Appetite For Self-Destruction Part 7

So in 2008, label executives and prominent artist managers floated an alternate idea, one that could return them to 1990s-style profits: The labels could simply ask internet service providers, like Verizon or Comcast, to start charging their users a fee for all the free music-trading they facilitate. Jim Griffin, a former Geffen Records technology executive, has been pushing this approach for years, and in 2007, Warner Music hired him as a consultant to work on this and other ideas. "ISPs, telcos, and tech companies have enjoyed a bonanza in the last few years off the back of recorded music content," U2's manager, Paul McGuinness, said in an early 2008 industry speech. "It is time for them to share that with artists and content owners." Griffin's proposal involves dumping the newfound ISP-tax money in a pool, then divvying it among labels, songwriters, and artists. Many in the business can't resist doing the math: If ISPs pay labels an extra $10 for each of 90 million users every month, a loose estimate of how many people pirate music, that's $10.8 billion in yearly profit. Easy money. But can it work? "Never gonna happen," says Gary Stiffelman, attorney for Justin Timberlake, Eminem, and others. "There's no motivation for the ISPs to come up with the money."

Unless such a big-money idea actually comes to fruition, it looks like the record business is doomed. The music music business, however, has a bright future. business, however, has a bright future.

In 2007, Madonna announced she was leaving Warner Music, her major label of twenty-five years, to sign with the world's biggest concert promoter, Live Nation. If anything pointed to the dire prospects of major record labels, it was this: Madonna Madonna was leaving. And she was going not to another label, but to a concert company-one that spun off from monolithic Clear Channel Communications, which made its money off radio and billboards. The Material Girl signed with Live Nation for $120 million-sharing revenue for music sales, performances, merchandise, and the rights to her name. Everybody in the concert business knew this deal was all about touring revenue, which has boomed over the past decade. At forty-nine, when she agreed to the Live Nation deal, Madonna was no longer at her peak as a recording star. In 2005, her was leaving. And she was going not to another label, but to a concert company-one that spun off from monolithic Clear Channel Communications, which made its money off radio and billboards. The Material Girl signed with Live Nation for $120 million-sharing revenue for music sales, performances, merchandise, and the rights to her name. Everybody in the concert business knew this deal was all about touring revenue, which has boomed over the past decade. At forty-nine, when she agreed to the Live Nation deal, Madonna was no longer at her peak as a recording star. In 2005, her Confessions on a Dance Floor Confessions on a Dance Floor CD sold just 1.6 million copies in the US, while her subsequent worldwide tour grossed $193 million. In April of the following year, hip-hop star Jay-Z announced he'd leave his longtime label, Def Jam Records-the same label at which he had recently been the president-to sign a Madonna-like deal with Live Nation. Jay-Z's haul was reportedly $150 million, for a decade's worth of recordings, tours, and an unnamed entertainment business venture. Nickelback and Shakira, longtime hitmakers for major labels, made similar deals with Live Nation in summer 2008. CD sold just 1.6 million copies in the US, while her subsequent worldwide tour grossed $193 million. In April of the following year, hip-hop star Jay-Z announced he'd leave his longtime label, Def Jam Records-the same label at which he had recently been the president-to sign a Madonna-like deal with Live Nation. Jay-Z's haul was reportedly $150 million, for a decade's worth of recordings, tours, and an unnamed entertainment business venture. Nickelback and Shakira, longtime hitmakers for major labels, made similar deals with Live Nation in summer 2008.

At the time Madonna announced her new deal-on October 10, 2007, to be exact, which SPIN SPIN magazine later called "a day that will live in infamy in the hearts of major-label executives"-Radiohead decided to avoid record labels entirely and release its magazine later called "a day that will live in infamy in the hearts of major-label executives"-Radiohead decided to avoid record labels entirely and release its In Rainbows In Rainbows alb.u.m as a digital download. Even more radically, the band asked fans to pay whatever they wanted for the alb.u.m. The people who paid averaged $6, which amounted to a total of $2.26 per alb.u.m-or more than $2.7 million in profits for Radiohead. Radiohead's experiment-concocted by managers Chris Hufford and Bryce Edge "when they were a bit stoned," guitarist Jonny Greenwood later said-was a stunning success. Although the band refused to say how many fans bought alb.u.m as a digital download. Even more radically, the band asked fans to pay whatever they wanted for the alb.u.m. The people who paid averaged $6, which amounted to a total of $2.26 per alb.u.m-or more than $2.7 million in profits for Radiohead. Radiohead's experiment-concocted by managers Chris Hufford and Bryce Edge "when they were a bit stoned," guitarist Jonny Greenwood later said-was a stunning success. Although the band refused to say how many fans bought In Rainbows In Rainbows online, or for how much, comScore estimated close to 1.2 million downloaders. "It felt very liberating to take complete control," singer Thom Yorke said. "If I die tomorrow, I'll be happy that we didn't carry on working within this huge industry that I don't feel any connection with." Radiohead's plan was so unique that it generated tons of media coverage, and regardless of its revenue success, it drummed up publicity for its 2008 summer tour. The band later delivered a CD version of the alb.u.m to record stores-and, as it turned out, the alb.u.m hit No. 1 on the online, or for how much, comScore estimated close to 1.2 million downloaders. "It felt very liberating to take complete control," singer Thom Yorke said. "If I die tomorrow, I'll be happy that we didn't carry on working within this huge industry that I don't feel any connection with." Radiohead's plan was so unique that it generated tons of media coverage, and regardless of its revenue success, it drummed up publicity for its 2008 summer tour. The band later delivered a CD version of the alb.u.m to record stores-and, as it turned out, the alb.u.m hit No. 1 on the Billboard Billboard charts during the first week of 2008, selling more than 122,000 copies. Marketing scheme or not, the band pocketed most of those profits. charts during the first week of 2008, selling more than 122,000 copies. Marketing scheme or not, the band pocketed most of those profits.

Who needs a major record label? Earlier that same year, Paul McCartney put out a new alb.u.m, Memory Almost Full Memory Almost Full, without the help of his (and the Beatles') longtime label Capitol Records. He released it through Starbucks, which expanded its purview in the early 2000s to include a specialty music label and distributed CDs from Ray Charles to Bob Dylan to Joni Mitch.e.l.l to a completely unknown singer-songwriter named Hilary McRae. (In an attempt to revitalize its business, the coffee giant announced in 2008 it would start deemphasizing music to focus on, you know, coffee.) Tellingly, McCartney's last Capitol alb.u.m, 2005's Chaos and Creation in the Backyard Chaos and Creation in the Backyard, sold 540,000 copies; the Starbucks release, as of late 2007, was up to 562,000. This lesson was not lost on the Eagles, who in fall 2007 distributed their first new studio alb.u.m in twenty-eight years, Long Road Out of Eden Long Road Out of Eden, directly and exclusively to Wal-Mart, with no record company involvement. (The band sold the alb.u.m digitally, through official Wal-Mart and Eagles websites, but not on iTunes, Amazon, or elsewhere.) The strategy paid off-the Eagles sold 711,000 copies in their first week and, by mid-December, more than 2 million.

In the same year, another huge rock act, Nine Inch Nails, announced it would no longer work with its longtime label, Jimmy Iovine's Interscope. "I'm truly saddened because I think music has been devalued, so that it's just a file on your computer, and it's usually free," Trent Reznor told New York New York. "But we can't change that. What we can do is try to offer people the best experience that we can provide them. Will it work? I don't know. But I think it's a great way to get music out to people who are interested. At the end of the day, all I care about is the integrity of the music, and that the feeling of those who experience it is as untainted as possible. I'd rather it not be on an iPod commercial. I'd rather it not be a ringtone that you have to get with a free cell phone or any of that bulls.h.i.t." Reznor backed up his talk in early 2008 by self-releasing an instrumental alb.u.m, Ghosts I-IV Ghosts I-IV, in $5 downloadable chunks, or for $10 to $300 for fans who preferred the CD format and more elaborate packaging. Unlike Radiohead, in March 2008, NIN told the world how much revenue the band took in by releasing Ghosts I-IV Ghosts I-IV on its own: $1.6 million. The band's manager, Jim Guerinot, estimated NIN made more than five times as much profit off this release compared to what it would have made under the traditional industry system. In May, the band released a full-alb.u.m download, on its own: $1.6 million. The band's manager, Jim Guerinot, estimated NIN made more than five times as much profit off this release compared to what it would have made under the traditional industry system. In May, the band released a full-alb.u.m download, The Slip The Slip. Ian Rogers, former general manager of Yahoo! Music, helped start a new company, Topspin Media, later in 2008, to help artists release music directly to fans, Radiohead-style.

For veteran artists, this newfound independence from major record labels means a shocking, liberating new world. They began their careers when labels had just about every bit of leverage possible in the star-making process. An artist who wanted to make a record needed studio time-and that cost money, which meant a sizable loan from a label. An artist who wanted to get a single onto a radio playlist needed connections-and that usually meant a label executive who had the money to hire an independent promoter. An artist who wanted to sell millions of copies of a record needed a big-time distributor with the clout to push CDs into big stores like Best Buy or Target-and that meant one of the major label's own subsidiaries, like WEA or CEMA. Today, it's not necessary to hook up with a label to do all these things. An artist can make a record cheaply, and professionally, using software like Pro Tools. An artist can forgo the radio, building buzz and exposure online via do-it-yourself websites like Mys.p.a.ce, viral videos on YouTube, or any number of social networking services from Facebook to Garageband.com. As for distribution, who needs crates, trucks, warehouses, stores, or even the discs themselves? Artists can follow Radiohead's example and simply distribute the music essentially free online.

"You see these articles about the disaster in the music business," James Mercer, lead singer for the Shins, told SPIN. SPIN. "When you think about how unhealthy the business has been, this is like lancing the f.u.c.king boil and cleaning it out. It's not a f.u.c.king disaster to regular bands out there. It's now more likely I'll be able to start my own label, release my work, profit from it, and have a more lucrative career. For a band at our level, it's all a bowl of cherries." "When you think about how unhealthy the business has been, this is like lancing the f.u.c.king boil and cleaning it out. It's not a f.u.c.king disaster to regular bands out there. It's now more likely I'll be able to start my own label, release my work, profit from it, and have a more lucrative career. For a band at our level, it's all a bowl of cherries."

Although the Shins recently departed from the record company that made them famous, Sub Pop Records in Seattle, these kinds of independent labels are proving that they can navigate industry problems with far more nimbleness and creativity than multinational corporations like Warner and EMI. They're unenc.u.mbered, for example, with the baggage that goes with producing one or two multimillion-selling CDs in order to pay for the smaller releases. The smaller labels don't have to show quarterly results to shareholders or corporate boards of directors. They can just put out music they like, experimenting with internet marketing and various new paths. In his Wired Wired piece, David Byrne cited the example of his own label, Warner-owned Nonesuch, which has a bare-bones staff of twelve people to release and market medium-selling music by Wilco, Philip Gla.s.s, and k. d. lang. On the web page for twenty-year-old Chapel Hill, North Carolina, indie Merge Records, there's a "listen/watch" link, allowing fans to stream video and audio from a wide range of acts. It's the same idea as radio: drum up free publicity so fans will buy the records. Acts from singer-songwriters Ryan Adams and James McMurtry to new-wave fixtures B-52's and rock hitmakers Coldplay have put out free online singles to promote their alb.u.ms over the past year. Prolific rapper Lil Wayne is a master of this approach, releasing free, high-quality online mixtapes over the past several years. Artists signed to major labels can't go very far with it, though, because many top record executives still consider free music a recipe for online piracy and a threat to profits. "The mixtapes were obviously very concerning to us as a label," Sylvia Rhone, president of Universal Motown, told piece, David Byrne cited the example of his own label, Warner-owned Nonesuch, which has a bare-bones staff of twelve people to release and market medium-selling music by Wilco, Philip Gla.s.s, and k. d. lang. On the web page for twenty-year-old Chapel Hill, North Carolina, indie Merge Records, there's a "listen/watch" link, allowing fans to stream video and audio from a wide range of acts. It's the same idea as radio: drum up free publicity so fans will buy the records. Acts from singer-songwriters Ryan Adams and James McMurtry to new-wave fixtures B-52's and rock hitmakers Coldplay have put out free online singles to promote their alb.u.ms over the past year. Prolific rapper Lil Wayne is a master of this approach, releasing free, high-quality online mixtapes over the past several years. Artists signed to major labels can't go very far with it, though, because many top record executives still consider free music a recipe for online piracy and a threat to profits. "The mixtapes were obviously very concerning to us as a label," Sylvia Rhone, president of Universal Motown, told Rolling Stone Rolling Stone in June 2008, just before her label released Lil Wayne's smash in June 2008, just before her label released Lil Wayne's smash Tha Carter III Tha Carter III in partnership with Cash Money Records. "It really goes counter to what we would like our artists to do." in partnership with Cash Money Records. "It really goes counter to what we would like our artists to do."

This major-label att.i.tude strikes many in the music business as anachronistic. "The idea of fighting it still seems silly. I've always felt like major labels blaming downloading for their declining sales is just somewhat wishful thinking. It's like a scapegoat-they wish it was that and not 'they've been putting out terrible records for a long time,'" says Mac McCaughan, frontman for punk band Superchunk and founder of Merge, whose roster includes Arcade Fire and Spoon. "I'm sure people download alb.u.ms that come out on Merge and don't pay for them all the time. But for the most part people who are our hardcore fans like music and want to support the artists and the labels that put out records they like. We're all in the music business, but it's like we're two different businesses."

So where does this leave the major record labels? Streaming songs for free as promotional items may be well and good for Mac McCaughan of Superchunk, but Doug Morris, chief executive officer of Universal Music, made a total of $14.46 million in salary and bonuses as recently as 2005. These gigantic companies need serious revenues. They can't afford to tinker with small-time experiments.

And that's exactly why major labels are failing in the digital age. For decades, they relied on long-term artist-development plans, breaking stars such as Bruce Springsteen and U2 over a period of four or five records, betting their investments would pay off with huge hit alb.u.ms. But that process has become a luxury in today's record business. Signing a weird, unknown act like R.E.M. or TV on the Radio and waiting years for it to manufacture a hit is simply unprofitable. In late 2007, major labels started letting go the executives who were experts at exactly that-like Rob Stevenson, the veteran A&R talent scout who discovered rock bands Fall Out Boy and the Killers, then lost his Island Def Jam job in a round of layoffs. Or Mark Williams, longtime A&R man for Interscope, who helped Gwen Stefani transform from No Doubt punk rock frontwoman to glamorous solo diva in 2004, then allowed his contract to expire and left the label three years later. For labels to survive and maintain an executive staff of top talent, they need faster hits than ever before.

A few days before he left Interscope, just before Christmas 2007, Williams was reflective. He was tired of forcing developing artists into the studio with big-name producers in order to manufacture a big hit right away. He was tired of pressure from top executives to tinker with an artist's vision until it became diluted. He was starting to second-guess his own instincts. "If I could just make records and work with artists, I'd do it forever. But it just doesn't work that way," he says. "There's always pressure. 'Is this the best it can get?' 'Will people like it?' 'It's not there yet.' 'Can we spend more money?' The overall focus [at major labels] is one of desperation to have hits. When the climate is one of desperation, it tends to not work so well.

"People at the majors for some time have been looking for an answer. The obvious answer is 'there is no answer.' Big labels are going to become smaller and smaller," Williams continues. "But it's going to affect the other side-small opportunities for releasing music are going to rise up. It's like, drop a globe and it shatters into a million pieces. It's going to be like in the '50s and '60s, when you had hundreds and hundreds of small labels. It's going to be a lot of trial and error. None of us know whether it'll work right. I laugh when people say, 'We're going to try to fix it.' They can try, but there's no real answer. It's over. It's just done."

Under the management of new CEO Guy Hands, EMI employees recently invited a group of teenagers to the label's company headquarters and instructed them to help themselves to a huge table full of free CDs. The kids turned up their noses. Hands has yet to figure out how to replace the CD, but his first job is to make the company leaner and more flexible, through layoffs and cuts in the artist roster. "The recorded music industry as a whole has not positioned itself well for the changing environment over the last ten years and has failed to antic.i.p.ate or adapt to the new marketplace," he wrote in a letter to employees.* It's working so far: In mid-July 2008, Hands announced that EMI revenues rose 61 percent in the first quarter, according to Reuters. It's working so far: In mid-July 2008, Hands announced that EMI revenues rose 61 percent in the first quarter, according to Reuters.

Other major labels are starting to think along the same lines. Even Universal, the powerhouse company run by Morris and Iovine, with superstars from U2 to Eminem to Gwen Stefani, has. .h.i.t a prolonged weak spot. In its Securities and Exchange Commission filings from 2006, Universal's parent company, Vivendi SA, acknowledged as much: "The recorded music market has been declining and may continue to decline." Many label executives think they know the formula for recovery: hits. hits. Sound familiar? Yes, even after a decade of Napster and Kazaa, YouTube and Mys.p.a.ce, iTunes and Amazon, the record industry clings to its time-honored model of selling a large number of shiny plastic discs. As of midyear, major labels were planning to roll out alb.u.ms by some of their biggest names in 2008: Eminem, Beyonce, and Metallica. In July, rapper Lil Wayne's Sound familiar? Yes, even after a decade of Napster and Kazaa, YouTube and Mys.p.a.ce, iTunes and Amazon, the record industry clings to its time-honored model of selling a large number of shiny plastic discs. As of midyear, major labels were planning to roll out alb.u.ms by some of their biggest names in 2008: Eminem, Beyonce, and Metallica. In July, rapper Lil Wayne's Tha Carter III Tha Carter III became the first alb.u.m since 50 Cent's became the first alb.u.m since 50 Cent's The Ma.s.sacre The Ma.s.sacre in early 2005 to sell 1 million copies in its first week. Coldplay's EMI alb.u.m in early 2005 to sell 1 million copies in its first week. Coldplay's EMI alb.u.m Viva La Vida Viva La Vida followed the next week, with 721,000 copies. But this boomlet was short lived. Both alb.u.ms' sales declined precipitously in their subsequent weeks, and overall industry sales were down 11 percent by late July, compared with the same period in 2007. followed the next week, with 721,000 copies. But this boomlet was short lived. Both alb.u.ms' sales declined precipitously in their subsequent weeks, and overall industry sales were down 11 percent by late July, compared with the same period in 2007.

The last time the record industry went through a slump of this magnitude was in the early 1980s, immediately after disco crashed. CDs and MTV would ultimately save the industry, but before they kicked in, what turned things around was, of course, Michael Jackson's Thriller Thriller. Ahmet Ertegun, the late Atlantic Records founder who discovered Ray Charles, Led Zeppelin, Kid Rock, and dozens of other superstars, brought this point home in a 1982 meeting that has turned into a sort of industry legend. Fredric Dannen retold it in his cla.s.sic investigative book Hit Men Hit Men, and Doug Morris mentioned it in a 2005 interview. In Morris's version of the story, after a not-so-great year, superiors at Warner Communications, Atlantic's parent company, asked Ertegun and then-president Morris to report to a strategy-planning meeting first thing in the morning. Morris showed up on time. Ertegun straggled in twenty minutes late with bloodshot eyes and a stained suit. The Warner executives asked, pointedly, what Ertegun and Morris would do to turn things around in the coming year.

Ertegun stood up. "Doug and I," he said, "are going to try to get more hits." Then he sat down again.

"The truth is, that's what it's all about," says Morris, chairman and chief executive officer of the Universal Music Group. "It comes down to hits and developing artists. And it's still the same. Nothing has changed."

He's wrong. Everything has changed. Thriller Thriller won't save the record business this time. Thinking differently will. And unless Morris and his colleagues stop fiercely protecting the old model of selling pieces of vinyl or plastic to as many consumers as possible and start hiring digital music executives trained to build the next Napster or the next iTunes or the next won't save the record business this time. Thinking differently will. And unless Morris and his colleagues stop fiercely protecting the old model of selling pieces of vinyl or plastic to as many consumers as possible and start hiring digital music executives trained to build the next Napster or the next iTunes or the next Long Tail Long Tail service or the next music-equipped cell phone or whatever particular shape the future might take, service or the next music-equipped cell phone or whatever particular shape the future might take,* the labels will become an anachronism. The biggest ones may survive, by manufacturing a few Beyonce-level, 2-or 3-million-copy blockbusters every year. They may still make money licensing their catalogs to movies, commercials, TV shows, and video games. But if they can't figure out, soon, how to make greater profits via digital downloads or other means, struggling majors like EMI may have to sell their lucrative catalogs to other companies. Maybe these new companies will follow Terry McBride's prescription: Stop messing around with any type of digital rights management, stop suing customers, drastically reduce digital-track prices, cut unnecessary overhead like warehouses and crates, and thereby return to 1980s-style profits. It's also possible that major labels such as Universal or Warner will come to this conclusion on their own-the Amazon MP3 Store and Mys.p.a.ce Music are tiny steps in this direction. Maybe, some in the business suggest, Apple or Microsoft or some other visionary company with money to burn will buy up the a.s.sets and, finally, start running the major record labels as high-tech content houses. the labels will become an anachronism. The biggest ones may survive, by manufacturing a few Beyonce-level, 2-or 3-million-copy blockbusters every year. They may still make money licensing their catalogs to movies, commercials, TV shows, and video games. But if they can't figure out, soon, how to make greater profits via digital downloads or other means, struggling majors like EMI may have to sell their lucrative catalogs to other companies. Maybe these new companies will follow Terry McBride's prescription: Stop messing around with any type of digital rights management, stop suing customers, drastically reduce digital-track prices, cut unnecessary overhead like warehouses and crates, and thereby return to 1980s-style profits. It's also possible that major labels such as Universal or Warner will come to this conclusion on their own-the Amazon MP3 Store and Mys.p.a.ce Music are tiny steps in this direction. Maybe, some in the business suggest, Apple or Microsoft or some other visionary company with money to burn will buy up the a.s.sets and, finally, start running the major record labels as high-tech content houses.

But continuing to build an entire business that relies on another Thriller Thriller is simply not viable. Hits are getting smaller and smaller, and they just don't have the healing power they had in 1982. Whether this reality finally prompts record executives to overhaul their business model in some profitable new way or destroys their entire business, buggy-whip style, remains to be seen. But in late 2008, it sure feels like the end is near. is simply not viable. Hits are getting smaller and smaller, and they just don't have the healing power they had in 1982. Whether this reality finally prompts record executives to overhaul their business model in some profitable new way or destroys their entire business, buggy-whip style, remains to be seen. But in late 2008, it sure feels like the end is near.

Notes.

All author interviews were conducted between August 2006 and July 2008 except where noted.

Prologue 19791982: Disco Crashes the Record Business, Michael Jackson Saves the Day, and MTV Really Really Saves the Day Saves the Day Early Dahl background from "Shocked Jock: His Partner Dumped Him. His Station Demoted Him. His Listeners Deserted Him. Will Steve Dahl Survive?" Chicago Tribune Chicago Tribune, November 6, 1994, p. 14. Steve Dahl quotes in this section are from an author email interview except where noted.

"still-Hawaiian-shirt-wearing": More recent personal Dahl description comes from author research for Knopper, Steve, "'Subtler' Steve Dahl Still Rocks Chicago," Billboard Billboard, March 7, 1998, p. 68.

Description of Disco Demolition comes from the following sources: Johnson, Steve, Chicago Tribune Chicago Tribune, November 6, 1994, p. 14; Sullivan, Paul, "July 12, 1979: Who Knew So Many People Hated Disco This Much?" Chicago Tribune Chicago Tribune, October 28, 1997, p. 2; Sullivan, Paul, "Looking Back on a Record-Breaking Night at Comiskey," Chicago Tribune Chicago Tribune, July 12, 1989, p. 1; Behrens, Andy, "Disco Demolition: Bell-bottoms Be Gone!" ESPN.com Page 3 Page 3, August 11, 2004; Steinhardt, Simon, "Disco Demolition Night," Swindle Swindle, December 2006, pp. 122129; and "Disco Demolition 25th Anniversary: The Real Story" DVD (TeamWorks Media, 2004, executive produced by Steve Dahl et al.).

"I loathed disco": From Sullivan, Paul. Chicago Tribune Chicago Tribune, July 12, 1989, p. 1.

"I loved disco music back then!": Author interview with Michael Clarke Duncan.

July 1979 Top 10 a.n.a.lysis: From Greenberg, Steve, "Sugar Hill Records," The Vibe History of Hip-Hop The Vibe History of Hip-Hop, Alan Light, ed. (New York: Three Rivers Press, 1999), pp. 2425, as well as author interview with Steve Greenberg.

"Most DJs never stopped": Author interview with Steve "Silk" Hurley in 1999. Unpublished notes for Knopper, Steve, "The Day Disco Died?" Chicago Chicago, July 1999, p. 21.

"People were trying to murder it": Author interview with Gloria Gaynor.

"The labels should have lost more more money": Author interview with Nicky Siano. money": Author interview with Nicky Siano.

Sales plummeted that year by almost 11 percent: Industry sales statistics come from the Recording Industry a.s.sociation of America or Nielsen SoundScan.

Dannen, Fredric, Hit Men Hit Men (New York: Random House, 1990), pp. 161171. Dannen's chapter on Casablanca Records is the definitive statement on the company. The Elephant's Memory recollection: Author interview with Ron Weisner, a former Buddah executive. "Almost anything could have happened": Author interview with Bill Aucoin. (New York: Random House, 1990), pp. 161171. Dannen's chapter on Casablanca Records is the definitive statement on the company. The Elephant's Memory recollection: Author interview with Ron Weisner, a former Buddah executive. "Almost anything could have happened": Author interview with Bill Aucoin.

"being used for nonsocial purposes": Author interview with David Braun. The Angel pods detail comes from a recollection by Leland Rucker, who reviewed one of the band's shows in the late 1970s for the Kansas City Star Kansas City Star. The "$30 million mess" is based on Braun's estimate. PolyGram market share figures: From Hit Men Hit Men, pp. 161171.

Casablanca imploded, and so did the industry: Most of the details in this paragraph, including the Walter Yetnikoff quote, come from Knoedelseder, William, Stiffed Stiffed (New York: HarperCollins, 1993), pp. 1920. Also author interview with Susan Blond. (New York: HarperCollins, 1993), pp. 1920. Also author interview with Susan Blond.

Walter Yetnikoff's personal background information: From Yetnikoff, Howling at the Moon Howling at the Moon (New York: Broadway, 2005). (New York: Broadway, 2005).

to win the respect of Mick Jagger: From Ibid., p. 138.

outrageous tantrums: From Dannen, Hit Men Hit Men, pp. 316317 (Tisch), 123124 (Simon). George Vradenburg quotes from author interview.

to make Springsteen happy: From Yetnikoff, Howling at the Moon Howling at the Moon, p. 133.

"If anything"..."I became more defiant": From Ibid., p. 188.

By the end of 1981: From Dannen, Hit Men Hit Men, pp. 226228.

"I told you I'd do it": Jackson-Yetnikoff exchange from Yetnikoff, Howling at the Moon Howling at the Moon, p. 154.

"Thriller was like Moses": Author interview with Lee Solters. was like Moses": Author interview with Lee Solters.

"taking black people back 400 years" as well as J. J. Jackson material and other MTV background: From Anson, Robert Sam, "Birth of an MTV Nation," Vanity Fair Vanity Fair, November 2000, p. 231.

"I was the instigator, I guess": Author interview with Ron Weisner.

"I'll give you my story": Author interview with Robert Pittman.

MTV background involving Tom Freston, John Sykes, and Van Halen: From Anson, Vanity Fair Vanity Fair, pp. 206216.

Pittman background: From Acker, Steve, "From MTV, Nick-at-Nite, Six Flags to Century 21," The Mississippi Business Journal The Mississippi Business Journal, August 7, 1995, p. 1.

MTV background and quotes: From Anson, Vanity Fair Vanity Fair, pp. 206216, 233. Quotes from Joe Smith and Robert Pittman are from author interviews.

"Like everything else, when the tide comes in": Author interview with d.i.c.k Asher.

David Braun quotes and recollections from author interview.

Chapter 1 19831986: Jerry Shulman's Frisbee: How the Compact Disc Rebuilt the Record Business The bulk of the James T. Russell material comes from author interviews with James T. Russell and Barbara Russell. Quotes from Kees Immink and Michael Rackman are from author interviews. Supplementary sources were Dudley, Brier, "Scientist's Invention Was Let Go for a Song," Seattle Times Seattle Times, November 29, 2004; Holdorf, Adam, "The Discoverer," Reed Magazine Reed Magazine, November 2000; Optical Recording Corporation vs. Time Warner Inc. and WEA Manufacturing Inc Optical Recording Corporation vs. Time Warner Inc. and WEA Manufacturing Inc., US District Court, District of Delaware, June 23, 1992; doc.u.ments from the US Patent Office, such as Russell, James T., "Photographic Records of Digital Information and Playback Systems Including Optical Scanners," filed November 26, 1971, patented April 23, 1974; and "Time Warner Is Told to Pay $30 Million for Patent Violations," Wall Street Journal Wall Street Journal, June 24, 1992, p. B10. Immink points out another pre-CD pioneer, David Paul Gregg, who first envisioned an optical disc for video in the late 1950s and earned two patents for it in the 1960s. Official Sony Corp. history quote is from various authors, Genryu Genryu (Sony, 1996), p. 216. (Sony, 1996), p. 216.

Details about John Adamson, Optical Recording Corp., and its patent negotiations with Sony and Philips come from Adamson, John, "Time Warner Inc. and the ORC Patents," Ivey Management Services, Richard Ivey School of Business, the University of Western Ontario, 2001, pp. 120; Adamson clarified some details via email. Finally, Lawrence B. Goodwin, who represented Optical Corp. in the Time Warner trial, confirmed trial details in two author interviews, although he is no longer affiliated with the firm that partic.i.p.ated in the case.

Early Philips-Sony history of the CD: From Nathan, John, Sony Sony (Boston: Mariner Books, 2001), pp. 116121, 137140; (Boston: Mariner Books, 2001), pp. 116121, 137140; Genryu Genryu, pp. 216225.

"Ohga had a long discussion with Morita": Author interview with Michael Schulhof.

"The meetings were absolutely fantastic": Author interview with Kees Immink.

Later CD history, including Sony-Philips cooperation on lenses and players: From Nathan, Sony Sony, p. 141.

"Hostile. Very hostile": Author interview with Jan Timmer. Description of Billboard Billboard conference in Athens: From Nathan, conference in Athens: From Nathan, Sony Sony, p. 143.

"I made a bit of a small statement": Author interview with Jerry Moss.

Business climate for Philips and Sony: From Nathan, Sony Sony, p. 143, and "Philips: An Electronics Giant Rearms to Fight j.a.pan," Business Week Business Week, March 30, 1981, pp. 8687.

Ohga and the first CD plant: From Nathan, Sony Sony, p. 143.

CD meeting in which the late Jay Lasker grills Jac Holzman: Author interview with Joe Smith, confirmed in email from Jac Holzman.

"It was a guaranteed showstopper": Author interview with Marc Finer.

Yetnikoff's resistance: From Nathan, Sony Sony, p. 169, as well as author interviews with John Briesch, Marc Finer, and Jerry Shulman.

"Super Goy": From Dannen, Hit Men Hit Men, p. 204.

"[Yetnikoff] was pretty tough": Author interview with John Briesch.

"I have no idea what they're talking about": Author interview with Jerry Shulman.

Clive Davis's resistance: Author interview with John Briesch. Confirmed by Jan Timmer. EMI's resistance: Author interview with Joe Smith.

"The expense of digital-music equipment is horrendous": From Foti, Laura, "Digital Cost Deters Studio Commitment," Billboard Billboard, February 13, 1982, pp. 1, 44.

Musicians Against Digital and "the mind has been tricked": From Nathan, Sony Sony, p. 145.

"We had a number of major acts": Author interview with Alan Perper.

"The retailers' point of view": Author interview with Jerry Shulman.

Beard and Yes alb.u.m detail: From Mark Knopper, my brother, who by coincidence was a friend of Simonds's during this period. "I was the first one of the people that I knew" and biographical information about Rob Simonds: Author interview with Simonds.

Jan Timmer background and Warner seeing the CD as the future: Author interview with Jan Timmer. Some description of Timmer from Dannen, Hit Men Hit Men, pp. 253254.

Steve Ross's fondness for video games: From Bruck, Connie, Master of the Game Master of the Game (New York: Penguin, 1994), p. 165. (New York: Penguin, 1994), p. 165.

Hamburg meeting: Author interviews with Elliot Goldman, Jan Timmer, and Stan Cornyn. (Holzman did not respond to email questions on this subject.) Also Cornyn, Exploding: The Highs, Hits, Heroes, and Hustlers of the Warner Music Grou Exploding: The Highs, Hits, Heroes, and Hustlers of the Warner Music Group (New York: Harper Collins, 2002), p. 303.

The royalty stands today: Author interview with Jim Caparro.

"the CD marketing guys kept pushing": Information in this paragraph comes from author interviews with Marc Finer and John Briesch; McCullaugh, Jim, "Compact Disc Seen Boosting Music Industry," Billboard Billboard, April 3, 1982, pp. 1, 74; Spahr, Wolfgang, "Compact Disc Officially Debuted; Timmer Stresses System's Standardization Benefits," Billboard Billboard, August 28, 1982, pp. 10, 41; Penchansky, Alan, "Digital Seen as Audio's Future," Billboard Billboard, September 18, 1982, p. 51.

Stevie Wonder and other stars: Author interview with John Briesch. Tos.h.i.tada Doi and Stevie Wonder: From Nathan, Sony Sony, pp. 145146. "It was what I was wanting to happen": Author interview with Phil Ramone.

Compact Disc Group background: Author interviews with Marc Finer, John Briesch, and Alan Perper. "We ran around the country like a bunch of vagabonds": Author interview with Alan Perper. MTV lobbying: Author interview with Robert Pittman.

Shizuoka Prefecture plant information: From Fujita, Shig, "j.a.pan CD Demand Outstripping Supply," Billboard Billboard, January 22, 1983, pp. 1, 56. Capitol Record Shop: From Lichtman, Irv, "Compact Disc Spins On," Billboard Billboard, March 12, 1983, p. 1. Sony executive (Michael Schulhof): From Horowitz, Is, "Momentum Builds for US CD Bow," Billboard Billboard, December 18, 1982, pp. 1, 64.

Windham Hill: from Sutherland, Sam, "Windham Hill Pacts for CD Pressing," Billboard Billboard, March 26, 1983, p. 6.

Rolling Stone printed: Booth, Stephen A., January 20, 1983, p. 55. printed: Booth, Stephen A., January 20, 1983, p. 55.

$16.95 opening CD price: From Horowitz, Is, "PolyGram Advances CD Bow; WEA Enters," Billboard Billboard, March 5, 1983, p. 1.

They also saw the CD as a chance to rejigger artists' contracts: Author interviews with Jay Cooper and Josh Grier. Note that the artist rate per disc is a hypothetical example based on a then-standard 12 percent royalty rate. To avoid confusion, I've calculated the rates based on the list price at record stores rather than the wholesale prices that labels change. Wholesale prices tend to fluctuate from store to store, making broad calculations difficult.

"They did it under the guise": Author interview with Cooper.

"That's not an insignificant reason": Author interview with Michael Schulhof.

CD price increases and "Every year they'd do this": Author interview with Russ Solomon.

CBS plant closings: From "Slow Year for CBS Records & Parent, Too," Billboard Billboard, February 20, 1982, pp. 4, 78; Lichtman, Irv, "CBS Records to Close Plant in Terre Haute," Billboard Billboard, October 23, 1982, pp. 1, 78.

"The environment is totally controlled": Author interview with Jim Frische. Most of the Terre Haute plant information comes from author interview with Jim Frische. Other helpful sources were Schumacher-Rasmussen, Eric, "20 Years Burning Down the Road: Sony Disc Manufacturing Celebrates, Rolls Out SACD Hybrid Production," eMediaLive eMediaLive, July 1, 2003, and Chambers, John, "Sony DADC TH Facility Is Company's Largest North American Plant," Tribune-Star Tribune-Star, Terre Haute, Indiana, September 20, 2005, p. A1.

The plant had cost $20 million: From Horowitz, Irv, "Momentum Builds for US CD Bow," Billboard Billboard, December 18, 1982, pp. 1, 64; Reuters, "Sony-CBS Deal," October 19, 1985. Half from Sony, and half from CBS: Author interview with Jim Frische; Chambers, Tribune-Star Tribune-Star, September 20, 2005, p. A1.

"Ten million f.u.c.king f.u.c.king dollars for dollars for this this?": Confidential source. Yetnikoff did not respond to multiple interview requests.

CBS profits: From "CBS Records '82 Profits Down: Revenues Also Dip; Domestic 'Reorganization' Cited," Billboard Billboard, February 19, 1983, p. 4.

"I had been predicting": Yetnikoff, Howling at the Moon Howling at the Moon, p. 145.

Terre Haute plant growth: From Schumacher-Rasmussen, eMediaLive eMediaLive, July 1, 2003; record industry profits, from RIAA; players, from Murphy, Liz, "Compact Discs Sing a Hi-Tech Success Story," Sales & Marketing Management Sales & Marketing Management, Feb. 4, 1985, p. 34.

Rykodisc growth: From Morse, Steve, "Amazing Little CD Firm That's Really Rocking," Boston Globe Boston Globe, April 2, 1989, p. B1; anecdotal information from author interview with Rob Simonds.