First things first.
In the movie business we would say this column is “Inspired by Real Events.” Some elements of the story I am about to tell I witnessed personally. Some are based on rumors. The rest simply comes from connecting the dots. While the outcome is unquestioned, there may be a few differences in the way it actually went down. But if it happened even close to the way I suspect, then it wasn’t Napster that put the final nail in the coffin of the music business — it was blind greed.
As mentioned in Part One of this series, once the major record companies became part of publicly traded conglomerates, everything changed. The one-time leader in the art of rebelliousness, was now in the business of mitigated risk and maximized profits. Scores of MBAs, lawyers and accountants ruled the roost. Suits were everywhere.
With their dog-eared rule books in hand, the suits set out to run the record business like manufacturing companies. Their product was plastic disks. Music was nothing more than a marketing hook.
Like any good manufacturing company, the goal was efficiency. Cutting costs at every corner and plugging holes in the company’s operations were top priorities. The re-invention of the music business began.
As you probably guessed, their task was daunting. The business had always been a little loose and fast with the bookkeeping and paperwork. Going through all of that silliness couldn’t have been easy.
I can imagine the scene.
Fade up: A lawyer and an accountant sit at Peter Luger’s discussing ways to clean up the messes left by the former “rock ’n roll” regimes… while eating a $700 lunch.
“Some of these contracts are such a mess, dude.” the lawyer said. “This could take years.”
“It is amazing the amount of money that is thrown away by these bozos.” the accountant sneered, as he gulped back his third martini. A subtle shake of his empty glass set the waiter in motion. Mere seconds later, the sound of a shaker can be heard from behind the bar. “Case in point, did you know that MTV pays us virtually nothing to play our videos?”
“What?” howled the lawyer incredulously.
“I’m serious. And when you factor in how much music videos cost to produce, we are throwing away millions of dollars.” the accountant spit through a mouthful of Beluga.
“So you’re telling me that MTV is making billions on the back of our music?” The lawyer said, his eyes burning red from disgust… and the extra spicy cocktail sauce he had just eaten on a shrimp the size of a baby’s fist. “And we get nothing?”
“Nothing.”
The lawyer knocked back his bourbon and smiled. “Well, that’s about to change. They make all their money off our music. They have no choice but to pay us whatever we ask.”
“I mean, what… are they just gonna stop playing music? They are Music Television for chrissakes.” the accountant shouted. “Time to pay the damn piper.”
Drinks refilled, they toast to their genius.
It was just days before the team assembled for the assault on MTV. They walked in unison to the executive suite, each with their alligator attaches and Brooks Brothers suits color coordinated for maximum effect. They came in, guns blazing. MTV had flourished by using the industry’s property. Millions of kids were seeing and hearing music essentially for free every day. The deal was simple: MTV had to to pay up, or the suits would pull their catalogs.
It wasn’t much of a fight. MTV had grown into a powerhouse, sure. But in their hearts, the remaining founders of the company were just music fans. The idea of not having music on MTV was unthinkable. They had no choice, but to agree to the record company’s terms. One by one, label after label. New deals were struck. And MTV’s costs skyrocketed.
That wasn’t MTV’s only problem, of course. They too, had been gobbled up by a publicly traded behemoth. And the number crunchers in the basement didn’t like what they were seeing. The videos the labels were making, just like their watered-down, market-researched albums, were not drawing as many viewers as they used to. And now, with the renegotiated terms, music was suddenly extremely expensive. The mandate was announced: find less expensive ways to get kids to tune in.
Before long, in some production office an executive offered a suggestion. “What if we made a show about what is happening in the real world.” he said. Another exec nodded and said, “The Real World. I like the sound of that.”
Fade to black.
What the suits didn’t realize was that for decades, music lovers all over the world had been discovering new artists, hearing new singles and consuming more music than ever because of MTV. The channel made artists and songs into cultural phenomenons and the record business thrived as a result. By forcing them to pay exorbitant fees for the music, the record companies had eliminated their single biggest FREE marketing channel.
Once again, the MBA rule books had failed the industry. Was MTV profiting massively from music? Yes. Were they paying for the music? Essentially, no. But the symbiotic relationship between the music business and MTV had been a goldmine. And now that mine had collapsed. Perhaps it wasn’t obvious to the new executives at the labels, but the writing was on the proverbial wall. As reality TV programming gobbled up more and more air time on the channel, sales of records fell precipitously.
Had the industry been thinking clearly, an immediate “about face” might have stopped the bleeding. But, they were too distracted… and they had someone else they could blame for their woes.
Around that same time, a couple of guys named Shawn and Sean walked into Universal Music Group’s offices. Oh sure, they looked like they slept in their clothes and yes, they were a bit smug— arrogant, even. But they had created a new platform that, they claimed, would be the salvation of the music industry. Okay, their pesky little startup called Napster had been facilitating piracy of music at a massive scale. But they proved, without question, that music could be delivered over the internet at a significantly lower cost… and fans loved it.
One would think that with the industry’s struggling investments in CD manufacturing plants, distribution companies and record stores (see Part One of this series) and the loss of their most inexpensive and powerful marketing channel, they would have been quick to embrace this ingenious technological solution. They weren’t.
After Shawn and Sean were unceremoniously booted from the building, a memo from one of the most powerful executives in the business (who shall remain nameless) began to circulate through the labels. The new course of action for the industry: “scorched earth.” Anyone, even fans, who dared associate with Napster would be punished.
It was war. The industry’s last flailing attempts to wrest control back into their hands would include suing digital music startups, artists and their customers. But it wouldn’t matter. The fact was, the music business was already dead.
There are many lessons to draw from what happened to the music industry during the years 2004-2009 (or so). So many lessons, in fact, that they will require a third part to this series.
Stay Tuned for
Napster Didn’t Kill the Music Industry… It Killed Itself - Part Three
History rhymes, if you let it
Napster Didn’t Kill the Music Industry… It Killed Itself - Part Two