that artist. A portion of it goes

(45:17):
to the artist, So while the initial amount is less
than what you would get with a CD sale, you
do it way more frequently because it's every time you
listen to it, not just every time you purchase it.
So record labels began to shift to support that model
once the economic realities became clear, and streaming gradually grew

(45:39):
to become a more prominent component in revenue. Now, it
also meant that some artists that might have trouble getting
traction in the world of c d s started finding
sustainable success through streaming. So it might be an artist that,
you know, maybe they'd only sell a couple of thousand
albums in the traditional way, that people would discover them online,
and they would get very popular that way. Now people

(46:02):
who usually would be struggling and be unable to live
just off of their music might even be able to
make a career out of it. They again might not
be getting rich, but they might be making a comfortable living.
Not At the same time, the streaming services themselves were
actually struggling to become profitable. They were operating, they were popular,
they just weren't making a lot of money. There was

(46:23):
clearly a business there, so there were a lot of
investors who were willing to support these services with the
thought that eventually they would turn a profit. People wanted
to listen to music, record labels were willing to play
ball in return for those royalties, and at least some
artists were totally on board or powerless if they didn't
have the influence, but making money as the service was

(46:46):
a bit of a challenge. It wasn't until very recently
that Spotify posted a profitable quarter from revenue. They did
have one profitable quarter earlier, but that was due to
attacks windfall, and you can't build a business off of that.
That's some us like a one off event. But they
did have a profitable quarter recently, so they were able
to show that maybe now it's actually a revenue model

(47:08):
that works. These services typically generate revenue through ad supported material.
They sell advertising time on their services, or they might
also offer subscription plans to customers. They might do both,
So a typical service could have a free tier in
which you can listen to music, but you might have
limited features and you would have commercials play between every

(47:31):
few songs, or you might have a selection of subscription
tiers that might be ad free. They could include other
features like being able to listen to the same song
more than once, um, that sort of thing. And many
also offer digital stores where if you want, you can
purchase songs and download them, kind of like in the
old days, or like on iTunes or something like that

(47:54):
um or you could have a limited cashing feature that
allows for offline listening. Now, this model caught on with
the public as well, and there are several streaming services
that you can subscribe to and the interest of full disclosure,
I Heart Media has an app that they use the
where you can listen to streaming music, and they talk
about how their approach is different from say Spotify, and

(48:18):
that it's all about curating a an experience and it
becomes a kind of a uh a collaborative effort between
the service and the listener. And then other services are
more about on demand listening. So they're very different approaches here,
but they're both geared towards having people be able to

(48:39):
access music through streaming as opposed to downloading. So Pandora
is another example. They select music for you based on
an algorithm and some guidance from the individual users. You
might give it a specific song that you like, and
it will go out and seek other songs that it
determines are similar to that one and serve them up
to you. Maybe you like it, maybe you don't. And

(49:00):
there are rules that these companies typically have to follow.
Uh those are rules they're set by recording labels and
broadcast companies, and it's been a challenge for many of
those companies to make the business actually earn money, and
many would exist primarily off of repeated rounds of funding campaigns.
And while I focused on the music industry in this episode,
we've seen the same thing happen with media like film

(49:21):
and television. Took a little longer for those to really
have that same experience, largely because the file sizes are
typically much much bigger than with music files, and so
the limitations of technology gave them a bit more breathing
space than the recording industry had. But services like Netflix,
Amazon Prime, Hulu, Disney's upcoming streaming service, and more provide

(49:46):
users with on demand digital streaming of films and TV
shows that belong in the libraries of those services. The
film and TV industries tried working with TV manufacturers to
push for advancements like ultra high definition, high dynamic range content,
even three D systems was an effort to help boost
sales both of hardware and of content and just increased revenues.

(50:11):
Much of that has had limited success. In the case
of three D it was pretty much a flop, and
we've seen cable subscriptions on the decline, streaming services have
been doing pretty well, so well in fact, that now
these distribution companies are also production companies. You know, a
decade ago, it would seem odd to suggest a company
like Netflix would be able to go toe to toe

(50:31):
with established, older media companies to produce award winning content,
and yet that's happened several times in the last few years. Today,
we have a culture of cord cutters who are canceling
cable subscriptions in favor of online delivery. You have cord never's.
Those are people who never had a subscription to pay
TV in the first place. They've only received things either

(50:52):
over the air or online. And this trend hasn't been
so large as to necessitate a complete change in the
entertain and industry, but it could be the beginning of
another very large disruption. So if the streaming model continues
to grow, or at least hold steady, while cable subscriptions
continue to fall, we might see a drastic change in
television and film production. Now we're seeing an increased emphasis

(51:16):
on huge, tent pole blockbusters in film, you know, like
the vast majority of them are coming from a single
movie studio that being the Walt Disney Company, which owns
not just all the Disney I p but Star Wars
and Marvel, and they just had the acquisition of Fox
as well. There's still a call for independent films, but
many of those have sought new ways to reach audiences.

(51:37):
Some have been released both in theaters and on online
channels UH and available for streaming, sometimes for a small fee,
but at the same time when it's out in theaters.
Others have skipped cinema distribution entirely and struck deals with
companies like Netflix to get distribution that way. And as
we head toward the future and which pay TV is

(52:00):
having this this existential crisis, we are left with a question.
Are we going to see a future where PayTV goes
away and movie theaters are only for showing Disney films
and everything else reaches us on one of a dozen
streaming services, or will it be possible that the proliferation
of all these different services, each of which has its

(52:20):
own selection of exclusive content and features, will ultimately frustrate
consumers who just want access to all the things they
like in one place. I know a lot of people
who said I quit cable because I thought it was
too expensive, and it was given me too much of
the stuff that I don't care about and not enough
of the stuff I do care about. But now there's
so many different streaming services and no one has everything

(52:42):
that in order for me to get all the stuff
I want, I have to subscribe to half a dozen
streaming services, which doesn't seem like it's any better than
one single cable service. So there's still a lot of
frustration out there. These are questions that we can't answer yet.
We don't know how it's all going to turn out,
so I'll likely have to do more episode in this
vein in the future, but for now it's time to

(53:03):
leave off and move on to other topics. We are
done talking about the evolution of entertainment media and how
that has changed our consumption. We have gotten to the
point now where a lot of people don't bother owning
music anymore. Instead, they will pay for a subscription to
or listen to ads in return for access to a

(53:26):
service that serves up music on demand in streaming format,
and not purchase it at all. I mean, I know
a lot of people who the way they listen to
music is they just start a YouTube playlist and they
listen to it that way, So it's it's a very
different world from the world of vinyl and and c

(53:46):
D s or even older if we want to go
with like you know, wax cylinders. So yeah, interesting, interesting story,
But we're going to now move on to other topics.
So look forward to something totally to friend in the
next episode. And if you guys want to reach out
with your own suggestions, you can email me the addresses
tech stuff at how stuff works dot com. Pop on

(54:08):
over to tech stuff podcast dot com. That's our website
where we have an archive of all of our previous episodes,
plus access to our social media accounts over on Facebook
and Twitter. There's also a link there to our online store.
Remember every purchase you make there goes to help the show,
and we greatly appreciate it, and I'll talk to you
again really soon. Text Stuff is a production of I

(54:32):
Heart Radio's How Stuff Works. For more podcasts from my
heart Radio, visit the i heart Radio app, Apple Podcasts,
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