[electronic beeping, buzzing]
[indistinct chatter]
[narrator] It's October 2007.
One of the world's biggest bands, Radiohead, makes a shocking announcement.
They're giving away their new album, In Rainbows,
as an Internet download
on a pay-what-you-want basis.
It was one of the most exciting things we've ever done, I think, actually.
[narrator] Why?
They know people are going to illegally share their music anyway,
so why not try and beat them at their own game?
Previous albums of yours had been leaked on the Net.
Everything, even my record, everything had been leaked.
[narrator] In 2007,
the music industry is in free fall,
all because of an innovation from the previous decade,
the MP3.
A digital disruptor that kick-starts the era of streaming
where we can now listen to any music we choose,
whenever and wherever we want.
In 2021,
487 million people subscribe to streaming services.
That's enough listeners to fill Madison Square Garden
25,000 times over.
Every day,
60,000 new songs are released on Spotify alone.
To check them all out,
you would have to listen nonstop for 145 days.
That's 20 million new songs every year.
If they were released as seven-inch vinyl singles
and piled on top of each other,
that's as high as the Statue of Liberty stacked 129 times.
Streaming is big business,
about 61% of the music industry's total revenue
of 23.1 billion US dollars.
Enough to buy a Gibson Flying V guitar
for nearly every person in New York City.
[guitar riffs]
The MP3 streaming revolution has changed the music industry
and the way we listen to music forever,
but it's not working for everyone.
[man] It's all changed in the last couple of years,
because people don't make as much money out of records.
[narrator] What have we gained,
and what have we lost?
[high-pitched notes pulse]
[radio static crackles]
["In the Evening by the Moonlight, Dear Louise" playing]
♪ When the summer day is dying Dear Louise ♪
[woman] When this phonograph first hit the market,
these things, with their wax cylinder recordings,
altered forever the way human beings enjoy themselves.
[narrator] Invented in 1887,
Thomas Edison's phonograph
means you no longer need musicians to enjoy the sound of music.
[Edison] Mary had a little lamb Its fleece was white as snow
And everywhere that Mary went The lamb was sure to go
[narrator] But it's the record player, arriving in 1930,
that really proves music to everyone's ears.
[man] As recorded in New Orthophonic high-fidelity sound,
Tchaikovsky's Romeo and Juliet plays about 19 minutes.
[love theme from Romeo and Juliet wobbles distortedly]
[narrator] With a vinyl record spinning at 33 and a third revolutions per minute,
it's like an orchestra playing in your living room.
[man] A new record is stamped every few seconds.
We now have a master disc.
[narrator] Record stores are soon flooded with everything from show tunes
to the great classical works.
The microgroove long-playing record now began to dominate the market,
and with minor improvement, it's been with us ever since.
[narrator] The record industry booms through the '50s, '60s, and '70s,
thanks to a growing pantheon of artists
and their legions of adoring fans.
[upbeat rock and roll music playing]
[clicks, music stops]
But it's this little shiny disc hitting the stores in late 1982
that provides the first clue as to the huge changes to come.
The compact disc.
By the mid-'80s, the CD brings music to the masses
by converting it to ones and zeros.
[beep]
Many see CDs as superior to vinyl, and not just because they're so durable.
Let's give it the breakfast-time test.
Some honey.
Nice and sticky and runny.
Bit of coffee… to see it through.
Right, that should be it. Let's see how it sounds.
[Trepak from The Nutcracker plays perfectly]
Now, you can clearly hear every note of the music,
free of hiss and scratches.
It has no noise. You know what noise is?
[narrator] In 1988,
CDs become the new standard for listening to recorded music.
By 1993,
music industry revenue in America alone
soars to a high of $18 billion,
and 65% of that is from CD sales.
As the music industry grows fat on revenue from CDs,
another digital revolution is underway,
the Internet.
[woman] Imagine a world where every word ever written,
every picture ever painted, and every film ever shot
could be viewed instantly in your home via an information superhighway.
[narrator] Researchers at the Fraunhofer Institute
in Munich, Germany,
are working on an exciting new idea
for this "information superhighway,"
to take the digital music files from a CD
and stream them to a home computer over the Internet.
There's just one problem.
This is the '90s, and Internet speeds are slow.
[dial-up tone]
Music files will have to be squeezed by 90% for the idea to work.
In 1993, after four years of dedicated work,
researcher Karlheinz Brandenburg creates the MP3.
[Karlheinz] I was always trying to find ways how to compress the music further.
Of course, there was the normal way of doing it,
transform and quantization and Huffman coding and all that.
Uh, but still, there was a hope to find something else.
[narrator] How does he do it?
Through the weird science of psychoacoustics.
Scientists have long known that the human brain is not entirely reliable
at interpreting what we hear and see.
-[kitten mews] -Take this image of a cat.
-[kitten mews] -And now this one.
Notice any differences? No?
And yet the file size of the second image has actually been reduced by 90%.
How?
Some of the color information has been removed,
and its minute details have been blurred and simplified.
But the brain still thinks it's seeing a perfectly good picture,
filling in the imperfections.
Of course, if you go too far, the image literally falls apart.
There, that's better.
This process, called lossy compression, will change lives.
[cat meows deeply]
In years to come,
it will make it possible to stream movies and shows across the Internet,
like the one you're watching right now.
[Netflix tudum plays]
But back in the mid-'90s…
[rewinding]
…lossy compression is used to make song files smaller.
Now anyone with a home computer
can rip their CD collections into huge libraries of MP3s.
[man] Down here on the campus, it's really easy to see
thousands of MP3s on, like, everybody's computers.
[narrator] Still, the music is trapped inside your computer.
If only someone would invent a way to move your MP3s onto a…
What it is, is a portable digital Walkman,
and all the songs are stored in a microchip.
[narrator] Well, that doesn't take long.
Early MP3 players, like this South Korean MPMan,
arrive in spring 1998,
capable of storing a whopping 12 songs.
But by October,
the Recording Industry Association of America
unsuccessfully tries to ban MP3 players in the USA.
It's as if they know where this is all heading.
A huge disruption is about to occur,
courtesy of a pair of 19-year-old hackers
looking for a way to share those little MP3 files over the Internet,
letting everyone have copies of their music for free.
June 1999.
That's Northeastern University student Shawn Fanning,
and this is his friend, Sean Parker,
the guy who ends up as president of Facebook
and being played by Justin Timberlake.
Their innovative app works like this.
[reggae music playing]
Brenda rips her personal reggae collection onto her PC,
and Bill has a thousand punk MP3s on his.
[punk music playing]
But Brenda and Bill get bored listening to the same old music all the time.
In the old days, they would just go out and buy a new record.
Fanning creates an app that allows Brenda and Bill
and 80 million people like them
to connect their personal MP3 libraries
and download copies of each other's songs to their own systems for free,
a concept called peer-to-peer sharing.
The app, called Napster,
becomes a global candy store of free music overnight.
I would definitely describe it as my vice for this past semester, you know.
I didn't go out to parties as much or, you know, anything like that.
But instead, I'd just sit home and, like, look at music.
[narrator] At campuses like UC Berkeley in California,
Napster use becomes an epidemic.
[woman] We find, on average,
that 70 to 90% of their network bandwidth is being used by peer-to-peer traffic.
[narrator] Napster gets so big so fast, it grabs the attention
of one of the biggest heavy metal bands in the world,
Metallica.
-[heavy metal music plays] -And the monsters of rock are not happy.
We learned that all our previously recorded copyright songs
were, via Napster, available for anyone around the world
to download from the Internet in a digital format known as MP3.
In fact, in a 48-hour period where we monitored Napster,
over 300,000 users made 1.4 million free downloads
of Metallica's music.
[narrator] It's no wonder drummer and band cofounder Lars Ulrich is upset.
Metallica claims there are almost 700,000 illegal downloads
of their songs every day.
Since Napster's launch in 1999,
that's roughly 150 million downloads,
which equates to a huge loss of revenue for poor old Metallica.
For that amount, they could afford 15 Learjets,
30 yachts…
[foghorn blares]
…or five million bottles of Jack Daniel's.
[woman] The court battle centers over whether Napster could be held responsible
for what its patrons did.
[narrator] Throughout the later legal battle
between Metallica and Napster,
Lars catches flack for standing in the way of Internet freedom
and for, well, being a spoiled, rich rock star.
[reporter] What's your beef with Metallica then?
Why not let the people listen to music?
[narrator] But to music industry observers,
it's obvious that the primary use of Napster is piracy.
As more artists announce lawsuits, it's game over.
In July of 2001,
Napster is shut down.
But the MP3 is here to stay.
[woman] The newer generation, it will never occur to them
that once they have it for free, that they need to go out
and buy it and compensate the writers.
[narrator] It's not like illegal music sharing stops.
This wasn't software that was written by a Nobel Prize winner.
This was written by a college kid,
and the… the technology, that genie's out of the bottle.
[narrator] MP3 sharing and MP3 players become a worldwide craze,
and the genius behind Apple, Steve Jobs,
watches with great interest.
We're introducing a product today, and that product is called iPod.
iPod is an MP3 music player,
has CD-quality music,
but the biggest thing about iPod
is it holds a thousand songs.
Now, this is a quantum leap
because, for most people, it's their entire music library.
This is huge.
[Tchaikovsky's 1812 Overture playing]
[narrator] To load up their iPods,
users are supposed to import songs from Apple's iTunes,
which converts tracks from legally bought CDs to MP3s.
But in practice,
vast libraries of illegally downloaded MP3s
find their way onto the little devices,
and sales of Apple's MP3 player soar.
It's the cutest little thing I've ever seen.
[narrator] In 2002,
Jobs strikes a deal with the big record companies
to sell music online
using the next-generation MP3,
the, wait for it…
MP4.
-[bell dings] -[audience cheers]
The iTunes Store hopes to make digital-music downloads respectable,
selling songs legally.
But the public isn't buying it, literally.
MP3 sharing triggers a sharp fall in record-industry revenues,
from a high in 1999 of $25.2 billion…
to $14.8 billion in just over a decade.
Sir Mick Jagger rings the alarm bells.
People only made money out of records for a very small time.
There was a small period where people did get paid.
And they got paid very handsomely, and everyone made money,
but now that period is gone.
[narrator] But in Sweden,
another innovator is watching the disaster unfold.
Daniel Ek, a young Swedish tech entrepreneur,
comes up with a way to transform the way digital music is sold and shared.
95% of all downloads were illegal,
and what we're doing is essentially taking those 95% that are illegal
and turning them into a legal environment where the industry actually makes money.
[narrator] Ek thinks people will prefer playing songs streamed from the Internet
without saving them as files,
and since MP3s come with a license fee,
he chooses a new, free compression format called Vorbis for his app,
Spotify.
In Ek's vision for the industry, you won't own any music at all.
You won't have to deal with vinyl or CD collections
or even drives full of files.
You'll just rent the ability to listen to whatever you want, when you want it,
on a subscription basis.
[Dance of the Sugar Plum Fairy from The Nutcracker playing]
Well, we just believe that people will care more
about access than ownership.
[narrator] Daniel Ek is right.
Launched in 2006,
within nine years,
Spotify boasts almost 90 million users, more than Napster at its height.
And, proving it was a good idea,
in 2015,
Apple gets in on the game and starts up its own streaming service.
And just like that,
streaming MP3s becomes a part of our everyday lives.
But one major artist takes a stand against the subscription model,
believing that music should be owned, not rented.
Listening to Taylor Swift's back catalog just got a bit more difficult.
The singer has removed all of her music from the streaming service Spotify.
If I was in the position of Taylor, I'd have done the same.
-[announcer] Jay-Z. -[crowd cheering]
Nicki Minaj.
Rihanna.
[narrator] Other megastars move to control access to their music,
launching a separate subscription service,
Tidal.
We wanna create a better service and a better experience
for both fans and artists.
[narrator] Everyone is streaming,
but although you might dance like no one is watching,
someone or something is.
[static crackling]
The streaming services know exactly which songs you like
and when you hit the skip button.
Then algorithms take that data and give you more of the music you like.
Sounds great, right?
But it also means you're less likely to discover new, independent bands
that the algorithm isn't trying to sell.
And today,
countless pop songs are now being written
to fit the algorithm.
You might have noticed that songs are getting shorter
and that they also tend to start with the chorus.
That's the algorithm at work.
[metal clunks]
Despite accusations that streaming could be blunting the edge of pop,
it's never been easier to listen to any music you want.
And the streaming platforms, especially Spotify,
explode in popularity.
Taylor Swift and even Jay-Z,
one of the founders of the competing platform Tidal,
return to Spotify.
Thanks to the MP3 revolution
and, from it, the advent of streaming,
music industry profits rise from their low point in 2011
of $14.8 billion
to a far healthier $23.1 billion in 2020.
Streaming may have saved the music industry from collapse.
[electricity buzzes]
But what works for the industry may not be working for musicians.
Unless you're Beyoncé, life is hard.
The only person getting screwed is the artist.
And that's the way it always is.
The artist is the last one to get treated fairly, you know?
[electronic buzzing, beeping]
[narrator] Today, record companies generate enough revenue from streaming
to buy 8.3 million Gibson Flying Vs every year…
[unenthusiastic riff plays]
…while artists on Spotify get thousandths of a cent per play
and would need nearly half a million streams
to buy even one Flying V guitar.
[guitar string twangs]
Before streaming,
bands could make money, even with moderate record sales.
Nowadays,
they need to play live to make ends meet.
All well and good, until a pandemic hits.
I don't think no artist is happy with how they're getting paid
from, you know, the streaming platforms today.
The business is set up
for the corporations to make money and the artists to just work.
[narrator] For now, musicians are waiting to see
what new economic models emerge
from this brave new digital world.
We're kind of slowly adapting and, you know, going with the flow
and, you know, just putting things out
like, um… little appetizers, you know?
[narrator] The wrestling match between artists, labels,
and streaming services is ongoing,
but they will have to find a solution that keeps everyone happy,
because streaming isn't going anywhere soon.
Still, MP3s, the invention that almost destroyed the music industry,
could now be showing it a way towards the future.
[electronic music plays]