Internet allows consumers to break shackles of U.S. music industry

June 29, 1999|By Fredric Dannen

A REVOLUTION has occurred in the way music is distributed, and the big record companies are in a state of panic. With an abundance of music now available free on the Internet, the major labels have essentially lost control of their catalogs. But they are not casualties of new technology so much as victims of their own arrogance.

These days, it's possible for anyone with Web access to download hours of music in an audio format known as MP3. The downloaded music is of surprisingly good sound quality and can be played out of computer speakers or on a special portable player. In just six months, MP3 music has grown from a fad to a phenomenon.

A large percentage of MP3 music on the Internet has been bootlegged from compact discs and is being offered by music fans to other music fans. The record industry is justifiably angry over this violation of its copyrights. Yet it doesn't seem to comprehend what's driving the MP3 boom.

Internet music, it can be argued, has less to do with piracy than it does with mutiny. It is an act of consumer rebellion. The record industry has behaved for too long like a cartel and consumers are sick of it.

For the past two decades, the industry has been dominated by at most six multinational companies. (The Big Six recently became the Big Five, when Seagram absorbed two major labels, PolyGram and MCA.) During that time, the major labels have abused their concentrated power: They fostered a multimillion-dollar payola system that drove independent labels off the radio and largely subjugated the small circle of lawyers who represent recording artists.

Worst of all has been the companies' mistreatment of the consumer. Though the cost of manufacturing and packaging a CD has plummeted since the early 1980s, the industry has kept CD prices artificially inflated. Today, we are asked to shell out $14 and up for an album that most likely contains only a few desired tracks with the rest filler.

By obtaining music directly from the Internet, however, consumers have the freedom to acquire only the tracks they want. That so many MP3s are obtained in violation of copyrights is due to the simple fact that so few are legitimately for sale. The record labels enjoined artists from making songs available in MP3 format. Meanwhile, the industry tried unsuccessfully to prevent the sale of the Diamond Rio, a portable MP3 player. How the record companies thought they could maintain this colonial system in the digital age is beyond me. Once the end product -- the music -- became a binary code, a string of ones and zeros, sooner or later the most logical way to distribute the product was going to be by telephone modem or some other direct method. Electronic distribution means that small labels can compete effectively against big ones.

Now, because of the Internet -- and the fed-up consumer -- electronic distribution has become an unstoppable force.

The technology may change: Microsoft, Lucent Technologies and other companies are working on alternatives to MP3 that provide better sound quality. And once the record labels, large and small, figure out how to sell downloadable music, whatever the format, they will probably find it profitable. But the power of the cartel is doomed. And for that, the major labels deserve no sympathy at all.

Fredric Dannen is the author of "Hit Men: Power Brokers & Fast Money -- Inside the Music Business" (Vintage, 1991). He wrote this for the Los Angeles Times.

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