The digital revolution that Napster heralded at the turn of the millenium finally seems to be bearing fruit. At the time, record labels decried the file-sharing program as an existential threat to the industry. To protect record sales, they sued everyone from tech startups to children, and lobbied Congress for new laws to curb piracy.
Now, though, digital music services have gone mainstream, promising listeners a world of perfectly legal possibilities and an end to the major labels’ vice grip.
If only it were so.
Far from becoming obsolete, the four largest record labels — Universal, Sony, Warner Music Group and EMI — now control almost 90 percent of the music market. And if the Federal Trade Commission signs off this week on Universal Music’s controversial $2 billion takeover of EMI, the new behemoth would control over 40 percent of the market alone — enough to make the company the gatekeeper for all sonic innovation, from Silicon Valley to Sweden.
Artists are also worried about the merger’s consequences. “It’s all totally stacked against the creator,” said Casey Rae-Hunter, who heads the Future of Music Coalition, an organization representing independent and unsigned musicians. “And the Universal-EMI merger gives them even more leverage to do really scary things.”
The American Antitrust Institute warned last month that the merger would lead to both “diminished consumer choice” and “diminished innovation,” and urged the FTC to block the deal. The European Union is expected to thwart some of the merger’s effects abroad, forcing EMI to sell off 60 percent of its European catalog before it gives a green light to the merger.
A Universal spokesman defended the deal, telling The Huffington Post that opposition to the merger is “based on a lot of hypothetical assumptions and misconceptions that are not grounded in the realities of the music business today.”
Sony and EMI declined to comment for this article. Warner Music also declined to comment, but in a recent Senate hearing, the company criticized the Universal-EMI merger as bad for big labels and independent artists alike, and claimed it was open to digital services, noting that it was the first record label to embrace iTunes.
Meanwhile, digital music companies are struggling to stay afloat. Over the past decade, major labels have used their market power to extract wildly expensive licensing agreements from new digital services — pricey enough to render almost all of them unprofitable. Pandora lost over $16 million last year, while Spotify lost more than $55 million.
Big labels have bludgeoned less fortunate startups out of existence with lawsuits. If the FTC approves the Universal-EMI merger, Grooveshark could be the next casualty.
Today, the same giant record labels that attempted to outlaw both the portable MP3 player and the CD burner during the 1990s now have a stranglehold on digital innovation, and they remain nearly as hostile to new services as they were to Napster.
“This was supposed to look a lot different,” said Rae-Hunter, who also runs the tiny, independent record label Lux Eterna and records as The Contrarian.
“We were supposed to not just solve the access problem about reaching new audiences, but also to monetize that activity in a way in which 99 percent of that activity was not captured by the major labels,” Rae-Hunter said. “But we see now that the majors still dictate the terms.”