With grassroots support rocketing, MP3 looks set to become the next great music opportunity, with or without the support of the vast majority of 'old guard' intellectual property owners. Bandwidth is increasing, data storage costs are plummeting, audio streaming is maturing, FM radio is booming, merchandise is more profitable than music, where will this all end? In five years time I will tell my multi-channel megabit GSM (For your convenience, the links in this document open a second browser window) wireless PDA - with accompanying earphones - to play me a 45 minute selection of British New Wave music from the early eighties, with a particular leaning towards Manchester-based bands and the complete avoidance of The Stranglers. I'll pay the equivalent of pennies per track or nothing at all, and at no time will I own or store the digits.

In the beginning there was a little known ISO (International Organisation for Standardisation) standard, a subset of the Motion Pictures Expert Group formats (MPEG, pronounced M-peg) originally designed for digital video encoding. MPEG Audio Layer Three (MP3) delivered a high compression efficiency whilst retaining hi-fidelity - in other words, it was small but still sounded great. These files were ten times smaller than the equivalent 'standard' audio format, such as the WAV file known to Windows users. To grasp the comparison in data sizes, an audio CD cannot hold more than 74 minutes of standard format CD-quality digital music - some 20, 3 minute tracks - whilst a CD carrying MP3 files will carry some 150, 3 minute tracks or 450 minutes of digital music with little or no discernible difference in quality to the average user.

Now the software industry loves a standard and the music fans loved the quality. Software encoders (to convert a standard CD-audio track to MP3) and players (to replay them through a PC's audio system) rapidly appeared and were distributed under the shareware honour system (download, use, pay a small charge) or were given away free. In the blink of an eye the reach of the internet had facilitated the rapid deployment of enabling technology, and a vibrant sub-culture of MP3 music file exchange and distribution began to take shape. This is when the trouble began.

As a legitimate owner of a piece of recorded music, i.e. having bought a CD from a shop, a blind eye is turned to the personal copies I make for my own entertainment and use. I am also allowed to resell my original CD providing I destroy any copies made. These rules were crafted in an age that had only analogue means at its disposal, and a cost barrier to high quality duplication. The problem now is that high quality digital duplication equipment is in a growing number of homes (the personal computer), and more and more of it is attached to a vast distribution network (the internet). The combination of these utilities had the predictable effect on the music punter's desire to get something for nothing. And on the back of a surge of new MP3 formatted music from unsigned bands popping up on web sites everywhere, there was an 'underground' developing of MP3 swap sites. These would be announced in the newsgroups such as DejaNews alt.music.mp3 (you need a newsgroup reader configured for this link to work) and would be live on an anonymous FTP (file transfer protocol) site for a few hours only for visitors to exchange files. The sites are still easy to find - use DejaNews and type 'mp3' into the search field - amongst the plethora of MP3 references is usually a couple of active sites that run their own etiquette, where each download must be matched with an upload.

The powers-that-be in the music industry have reacted with predictable outrage at the activities of these music 'enthusiasts' - and this is what they are, for despite their questionable activities, they are serious music consumers - and even a few 'name' artists such as Jean Michel Jarre, the Spice Girls and Nana Mouskouri (now a representative in the European parliament) have got on their soap boxes to complain about lost income. Multinational corporations complaining about lost revenue has never had much impact on the activities of consumers, in fact it usually alienates and deters them. The music industry, however, enjoys the insulation of the artist, as this is where the loyalty is retained, and seems unconcerned about the growing resistance to CD pricing. But hold on, let's not jump ahead of ourselves. Remember MP3 is booming.

The almost universal enthusiasm for MP3 is seeing its fair share of entrepreneurial ride-alongs. MP3.com Inc. is perhaps the web's leading authority and 'portal' for all things MP3, and it has just enjoyed a multimillion dollar venture capital investment. Apart from carrying a depth of editorial comment on the current and future histories of MP3 and pointing to every conceivable online resource for MP3 software and files (legal ones only), it is brokering deals with the more progressive independent record labels to act as agents for the distribution and sale of 'signed' artist recordings. We have also seen the arrival of portable MP3 players such as the Diamond Rio. Releasing the MP3 file from the tyranny of the desktop is a first step into the mainstream (the IMRG has been living with a Rio since Christmas, and it has revolutionised our view of portable music). The release of the Rio was delayed by the action of the Recording Industry Association of America (RIAA) who complained that it was nothing more than a licence for piracy - they lost.

More recently we have seen the search engine/portal Lycos launch its dedicated MP3 search service and the arrival of 'recognised' artists selling tracks at 99cents each on the Goodnoise site. The Lycos service attempts to hunt down every internet file with a file extension of ".mp3". Whilst this seems a compelling option for the MP3 enabled internet user, the reality is that at present the vast majority of files found are obviously illegal copies and any attempt to connect to them ends in either a 404 Not Found error (in other words the site has moved on because it knows it's illegal) or an interminable wait, only to be told the server is too busy to take the request.
Goodnoise, in the meantime, has established itself as the legitimate MP3 selling site forging early deals with Rykodisc (including 40 Frank Zappa recordings) and with America's favourite alternative band They Might Be Giants - not exactly mainstream bands, but a significant beginning. Tracks cost 99cents and a complete download of an album costs $8.99 - contrast with a typical retail sale of approximately $15.00 for a CD in the US. Purchasing from the site is simple, painless and immediate, and allows three downloads of each track purchased.

It is understandable that the industry heavyweights are nervous about losing control of the distribution of their investments, but the option to rule out the use of MP3 seems at odds with the pressure building up within the fan base. All existing recordings are at risk of being copied and distributed, so if there is no official source, the unofficial ones will continue to grow. Visits to the Sony Music web site demonstrates their reluctance to even discuss MP3 - a search on the term 'MP3' delivers almost no official statements and rather ironically offers up the discussions on their web-based bulletin boards of individuals with MP3s to swap.

The corporate music industry is not without its enthusiasts however, with Creation Records - home to Oasis - particularly keen to use MP3s as a pre-release promotional device. They were planning to put MP3s of forthcoming singles on their site and withdraw them when the singles were released on CD. Andy Saunders, head of communication at Creation, explained that they had withdrawn these plans at the request of Sony who own 49% of Creation. Sony had asked them not to embrace MP3's just yet, as they were uncertain of the longer-term implications. It is, however, somewhat hard to anticipate what might change in the foreseeable future that would change Sony's mind.

Conventional wisdom within the music industry continues to support the status quo. Any suggestion that the internet can facilitate the bigger challenge of breaking bands into the mainstream, is answered by the assertion that marketing clout and experience will remain the decisive issue. There appears to be little sense of the paradigm shift that is beginning to emerge.

Within the recent flurry of announcements on MP3 has been the launch of SHOUTcast from Nullsoft. Nullsoft created the most popular MP3 player Winamp - which has been downloaded some 10 million times in less than a year - and have launched a streaming engine for MP3 files. The obvious detractors to yet-another streaming technology have been RealNetworks and Microsoft, who have invested millions in developing their own proprietary solutions. The difference with SHOUTcast is that it is based on the open standardised compression technology of MP3. SHOUTcast has begun its life as a 'boutique' solution for small sites with a limited need for simultaneous users. However for independent bands and garage radio stations wanting a cheap and easy way to promote themselves SHOUTcast seems the ideal answer. It also costs a fraction of
the cost of a RealNetworks server.

Streaming of MP3 files seems to be a natural extension to the enthusiasm for this standard, and bandwidth, network and server technology allowing, it suggests some fruitful views of the future. Known for his views on the impact of technology on the music industry, John Griffin, former head of new media at Geffen Records, part of the Universal Music Group, and now fronting the OneHouse consulting group based in Los Angeles, is particularly lucid on where this may be leading. His expectations are based on the understanding that the only time consumers store things is when they are insecure about their ability to get them just-in-time. Research has proven that, given the option, consumers would opt for streamed rather than downloaded music. According to Griffin "the future is not so much about a change in distribution but the atrophy of distribution and the arrival of just in time delivery of mass customized bits". So whilst the next few years will witness a considerable tinkering with a new version of the distribution model, albeit a massively more efficient one, the destination under 'unlimited bandwidth' will be one in which you get what you want when you want it. He predicts that the music industry's copyright problems now will look like chicken feed compared with the problems they face in the coming years.

Of particular note in the years before 'unlimited bandwidth' will be the concept of 'buffered push'. With dramatic fall in magnetic storage costs - for example, hard disks getting smaller and cheaper while holding more and more data - and the rapid continued growth in microprocessor power, there are already products on the market offering buffered push for television. One of these is ReplayTV, which is designed to capture a programmed set of broadcasts and allow the user to replay them at a time and in an order of their choosing. It is not intended for long-term storage, but for the packaging of the viewer's choice of programmes at the viewer's convenience. This is a complicated middle ground as far as copyright is concerned which is largely being ignored by the TV industry - ReplyTV can only store 6 hours of programmes at any one time. The impact of this technology on music is likely to be considerably more challenging.

Ultimately in the world of 'pull' and 'unlimited bandwidth' the nature of transactions becomes simpler. But it is essential that the majority stakeholders in music - corporations, artists and fans - are aiming at the same point on the horizon or a messy conflict will ensue. The music industry, however, seems to be waiting for a guaranteed profit opportunity before it will engage with these new models. In contrast, the activity of print media - particularly the daily newspapers - are already in a world of 'almost' unlimited bandwidth and immediate customer 'pull', are launching into the unknown, with free versions of their content, in an effort to learn how the paradigms are likely to unfold.

It seems unlikely that the music corporates' Draconian strategies of control will succeed in these new channels, particularly when the artists and fans are keen to embrace these new opportunities. And if CD sales are in decline it has to be more as a result of a proliferation of FM radio broadcasts - a possible precursor to multiple niche channels of pull - and of the dumbing-down of music output than of any significant piracy. We don't expect the music industry behemoths to move rapidly on these issues - moving rapidly may simply not be possible - however a display of vision and a willingness to take risks would begin to shift some entrenched views and open up the possibility of consensus, which is clearly absent.

In the meantime, most players in the existing music supply-chain should be able to retain a piece of the action in a continuing distribution model. HMV Media Group's Stuart Rowe is confident and excited by the opportunities of digital music distribution through their forthcoming e-commerce operations. But you have to wonder whether operations focused on the efficient distribution of things and data can adapt to a model in which the consumer never owns such products. The answer, as ever it seems, is 'it depends'. Is it possible to imagine HMV on Oxford Street in London being a merchandise and brand building experience for music artists without any music sales actually taking place?

MP3, with all its glorious virtues, is testing the boundaries of the distribution model right now. Its future, on the other hand, seems boundless. As Louis Armstrong said "All music is folk music, I ain't never heard no horse sing a song". All music is folk music and the folk love MP3.

Steve Johnston
Director of Development