Online Music - From Piracy to Profit

Internet MusicThe music industry initially saw the Internet as the enemy, responsible for falling CD sales and profits.

The best-known early battle involved the original Napster, a peer-to-peer file sharing service.

Napster was founded by Sean Parker, among others, in 1999. (Parker, portrayed by Justin Timberlake in The Social Network, went on to become the first president of Facebook.) At its peak, Napster had 80 million registered users worldwide.

Napster obtained no permissions from music owners, and paid no royalties to music companies.

The Metallica Suit

When the heavy metal band Metallica discovered that a demo version of its song “I Disappear” was available on Napster even before it was released – and was even played on the radio before its release – the group sued Napster in 2000.

Dr. Dre filed suit against Napster a month later, and the seven major music labels, via the Recording Industry Association of America (RIAA), filed their own lawsuit soon after.

(I was then working at the Motion Picture Association, and peripherally involved in the RIAA case, which was being watched closely by the movie industry.)

In 2001, after a ruling by the Ninth Circuit that Napster was responsible for copyright infringement by its members, the service shut down.

The Birth of iTunes

In January, 2001, right around the time Napster was dying, iTunes was born. After the launch of the iTunes Store in 2003, iTunes quickly became the biggest music seller in the US, with a business model based on paying royalties to intellectual property owners rather than on piracy.

With a legal alternative now available, music piracy began to decline.

Another reason that piracy has declined is that people increasingly stream music rather than download it.

In some contexts, the owners of uploaded music have stopped trying to block “unauthorized” uses and are instead focused on making money from them.

Monetizing “The Harlem Shake”

For example, in early 2013 more than 4,000 amateur videos featuring the term “Harlem Shake” were uploaded to YouTube every day, according to Time. This made money for both YouTube and for the song’s creator, Baauer.

Through a service called Content ID, YouTube automatically searches its servers for copies of copyrighted content that the owners have asked YouTube to protect. When these copies are found, the owners can have them removed, or it can reap the profits from ads displayed in connection with the content.

As reported by NPR, not only the major music labels are benefiting from this type of music monetization.

Wedding Videos

A musician named Josh Collum, using the stage name Josh Ryan, signed up with a company called Rumblefish to license the music from his band, Secrets in Stereo. Initially, Collum made only an occasional few hundred dollars from his music. However, a few years ago he starting getting tens of thousands of dollars every quarter.

What had happened is that a wedding photographer had used one of Collum’s tracks to go with a wedding video. He found the track on Animoto, which offers pre-licensed music to photographers and videographers.

Enough people liked and shared the wedding video that it passed 250 million views on YouTube.

According to Casey Rae, the CEO of the Future of Music Coalition,

we may be about the enter a new era, one in which the music business becomes more global and the Internet actually brings in new areas of revenue for musicians rather than just killing the old ones.


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