1.1 Digital Disruption in the Recording Industry: The Quest for a New Perspective
By enabling the duplication and sharing of cultural products at no cost with no degradation of quality, digitalisation suggested there would be a major shift in the way cultural contents are produced, distributed and consumed. The recording industry has been the first of the cultural industries to confront the changes posed by digital technology. The debut of Napster , the pioneering digital music service based on Peer-To-Peer (“P2P”) technology, promoted widespread predictions of an imminent and radical transformation within the music industry. The concept of radical innovation brings to mind Schumpeter ’s concept of innovation as involving “gales of creative destruction ,” a process of far-reaching changes to existing frameworks, technologies and institutions “that incessantly revolutionizes the economic structure by incessantly destroying the old one, incessantly creating a new one” (Schumpeter 1950, p. 83).
This radical change was claimed to bring about the “networked information economy ” that could offer individuals “greater autonomy, political communities greater democracy, and societies greater opportunities for cultural self-reflection and human connection” (Benkler 2006, p. 473). P2P technology had the potential for decentralising the commodification and commercial control of capital-intensive intellectual property, and was celebrated as a way to build a “communal innovation,” in which individual information sharing and filtering mechanism would diversify user tastes through exposure to lesser-known artists (Pasquale et al. 2002).
However, the path of technological innovation is by no means straightforward. The unauthorised use of copyrighted material has undermined the recording industry’s business structure, which was based upon distributing and selling cultural content embedded in physical artefacts, through which an artificial scarcity created as a rival good was used to control distribution and consumer price. The possibility of infinite reproduction and distribution of free music, in conjunction with the ease of music recording, presented a great challenge to the recording industry, potentially displacing the conventional gatekeepers or rendering them redundant. The immediate consequence was manifested in the decreasing revenue from record sales. The recording industry cultivated the so-called digital crisis rhetoric to lobby for longer and stronger copyright protection . The “war” on piracy was launched to stamp out P2P file-sharing, criminalising all forms of file-sharing activities. Napster was shut down, and a plethora of subsequent P2P services remained on the outskirts of the marketplace as “darknet” (Biddle et al. 2002). While iTunes and a myriad of other digital music services arose to valorise music on the digital music networks, a large proportion of digital music users remained unwilling to pay for digital content.
Since Napster was closed down, a series of digital initiatives were launched, and through trial and error, the recording industry entered a new phase in which consumers were attracted to legitimate digital music services, and not the free, often illegal, options. Central to this change is the growth of the freemium -based streaming music business service initiated by Spotify . Spotify ’s proclaimed legal and superior quality to P2P file-sharing, as well as access to a large number of legal catalogues, have proved enticing enough to engage almost 100 million paid users (IFPI 2017). The recent changes in the recording industry, such as newly adjusted rights and services suitable for digital formats and the diversification of revenue streams, have prompted some commentators to proclaim that a successful new technological model has been established in the music industry (Roberts 2011). Indeed, streaming services are increasingly perceived to be an answer to the industry’s battle to eliminate piracy (Page 2013; Aguiar and Waldfogel 2015; Wlömert and Papies 2016), signalling the economic recovery of the recording industry as a whole (IFPI 2017).
However, this pattern of development deviates from the initial predictions of digital disruption in the recording industry . Why did this mismatch between predictions and what actually happened arise? What factors shaped this development? Is the growth of the digital music business a response to digital innovation or an outcome of a restrictive copyright regime? There are sharp dichotomies in assessments of the recent changes emerging in the digital recording industry . Studies focusing on the legal impacts tend to emphasise the constrained aspect of the innovation. Drawing upon the continuity of the conventionally run technological, legal and societal structure, these studies argue that as long as the major labels retain control over the market built around copyright , innovation is difficult to attain. On the contrary, many media accounts have placed a greater emphasis on the discontinuity which have enabled new forms of production, distribution and consumption outside the well-established industry structure. Focusing on a few notable changes or cases, these accounts portray a utopian picture of the contemporary digital recording industry .
However, both views offer a techno-centric vision, which places P2P distribution as the central focal point of analysis. In contrast, this book argues that technological innovation in the recording industry entails a complex interplay amongst a diverse array of factors such as digital technology, copyright regulation and the more or less conflicting interests between heterogeneous players such as major labels , intermediaries , music consumers and artists. Despite the overall popularity of the subject, there has been a dearth of enquiry into these complex interactions between law, society and technology in the digital recording industry . This book attempts to fill that gap by mapping out the interplay amongst a diverse array of actors and factors involved in the actual innovation process. To do so, the book explores the early history and addresses contemporary developments from a number of viewpoints in the sector.
The study has adopted a qualitative data analysis of 55 interviews with a wide range of entrepreneurs and innovators, focusing upon two successful innovation cases within different locales within the digital recording industry: (1) Spotify : a digital music service and (2) INgrooves : an independent digital music distribution service provider whose system is also used by Universal Music Group . This book is largely inspired by the Social Shaping of Technology (SST) (MacKenzie and Wajcman 1985; Williams and Edge 1996) and its extension into the Social Learning in Technological Innovation (SLTI) perspective (“SLTI ”) (Sørensen 1996; Williams et al. 2005). SST guides this study in investigating the heterogeneous and dispersed process of innovation through which the negotiations amongst the diverse actors and factors drive choices in the direction of technological development. SLTI as an extension to SST provides an insightful conceptual tool to explore the gradual process of technological change arising over a period of time and the reflexive efforts to ensure technologies are implemented, appropriated and domesticated in the market. The insights from SST to SLTI as well as an in-depth analysis of two layers within the industry—digital music service and distribution—allow this study to investigate a broader range of settings for innovation and a wider array of players involved in the innovation of the recording industry.
1.2 What I Mean by the “Recording Industry”
Before advancing the discussion, I will clarify the scope of the research this book covers by giving a definition of what I mean by the recording industry. Amongst academia, the term “music industry” has been defined in a number of ways. The music industry has therefore been covered by many different terms including forming part of the creative industries, the cultural industries and the copyright industry.1 Williamson and Cloonan (2007) particularly raised the discussion on defining the music industry. Questioning the simplicity compressed in the term, they suggest “music industries” (as a plural) as a more practical term to convey the complexity and plurality of the tenets in the music business sparked by digitisation. While there is an increasing adoption of this concept (Marshall et al. 2013), and acknowledging the disputes around the term, in referring to recording industry , for this book I define the recording industry as that which does not include the business unit of music publishing. The recording and publishing businesses often share many canons of music business practices. However, publishing has its own characteristics that this book did not cover. The music industry is used when it is considered appropriate to describe the overall state of the industry in general. The music business on the other hand refers to the specifics of the business side of the music industry.
1.3 Major Predictions of the Digital Recording Industry
The process of technological innovation is imbued with uncertainty, contingency and complexity. Understanding digital technology requires a sophisticated and intricate understanding of the relationship between technology and society; analysis must attend to the interplay between heterogeneous players ...