MP3 The Day the Record Industry Died.
Created: Sometimes in 1999

The MP3 format has been around for quite a while now. About a year ago I first downloaded an MP3 decoder for my Linux box, and thought that it would be a cool way of storing sound for my micropower radio station. I encoded some music onto a CD, tossed the CD into a Linux machine, and had about eight hours of continuous music, with no duplicates. And, for the last year, I've had a computer plugged in to my stereo playing a good mix of music, all encoded in the MP3 format, and rotated randomly.

When the MP3 format started picking up steam early in 1998, it was largely ignored by the mainstream music industry. A couple of small unknown artists and little e-commerce sites started making MP3 format music files, but this was largely shrugged off by the rest of the music business. Even though the MP3 format was poised to rattle the music industry to its very foundation, you didn't read about it in the Los Angeles Times or Variety hardly at all last year. Wired didn't even pay it much notice.

Now, the record industry sees the MP3 System as a threat. Hoo-yeah. In ways they hope we don't understand.

Cat's Out of the Bag, Folks.

Is it just me, or are these record labels completely unaware that the cat is already out of the bag? They gleefully ignored MP3, and now they're racing to catch up to it. Too little, too late.

Thing is, computers are nowhere near 100% market penetration in the United States. Just about every MP3 device on the market is somehow connected to a computer. So, the compact disc (the old audio CD) is probably going to be around for at least another 10 years, and that's assuming a sizable penetration of MP3 devices, which I don't personally ever see happening. It's way to "geeky" for about 40% of the population to even consider.

So What Are The Record Companies Worried About?

All the MP3 products being sold now (the Diamond Rio, the EMPEG car MP3 player, etc.) are designed to rip MP3's out of conventional CDs, or at least, come with software designed to do same. A common tactic of many I know is to purchase CDs, rip the contents into MP3, and then resell them back to the Wherehouse or similar used outlets. Sure, it ends up costing them US$4-7, but they can get that back as "trade bait" (for the warez puppies)... or, they buy used CDs in the first place, and do the same. Hell, one guy I know sells the CDs at a local swap meet for what he paid for them at Wherehouse.

So, the question is, what is the record industry hoping to accomplish? The standard record company hogwash states that it costs $x million to make a CD. Everybody reading this knows that $1,000 well spent at Radio Shack and/or Fry's Electronics can produce a studio (plus the cost of a PC, so make that $2,000) that is capable of producing professional quality masters and also capable of short-run production (at high cost, granted, around $4 per disc if you calculate all the costs involved). So, what costs all those millions of dollars?

Now we're getting an answer.

I know (from personal experience) they aren't paying the "engineers" and the wire jockeys in the studios more than $15/hour. The artist is lucky if they see 30 cents a copy. Record stores, while they probably make more than anybody that low in the food chain, typically are only making a couple of bucks per CD (a small record store I know of typically has a 20% markup. And his prices are high compared to a chain, so one can only assume similar markup everywhere given the volume of even a "smaller" chain like Tower Records).

So, once again, some greedy corporate bastard is making 90% of the money.

Uh huh. So, what the record companies have to worry about is competition to their business model. Their business model is based on the fact that not everybody can produce a CD. Well, that's changing, folks. In fact, anybody that knows how to press "RECORD" on a CD-writer can make a CD.

But who needs CDs? Once you've spent the money to buy a computer capable of writing CDs (and let's face it, although audio CD writers do exist, they are about as much as a good computer with a CD-RW drive, so unless you're a total technophobe [why are you buying a CD-recorder then?] a PC + CD-RW is still a better buy), you've got all the equipment right there to make MP3 files of your music.

What About The Poor Recording Industry?

The fact that artists don't make but a trivial amount off record sales is the reason many people don't feel bad about pirating music. After all, it's not literally like your taking money out of some starving artist's mouth. Just about all artists don't make diddly off record sales, they make it off tours and things like that.

*sigh*. Most MP3-only labels pay their artists around 20-40%. Some (*wink* *wink*) are offering 50%. Compare 50 cents per downloaded song to the paltry sum most artists see from CD sales, and I think you'll find, even considering the piracy aspects, that unsigned artists are finding MP3 to be more and more attractive.

This is why the record industry is scared by MP3. They aren't necessarily worried about the rampant piracy issue, although that is more than an accessory concern. What they are worried about is that MP3 is going to remove all the middlemen between artist and patron. Their entire money-making infrastructure, designed to screw artists and patrons alike, is outdated and obsolete. Like the steam engine, it is a relic of a bygone era when records were pressed onto vinyl, and hi-fidelity equipment like dynamic microphones and balanced-audio mixers cost thousands of dollars, when you could find it.

Let 'em die. I've seen the future of the record industry. And it looks a lot like GoodNoise and MP3.com. And a lot less like WEA and Sony Music.

The MP3 Revolution will continue well into the next century. The recording industry may well be left in the dust, left to service the percentage of the population that dosen't have computers, and/or wants music in conventional formats. The only way out for the recording industry is to realise that their business model is faulty, and to "come around" and do what the MP3 "Labels" are doing.

It may be a hard pill for them to swallow. Selling "bits" is a hard game, just ask any software company.

The folks at Diamond Multimedia are to be congratulated. They may have, singlehandedly, fanned the fires of the MP3 revolution to the point where it is now an unstoppable force, even if (at the moment) only in the wired mindset. And, since that same "demographic group" is a large purchaser of music, and also a large purchaser of stuff online, it may be enough to humble the music industry into doing what's right. And that's finally paying artists what they're worth, and treating them like human beings.

It's a noble fight for any revolution to improve the status of a segment of society. Let's hope, for the sake of the artists, that it is won by the revolutionaries.

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