Industry Insider | Q&A With Steve Knopper

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FIG. 1: Author Steve Knopper is a longtime music journalist whose work has appeared in such publications as Rolling Stone, Spin, and Billboard.
Courtesy Steve Knopper

One of the most stunning declines in recent years has been that of the major record labels. From their once-lofty position as powerful controllers of the musical world, they've become stripped-down shells of their former selves, another medium turned upside down by the Internet. But did things have to happen this way? Not necessarily, says Steve Knopper (see Fig. 1), author of the new book Appetite for Self-Destruction (Free Press, 2009). The book (see Fig. 2) chronicles the labels' fall and provides context by examining what led up to their undoing, starting with the introduction of the CD.

The major labels didn't exactly embrace the CD format when it was first proposed, right?

Yes. There was a lot of resistance at first, because record-label people felt like they'd been burned by a lot of different technologies in those years. They struggled with formats. The LP was successful, but the 8-track kind of came and went. There were all different kinds of formats throughout the '70s and '80s, and then all of a sudden here were these foreign guys from the Netherlands and Japan — Philips and Sony — coming into their offices saying, “This is the future.” And old-school record guys said, “What? Are you kidding me?”

How did this resistance manifest itself?

It kind of ranged from clueless idiocy all the way to just “We're not doing this, forget you. We're not going to let Sony and Philips come in and take our business.” Actually, there was a major meeting — kind of an infamous one — in Athens [Greece]. It was a Billboard meeting when Sony and Philips tried to introduce the CD, and the people who were opposed to it, including Jerry Moss from A&M, literally screamed. They were shouting. I talked to Jan Timmer, who was then the head of PolyGram [which was owned by Philips], and he said that if they'd had rotten tomatoes, they'd have definitely thrown them.

But eventually, the label people realized that they could actually make a lot of money from CDs.

Yes, that's it. Money talks.

And starting in the mid-'80s, it talked a lot. You point out that the labels entered a boom phase of music sales, fueled initially by Michael Jackson'sThrilleralbum (Epic, 1982). Then toward the end of the '90s came the teen-pop era. Do you agree with the observers who postulate that the questionable quality of the pop music from that time contributed to the labels' later problems?

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FIG. 2: This impressively researched book begins its account in the 1970s and goes up to the present in an attempt to pinpoint the reasons for the record industry''s current malaise.

My theory is that those acts were actually good. I mean, Britney Spears released some really excellent pop singles. I'm saying this with a straight face. But the problem — and this is where my thesis comes in — is that these were singles acts. On their CDs, they put probably three or four of these great pop singles that I'm talking about, and the rest was filler. And [the record companies] sold them for $18 a pop. At the time they came out, Napster had just hit, and people were still in the habit of buying CDs. And if you wanted to get the two or three good Britney songs or the one Third Eye Blind hit or Chumbawamba's hit, you had to buy the whole CD. In my book, I have these chapters called “Big Music's Big Mistakes.” I said that one of the biggest mistakes that the music industry made was going completely in the [direction] of “one size fits all,” [or] “We're only going to sell one $18 product, whether it's good or not.”

So when Napster came along …

When Napster came along — in addition to there being piracy and theft, which should not be discounted — the consumers were ready for it. They were angry because they didn't want to buy the Chumbawamba song for $18. That's not a good deal.

The labels had some chances — during the period after they'd sued Napster, but before the case was concluded — to settle. What would such a settlement have meant, do you think?

I think it's not an unrealistic fantasy to say that had they made a deal at the right time with Napster, they might have avoided some of this pain completely. And that they'd at least be on the road to much bigger margins in the future. But I don't see it now.

Why didn't it happen?

I think there was arrogance [on the part of] the labels; they liked the profits they were making at the time and they just could not see past them. And they also felt (I think legitimately) that this was theft — “Why should we let a bunch of people stealing stuff completely destroy our business and take it over?”

But couldn't they see that the technology would have been useful to them if they were able to control it?

Some people saw that. A minimum of people, a minority of people.

What could have evolved had the labels made a deal with Napster?

The most common model that I've seen that people proposed would have been sort of a monthly paid-subscription service. On one level, they could have built their own iTunes using the Napster technology. And it could have been even more flexible. It could have been an iTunes that mixes in Rhapsody. And you could have charged people different price levels for this. My idea is that they [the labels] could have absorbed the Napster user base. Probably some of the users would have fled when it was not free anymore, but not all of them.

What would have stopped another piracy site from coming online if Napster had made a deal with the labels and gone legit?

The answer is that nothing would have stopped them. But Napster could have conceivably been such a better service that people would have used that instead of going to the renegade services.

How does the Apple Store fit into the picture?

The Apple Store, obviously, came along after Napster was killed in court. So Napster was gone by that point, and it was 2002. And the basic way that the Apple thing came about was that Steve Jobs called some people in the record industry and said something like, “You guys are idiots. You're not doing it right. You've stamped down on digital music and Internet music at every turn, and my customers don't want that. My customers, Apple's customers, want something that's easy to use for consumers.” And out of that was born a lot of simple, commonsense solutions, like the 99-cent-per-song price and the pay-by-the-single model as opposed to a subscription. All of that came from Steve Jobs.

Where do you think the labels stand today?

The days of the incredible profits of the '80s and '90s all the way through the teen-pop era are gone. That ship has sailed. Eventually they're going to bottom out, and then they'll bounce back a little bit. But they'll be in a reduced form.

How do you think this new environment impacts musicians?

The Radioheads of the world, the Wilcos, the Ryan Adamses — those guys are fine. Basically what we're seeing now, in terms of money, is a sea change, a shift, from selling records to touring. The way you make your money now is off tours. So the superstars and the midlevel bands who've already made their reputation off CDs and the radio are fine. The younger bands, if they want to stay small, they're fine, too. They have a lot of new tools, as you guys write about all the time — MySpace and all of that. The thing that I think is going to be the hardest — that's still being worked out and may never be the same again — is the idea of the young band trying to become the huge hit band. There are still some that do it on the radio, and radio is still the most efficient way of doing that. But it's harder and harder to get access to the radio. So can you use MySpace to become a star? Well, yeah, some have done it, like Secondhand Serenade or Tila Tequila.

Or Ingrid Michaelson.

Right. There are some big Facebook and MySpace bands, but so far we're not seeing in those outlets evidence that they're turning into the next FM radio. So the jury is still out. Right now, as it exists in this moment today, the only way to take that step from being kind of a small local act to being a huge act, really reliably, is to get a major label and have them get you on the radio. That's still the reliable way. And so far there hasn't been anything that's reliably moved into the vacuum. That may be coming.

Mike Levine is EM's executive editor and senior media producer.