The MP3 At 25: How A Digital File Dynamited The Music Industry

A quarter of a century ago today, the MP3 was born. Eamonn Forde argues that this, not the invention of vinyl, was the most revolutionary format in musical history

It was really just a name change because the technology already existed, but it was to become the luggage tag on a revolution.

On 14th July 1995, audio engineers at the Fraunhofer Society in Munich finally settled on what the filename extension for the compressed digital format they had developed should be named. What was previously known as .bit was now to be called .mp3.

The “MP3” eventually became a catch-all term for a downloadable music file. In truth, different services use different file formats such as AAC, WAV, FLAC, ALAC and DSD – all coming with different compression sizes and audio quality levels. But the “MP3” became, like “Hoover” and “Coke” before it, a common noun. We can get bogged down in codecs and nomenclature, but it is what the downloadable audio file represents that is our concern here. The simple truth is that the MP3 is the most influential music format of all time.

It really only had a 12-year window at its peak, but it packed a lot into them. In just over a decade it changed the record business completely. Twice. It also paved the way for streaming – all streaming, not just music streaming – to become the default way to, drawing on the industry’s own terminology, “consume” “content”.

No other music format since the phonograph in 1877 has had anything even approaching the profound impact that the MP3 has had on the music business. All formats before the MP3 were designed specifically to plump up the profitability of the music business; the MP3 ripped it to shreds.

In terms of the history of music ownership – something that has really only existed for just over a century – the MP3 was not a full stop but rather an ellipsis.

It was the last audio format that people could own but, as it was a digital string of zeros and ones, it was inherently intangible. You cannot look at an MP3 but you can see its impact everywhere.

The apostles of the LP (the LP-ostles?) will inevitably claim that it is the most influential music format ever. It has weathered the storms and endured every trend, they will say, and it is still being sold almost three quarters of a century after its first pressing. For them, the numerics 33⅓ are treated with the same reverence as a verse in the scriptures. Vinyl is a religion and, like all religions, it is propped up by a lot of blind faith.

The thing about vinyl (and the cassette and the CD for that matter) is that it was cooked up by the record business principally to aid the record business, having been developed by Columbia Records in 1948.

Vinyl contrived the ideology of The Album As A Body Of Unassailably Great Work and the pernicious mythology around it continues to embraced by (mostly) men of a certain age and an even more certain disposition, dressing it in the shimmering robes of high art when it was primarily a double sales channel for the “software” (the music) and the hardware (the expensive devices you needed to buy to play the discs on).

Vinyl, as a format, was there to shore up the record business. Everything it did was as an agent of record labels – the Panzer division in its steady march towards even greater profitability.

The MP3 kicked the legs from under the record industry and then offered it a highly conditional route back to recovery at a fraction of the size of its bloated peak as the 1990s wheezed towards their close.

Vinyl created the unreasonable romance of the album to disguise its naked commercial function.

If vinyl, both creatively and commercially, made the album possible then the MP3 destroyed it.

Let’s look at the evidence. In order to do so, it is best to understand the development, the impact and the influence of the MP3 across four distinct phases.

Phase 1: The Tech Esoterica Years (1995-1999)

In the 1990s, the bold new format that the record business was trying to foist on the public was the MiniDisc, which was pushed by Sony as some halfway house between the cassette and the CD. The CD was, in commercial terms, entering its imperial phase and the MiniDisc had minimal impact outside of Japan. It was – like the CD in the decade before where Sony and Philips joined forces to bring it to life – developed by a technology company that had a music arm. This is important: it was technology first, music second. It was created as part of a strategy of media synergy. It was by the record business, for the record business. Most significantly, it was the last time record labels (or, more precisely, their parent companies) were to be technology powerhouses.

The MP3 was created outside of the music industry – developed without its blessing, but mostly without its interest. It was in many ways an opportunity for audio engineers to show other audio engineers their chops. In the mid-1990s, home computers were not that common, the internet was mainly confined to academia (its campus location is critical for Phase Two) and the Discman was the apex of music portability.

In 1995, the global record business was still being propelled upwards due to the CD boom – a golden financial period that was to continue until the closing months of the millennium when Napster first showed its teeth.

The IFPI reports that 1995 saw a 9.9% increase in retail value of recorded music to $39.7bn. The dark clouds in the IFPI’s numbers back then were that vinyl album sales were down 27.5% to 30m units and cassette sales slipped 7.3% – but there were still 1.4bn of them sold. This was all easily offset by the 11.4% increase in CD sales to 2bn units, accounting for 60% of the market.

This was a carefully managed transition time for the record business. The CD was introduced in Japan in 1982 but, in terms of its economic and cultural impact, it was a truly 90s format. When you have an iron grip on manufacturing and distribution, as the majors did in the 1990s, you can slowly phase out heritage formats and slot in replacement ones – promoting them as a huge audio leap forward and considerably more convenient – at a far greater price point. Selling more things and at higher prices in a market you have enormous power over? The record business in 1995 was in the Midas stage of its history. It had an iron grip on the licence for printing money. In this capitalist jamboree, no one was attuned to the Marxist philosophy that, as its success accelerated, it was sowing the seeds (or rather the CDs) of its own destruction.

Some in the record industry were aware of what was going on and felt that putting digital copies of recorded masters in the hands of consumers with the CD might somehow mean something someday. These people were too few in number and too junior in rank within record label hierarchies to send up a red flag that the label heads – for whom the CD was still regarded as a “new” format – would have any reaction to beyond befuddlement or bemusement.

While most certainly not a gewgaw for lab workers, the playground for the MP3 at its inception was inherently limited. Culturally and technologically, it had its tightly defined parameters. Its life at the margins, however, was only to last four years. When it stepped into the light, it changed everything.

Phase 2: The Iconoclastic Years (1999-2003)

The closing year of the millennium was to be the starting point for The Great Decline for the record business.

Shawn Fanning, a student at Northeastern university in Boston, wrote the code for a piece of software he called Napster. It was named after his online chatroom username which, in turn, was his childhood nickname, and it was designed to quickly transfer MP3 music files between connected computers. It launched in June 1999 but it wasn’t the first piece of filesharing software ever written. It was, however, the one that connected fastest and widest – around colleges and universities initially, then workplaces and homes and finally the boardrooms of the biggest record companies in the world.

Before the year was out, US record company trade body the RIAA had filed legal action against Fanning, his co-conspirator Sean Parker and their Silicon Valley investors. By 2000, Napster was the hottest name in the world – both in terms of the law and its iconoclastic attractiveness. The album – that totemic item for the serious music fan and that retail powerhouse for the industry – had been blown to smithereens. Those pieces could now be accessed online at any time and for no money. What was to become a 14-year nosedive for the fortunes of record companies began in Fanning’s Boston dorm room, exacerbated by faster internet speeds, falling computer prices and the flurry of lookalike services that came in its wake like Grokster, LimeWire, Audiogalaxy and KaZaA.

The record industry pursued legal action against services (Napster eventually tried to go legal but ran out of time, money and luck) and then looked to sue uploaders and downloaders (the biggest PR disaster of its lifetime). It even tried to create legal alternatives to filesharing sites – but Pressplay and MusicNet were, frankly, not very good and were desperately clasping to a pricing structure similar to that of CDs with the added turn off of placing numerous restrictions on where people could play their music and what they could do with it.

The labels bemoaned the (at times incredibly shonky) audio quality of the oceans of unlicensed MP3s on the internet, but this was its first and greatest misunderstanding. While it had pushed the CD as the great audio leap forward, those under the spell of the MP3 were not primarily there for the sonics. For them, some of the appeal was price (it’s hard to do better than free), but the biggest draw was convenience. You want to hear the new song from Hot Band A or explore the work of Classic Band B? It’s all there and it’s seconds away.

The record industry lost serious ground here because it was focused on its war against free and crummy audio when the MP3’s headline appeal was about convenience and the fizzing thrill of instant accessibility. And that was only possible because the MP3 was developed outside of the industry as was its first mass distribution system (filesharing) and its channel of distribution (the internet). If the record business had been tasked with creating the MP3, it would most likely have come up with “a CD – but a bit smaller”.

Phase 3: The Co-option & Pyrrhic Victory Years (2003-2007)

In a trick it was to pull over and over again this century, Apple took something that already existed, polished it and perfected it for mainstream consumption and continued bouncing upwards to become the most profitable company in corporate history.

Many pieces of software already existed online for ripping and organising MP3s. Indeed, the Fraunhofer Society had launched WinPlay3, its real-time software MP3 player, within months of minting the .mp3 file extension. Apple seized the moment, however, with the arrival of iTunes in January 2001, a piece of free software for Macs (basing it heavily on SoundJam MP, which it bought the year before) for not just organising digital files but also for ripping a user’s existing CD collection into manageable files.

Apple called iTunes the World’s Best & Easiest To Use Jukebox Software and it ushered the idea of the MP3 (it also supported WAV, AIFF, Apple Lossless and AAC) into the mainstream. In October 2001, the iPod arrived and made portable digital music aspirational.

The MP3 was the last gasp for the notion of ownership before giving way to access. But it was a kind of ghost ownership as the MP3 was not something you could display on a shelf. The iPod was able to give it a form of pseudo-physicality (the noise of the click wheel in the early models there to reassure users there was something there as they scrolled through their collection). It helped make the intangible tangible.

The great consumer shift was unstoppable at this stage. In 2003, Apple added the iTunes Store to the iTunes Software, quickly becoming the world’s biggest (but, once again, not the world’s first) legal download store. Labels initially hoped that they had been thrown a lifeline, but it turned out to be a lasso

Apple’s greatest coup was persuading a desperate and floundering record industry to unbundle the album and charge a single price for any song rather than forcing consumers to buy a whole album. There was a mainstream market now for downloads – the ones Napster had made available for free – but it was really a tax burden on the long-term viability and relevance of the album.

Slowly the “MP3” was legitimised and worked into the charts, but as it began eroding the CD it also set everything up neatly for the next technological wave to replace it.

Phase 4: The Slow Bleed Of Sovereignty & Big Tech’s Takeover Of The Record Business (2007-present)

In 2007, Spotify made its first stirrings. Pulling an Apple-style conjuring trick, it was not the first subscription streaming service (Rhapsody debuted in late 2001), but it was the one that marked the first major consumer transition.

While it focused initially on hitting scale, using its free streaming tier as the bait to eventually flip heavy users into paying subscribers, Spotify had its own (now forgotten) MP3 and AAC store within the desktop software, using a white labelled version of 7digital from 2009 to do so. In what seems either ludicrous or quaintly archaic now, part of its initial revenue model was using ad-supported streaming as a taster menu to buy downloads. That may have been a condition of major label licensing and never a long-term component, but it still used the MP3 as a consumer handrail into streaming. The 7digital partnership ended in 2011 and this part of Spotify’s history was eventually shunted into the shadows.

Even as Spotify grew, Apple still clung to the download and its iTunes store. It eventually capitulated in June 2015 when it launched Apple Music, its own subscription streaming service. While you can still pay to download tracks from iTunes today, it all feels like a digital Miss Havisham edging ever closer to the hearth.

The MP3 was the start of the end of the record business that defined the 20th century. It previously controlled the entire process, all the way from creation (owning the studios), through manufacturing and distribution (owning the plants where records were pressed as well as the network of trucks that got them to the shops) and even the shops themselves (e.g. EMI’s ownership of HMV until the late 1990s).

Through companies like Ingrooves (owned by Universal), The Orchard (owned by Sony) and ADA (owned by Warner), the three remaining majors are trying once again to reassert their authority in distribution. But they have – partly out of myopia but mostly out of necessity – ceded significant market control to the streaming services that could not have existed without the MP3 setting a bomb under the old record company system. The majors may still have too much control, but they must now tug their forelocks to the streaming services that the bulk of their income depends on.

This, of course, still leaves the artist greatly disadvantaged, switching out one barbarous boss for another. What the MP3 did, having been developed by the tech sector without the consent of the labels, was to upend the entire record business power structure that it once arrogantly took for granted. Record labels, no matter what they tell you, have surrendered a lot of their authority to big tech.

In terms of influence, the LP just added more and more chimney stacks at the record industry’s factories as output increased. In painfully stark contrast, the MP3 was the record industry’s Fred Dibnah.

Eamonn Forde’s book The Final Days Of EMI: Selling The Pig (Omnibus Press) is out now. You can buy it here

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