For more than a decade Rabid Neurosis had burrowed its way into the music industry’s supply chain. They had scoured eBay for early CDs; they had bribed radio DJs and record store employees; they had sourced moles inside warehouses, and television stations, and music studios; they had even made their way into the factories themselves. They had leaked 3,000 albums a year across every genre. Across the globe they had built a network of infiltration and dissemination. In the shadows of the Internet they had stashed their secret troves of pirated material and kept them locked under uncrackable encryption. A team of expert FBI agents and a small army of private detectives had tried, and failed, to work their way into the group for more than five years. The economic damage they had caused to the recording industry was measurable and real, and ran to millions and millions of dollars.
But on March 19, 2010, a Texas jury, specifically selected for its technological unsophistication, found that the laws that prohibited these activities did not have to be obeyed.
EPILOGUE
Six months after the trial of Adil Cassim concluded, I met Karlheinz Brandenburg in person for the first time. By this time he was 53 years old and his graying beard gave him a distinguished, wizardly affectation. He had continued his work as the director of Fraunhofer’s Institute for Digital Media Technology in Ilmenau, and was an avuncular presence there. His students spoke of him with affection, but he had no children—the mp3 was his legacy.
Now, with the rise of Internet streaming services like Spotify, its retirement was looming. Dieter Seitzer, Brandenburg’s thesis adviser, had anticipated this switch over 30 years before, and his original vision for the mp3 was for streaming media, not storing it. But Spotify didn’t use the mp3 format. It used Ogg, the open-source alternative. Brandenburg and Grill had long suspected Ogg of infringing on their patents, but those patents were more than 20 years old and beginning to expire. The technology was free now. It was the music that cost money.
Still, he could hardly complain, as he was wealthy and successful by any standard. The fruits of his insights could be found anywhere electronics were sold, tracing all the way back to the ancient, five-song MPMan player that Saehan International had commissioned all those years before. In fact, Brandenburg still owned one of those. The thing didn’t work anymore, of course—the battery had crapped out, and no modern computer supported the 20-pin connector by which it transferred files. But for some reason Brandenburg, who was “not sentimental” about technology, had held on to it.
Doug Morris, too, was a lucky man. He’d won the coin toss with Jay-Z, and saved Universal a million bucks. But then The Blueprint 3 had launched a late-career renaissance, far outselling expectations, and by the end of 2010 it was Shawn Carter who’d come out ahead. That same year the music industry bottomed out at less than half its 2000 size. Vivendi finally decided to enforce its retirement clause, and at the beginning of 2011, Morris was replaced as CEO of Universal Music Group, and moved to an advisory position with limited responsibility.
After twenty years at Warner, Seagram, and Vivendi, Morris had earned more than 200 million dollars. Even in his last year, straddling the smoking wreckage of the music industry, he’d cleared more than ten million bucks. Was he overpaid? Perhaps—corporate reports showed that Lucian Grainge, the successor CEO at Universal whom Morris had personally groomed, earned only half of that. Then again, perhaps not. His services remained in high demand, and, in an echo of his Time Warner firing in 1995, a restless Morris was hired away by a rival firm almost immediately, this time as chairman and CEO of Sony Music Entertainment. Morris—a 72-year-old self-confessed technology ignoramus—would shepherd that company’s artists and repertoire into the next millennium. Later that year, the British music conglomerate EMI was acquired by Universal, making the Big Four the Big Three and leaving 80 percent of the recording industry in the hands of just Universal Music Group, Warner Music Group, and Sony Music Entertainment. At one time or another, Doug Morris had run them all.
As artists and labels sought new directions for revenue, the importance of viral videos, publishing rights, streaming services, and the festival touring circuit continued to grow. In 2011, for the first time since the invention of the phonograph, Americans spent more money on live music than recorded. In 2012, North American sales of digital music surpassed sales of the compact disc. In 2013, revenues from subscription and advertiser-supported streaming passed $1 billion for the first time.
The creative industries scrambled to cut licensing deals for streaming media. Apple bought Beats, paying Dr. Dre and Jimmy Iovine more than half a billion dollars each. Google Play debuted. Spotify, Rhapsody, Deezer, Rdio, and Pandora all saw double-digit growth. Bidding wars erupted over the rights to stream the back catalogs of Led Zeppelin and the Beatles. Leading the way was Vevo, hitting five billion views a month and still growing by 50 percent a year. Morris now understood that this, above all, was the thing he’d be remembered for.
But streaming didn’t solve everything. It may not have solved anything. The music streaming platforms were perpetual money-losers, spending unsustainable amounts to license content to attract early users. Despite this spending, artists with millions of plays earned royalty checks only in the hundreds of dollars. In 2013, amid an upbeat economic picture, the recording industry’s total revenues once again declined, to their lowest level in three decades. Consumer research showed that new Spotify subscribers stopped pirating more or less completely. They also stopped buying albums. The labels were now engaged in a difficult two-front war, with the streaming services on one side and the pirates on the other.
Artists began to experiment. Lady Gaga moved a million units in a single week by selling her album Born This Way for 99 cents. Beyoncé released a surprise self-titled “visual” album with 17 attached videos, exclusively sold through Apple. Radiohead’s Thom Yorke pulled his work from Spotify and dumped his album Tomorrow’s Modern Boxes onto BitTorrent. Taylor Swift pulled her work too, then sold nearly two million copies of her album 1989 in a month, the bulk of those as compact discs at big-box stores.
Retail still meant leaks, but the industry was taking better precautions. Kanye West had been a favorite target for RNS for years. In 2011, he struck back. An article in Billboard detailed the “near-military-scale planning” he took to keep his collaborative album Watch the Throne in-house, storing the masters on hard drives locked in waterproof “Pelican” cases that never left the sight of his studio engineers. Opening the cases required biometric identification scans, and the finished masters were shipped to the production plants under careful oversight. The pirates didn’t get it until the Tuesday it was released.
Of course, the easiest way to prevent leaks would have been to get rid of the CD entirely. But even in 2013, after 17 years of psychoacoustic chaos, the industry could not afford to do so—more than a third of the U.S. music industry’s revenues still came from physical album sales, and more than half globally. The last major manufacturing facility for compact discs in the United States was in Terre Haute, Indiana, and the industry still relied on it. Once the discs were shipped to stores, the supply chain was too diffuse to control, and new Scene groups like CMS, MOD, and CR established themselves as contenders for RNS’ vacated crown. But none got close to the dominance that group had achieved, and the music Scene began to decline.