Taking the rap

The record industry doesn’t feel like dancing at the moment. In 2001 global record sales dropped by 5 per cent, the first time in 19 years that they have not enjoyed an annual increase. The market is still worth 23 billion but the big five players - EMI, AOL Time Warner, Bertelsmann, Sony Music and Vivendi, which owns Universal music - are unhappy about the shrinkage in their slice of the cake. Both AOL Time Warner and EMI reported a 20 per cent drop in music sales last year and fear 2002 will offer little to sing about. Blame is being directed at the internet. It’s now all too easy to download copyright material from websites and then burn the songs on to recordable CDs. The "Big Five" say their profit margins are going up in smoke.

The International Federation of the Phonographic Industry (IFPI) estimates that as many as 4.3 million additional and illicit copies of Linkin’ Park’s debut album, Hybrid Theory, were downloaded in America alone. "More people listened to more music than ever before last year," says Jay Berman, the chairman of the IFPI. "But we weren’t getting paid for it because of mass copying and piracy." From many controversial websites at least four albums’ worth of material can be downloaded on to a recordable CD for as little as 25p, compared with the 60 it would take to purchase the same material in a music shop such as Virgin or HMV. A revolution is going on in the record industry at the moment and artists are manning both sides of the barricades.

Among those proclaiming the liberty of the new e-commerce is Courtney Love, widow of Kurt Cobain and founder member of Hole. She declared in an interview: "Record companies stand between artists and their fans. We signed terrible deals with them because they controlled our access to the public. But in a world of total connectivity, record companies lose that control.

"Artists can sell CDs directly to fans. We can make direct deals with thousands of other websites and promote our music to millions of people that old record companies never touch."

Hear, hear, declared Chuck D.

Public Enemy, the rap band with whom D sings, have already released one album via the internet, with a second one, Revolvaluation, consisting of tracks downloaded and remixed by the public, to be released later this year. "Napster’s the new radio," he said. "I just think it develops a whole new paradigm and there’s no legitimate proof it cuts into the traditional market for music."

The industry would disagree, citing statistics that one third of all CDs in private collections are pirated copies and that the ease with which new technology can be used will only increase this figure.

Either way, many artists are furious, insisting that pirate CDs are the equivalent of them busting their guts to give a concert only for the audience to refuse to pay for a ticket. Eminem, the rap artist, said: "If I’m putting my heart and all my time into my music, I expect to be rewarded for that. If you can afford to have a computer, you can afford to pay $16 for a compact disc." Nicky Wire, bassist with the Manic Street Preachers, describes free downloads as "evil", while Metallica, a former blue-collar garage band who went on to become the largest heavy-metal band in the world, displayed their white-collar instincts when they branded those who download free music as possessing the morality of "street looters".

The man responsible for turning music fans into "street looters" is Shawn Fanning, the founder of Napster, the music-swapping internet site, that last year was ordered to shut down by a federal judge after the record labels sued for copyright infringement. Named after his nickname - Fanning reportedly had "nappy" hair at high school - Napster acted as a funnel, allowing internet users to download albums that were stored on the hard drives of other internet users. At its peak prior to the court case and in the white heat of media glare, Napster was reporting that 2.8 billion songs per month were being downloaded. Today, the site has grown silent, but not for long.

The formation of Napster was an irritating wake-up call to a sluggish industry that has consistently ignored the reality of the internet. "The big record labels are like big ships," says one insider. "They don’t move fast. They were happy making CDs. They just didn’t get it." Two years ago Malcolm Thomson, the chief executive of DigMedia, an Edinburgh company that helps record labels harness potential of the internet, was told by a senior executive of a major record label that one day customers would be able to buy music off the internet. It was left to Thomson to tell the executive: "What are you talking about? You can do that now."

Record labels have grown slightly more streetwise, though. The first thing they did on discovering the abuses of Napster and MP3.com, named after the software (MPEG-1 Audio Layer 3) that allows downloading, was to sue; the second thing they did was buy. Today both Napster and MP3.com are reformed characters shown the error of their ways - with the aid of large cheques. Bertelsmann, the German media giant, owns a controlling stake in Napster and plans to reconfigure the site as a pay subscription service, while Michael Robertson, the former boss of MP3.com, who put the wind up the record majors by promising to break new and unsigned bands on the web, is now part of Vivendi Universal after the French company paid $372 million for the company in May 2001.

Today all the major labels are involved in online music distribution. "My job is to make buying music easier than stealing it," says Jay Samit, head of EMI’s new media team. EMI has joined with AOL Time Warner and Bertelsmann to launch MusicNet, while Sony Music and Vivendi have their own system, PressPlay - customers pay a monthly subscription of $9.99 to listen to their choice of songs online (like listening to a radio station) and to download a limited amount of material each month.

In many ways the internet revolution is comparable to the upheaval caused by audio cassettes in the early 1980s. Who could forget those skull-and-crossbone symbols on albums that declared, "Home taping is killing music"? But the music industry continued to flourish.

At the moment, the miniature MP3 machines that allow you to download music from the internet via a PC or an Apple Mac cost about 250, but it won’t be long before they are much cheaper and more widespread.

What exactly has been the effect of new technology on how we buy and listen to music? The most high-profile victim has been the single. Music fans once made a weekly pilgrimage to their favourite record shop to collect the latest hits, but now the only people who buy CD singles are pre-teen girls and the geriatric fans of Gareth Gates, anxious to add yet another rendition of Unchained Melody to their collection. The industry insists this is as a result of free downloads but shop-owners blame poor music that fans are reluctant to fork out 4 for.

For consumers, the advent of recordable CDs and computers such as the Apple Imac, marketed as much as a copying facility as a word-processor, has made copying CDs both easy and convenient.

Understandably, the music industry has taken steps to defend its property. In an attempt to prevent illicit duplication CDs are now being manufactured with encoded protection that allows them to be played on standard hi-fi equipment but interferes with any attempt at copying on a computer. The technology was deployed by Sony on promotional copies of Michael Jackson’s Rock Your World single released last year, and could have prevented the disastrous launch of Oasis’s new album, The Heathen Chemistry, which was scuppered when several tracks were available in advance on the web.

The notion that artists can now circumvent record companies and reach their fans through the net is correct in theory but unlikely in practice. In order to attract fans in really large numbers, bands need a large dollop of hype, which costs enormous sums of money, but record companies are willing to risk this kind of investment in the hope that this or that band will become a cash cow. And it is a very real risk. Between 90 and 95 per cent of all bands are little more than a cash drain. Record labels make their profits only on the top 5 per cent of their contracted artists.

Critics of the industry insist that pirate copying would be less likely if CDs were more competitively priced. They are, after all, produced for a few pence and cost in Britain an average of 15, three pounds more expensive than on the continent. But, as Jorgen Larson, the chief executive of Universal Music International, which controls U2 and Eminem, says: "The price includes the cost of recording, manufacturing, promoting the artist and videos. The record company makes 11 to 13 per cent profit on each CD. I don’t think that is excessive."

The future of record labels is as murky as the lyrics of Linkin’ Park. While projections insist that CD sales will continue to make up four-fifths of music sales by 2010, how much longer they will dominate is uncertain. Analysts who spend their careers peering into a crystal ball argue that in ten years’ time the sole responsibility of record labels will be the marketing and promotion of bands, with distribution handled by the world-wide web, a depressing thought for anyone who enjoys flicking through the racks of a record shop rather than playing "click and highlight" with a computer mouse.

Either way, there will still be bands like Linkin’ Park and fans anxious to get their hands on their latest album. But maybe then instead of selling under 5 million copies and being ripped off for as many again even wastrels from California will be able to earn their just reward.