How Music Got Free

Takeaway #1: Those with the power to recognize the mp3’s potential struggled to implement it soon enough

Believe it or not, the development of the mp3 format actually began in 1987. German scientists at Fraunhofer Institute worked for years to find a way to compress audio files in a way that would sound indistinguishable from CD, which was a monumental challenge. Once they got it right, they sent it to the Moving Pictures Expert Groups, or MPEG, who approved of their format, known as mp3, as a technology standard.

Little did they know, they had also accepted their rival, who would be known as mp2. Thus began a long battle between the two. Mp2 had the advantage of support from Phillips, so they became the preferred format for CDs, digital audiotapes, and FM-radio. The MPEG neglected to assign anything to mp3 and it seemed like they had lost the battle.

But soon the ever-improving mp3 format gathered steam when it continually came out on top in head-to-head comparisons with mp2. However, everything almost ended for mp3 when DVDs began to use the mp2 format.

The Fraunhofer team stuck it out a little longer and had an unexpected win for mp3. They managed to land a deal with the National Hockey League (NHL) to install mp3 conversion boxes in every North American stadium. This small win was enough to give them the financial push to keep going.

Takeaway #2: The mp3 beat the CD in the format war thanks to the internet

The NHL deal gave mp3 makers what they needed to survive for a little longer, and they pushed forward. All they needed was for people to realize what they had was better.

In 1995, in a bold and unexpected move, Fraunhofer decided to give away their mp3 converting software for free. They called it WinPlay3. Unbeknownst to them, this would mark the beginning of a music-pirating revolution.

Soon, everyone’s preferred format became mp3, as they could rip off songs from their CDs and share them all over the internet. And it became easier and easier as broadband spread across the world. Music piracy was spreading like wildfire, thanks to how easy it became with mp3.

When the Fraunhofer team became aware of this problem, they offered the music industry a copy-protected version of the mp3, but no one was interested.

Within two years, mp3 won, and it was everywhere on the internet. And with this, piracy became commonplace. Witt says that music piracy in the late ‘90s was what drug experimentation was to the late ‘60s.

It was a generation-wide flouting of laws and norms without even considering consequences. Music was forever, irreversibly changed.

Takeaway #3: In a similar fashion that the CDs have become a thing of the past, streaming is going to beat the mp3 when it comes to sharing music (... and it already has)

Today, CDs are pretty much extinct. And while some people still own digital versions of their music, the majority of us now prefer to stream music.

Spotify is one of the most popular sites for streaming. Research shows that while Spotify has helped halt music piracy, people are no longer buying albums at all.

This radical shift in music-purchasing trends has all but forced the humble mp3 into retirement. For the first time since the invention of the photograph, consumers actually spend more money on live music than recorded, all because of streaming. This shift came shockingly fast. 2012 marked the first year digital music overtook CDs, and just a year later, streaming services revenue was over $1 billion.

But with the emergence of streaming also comes problems with revenue distribution. With the easier-than-ever ability for musicians to make an album and stream it worldwide, musicians are beginning to question the need to have a record label at all.