Piracy, technology send sales model back to the '50s

Someone teleported through time from the early 1950s to 2009 would find a music business curiously similar to the landscape of 60 years ago. Few specialty record outlets. Department stores dominating the market. A singles-driven industry. Pop music dominating radio. TV musical talent shows all the rage.

A tangle of factors – many of them technological — conspired to turn the clock back on the music biz during the decade, and there was naught to cheer in the Aughts.

Music had boomed in the ’90s, as labels cruised to huge profits on the back of the CD format. But as the ’00s dawned, a Pandora’s box opened when computer-savvy college student Shawn Fanning’s website Napster allowed users to share compressed MP3 music files — at no charge. Napster was eventually knocked down by the courts (and absorbed by a major label), but other illegal Internet file-sharing services sprang up to replace it.

The major labels stuttered into action with the best solutions to peer-to-peer piracy they could muster. Nothing worked. The RIAA was unable to sue file-sharers out of existence, and the labels’ official music services, Pressplay and MusicNet, expired with a whimper.

It was left to a computer manufacturer to develop the software and hardware that would get consumers interested in buying music again. Apple built iTunes, which allowed Mac users to organize their MP3 files. It followed with the iPod, an ingeniously designed MP3 player that swiftly dominated the portable market, and, in 2003, the iTunes Store, a sleek, easy-to-use commercial adaptation of iTunes that sold MP3s for 99ยข a track. By mid-2004, it had shifted 100 million tracks.

The ascent of the iTunes store, which soon accounted for nearly 80% of digital music sales, spelled more bad news for the music business — and especially for brick-and-mortar retailers. Labels had snuffed the physical single in the ’90s, reasoning that the configuration ate into sales of the more profitable CD album. Consumers, who had long believed CDs were overpriced and packed with filler, embraced the MP3 — either legally or illegally — as the “new single.”

And, as the album business crashed, so did music retailers, who had ridden the boom years of the ’90s on a wave of highly leveraged expansion. Music merchants were hit by consumer dissatisfaction, and assaulted by competition from big-box merchandisers like Best Buy, Wal-Mart and Target, who low-balled CD prices as loss leaders to build traffic for high-ticket goods.

By the end of the decade, many of the biggest specialty music chains — Tower Records, Virgin Megastores, Musicland, Wherehouse Entertainment — had either collapsed in bankruptcy, been acquired by healthier firms, or simply folded their tents. It was the eclipse of traditional music retailing and the ascent of the mass merchant.

On the sales front, rap and pop dominated the marketplace (though a little group called the Beatles had the decade’s bestselling album in “1”).

TV became an increasingly important venue for the exposure of musical talent. No show demonstrated the medium’s power more than Fox’s “American Idol.” From its 2002 debut, the talent competish — which sports a format as ancient as “Arthur Godfrey’s Talent Scouts” and “Ted Mack’s Amateur Hour” — has dominated America’s conversation about popular music, and developed stars including Kelly Clarkson and Carrie Underwood.

So: Whither music? As the decade wraps, the biz’s biggest hits come courtesy of an unlikely, unforeseen and utterly dissimilar pair of newcomers: Taylor Swift, a teenage country-pop singer whose second album has sold nearly 5 million copies, and Susan Boyle, the 48-year-old Scottish Web sensation whose debut collection sold 1.2 million copies in the U.S. in just two weeks.

In an age when the term “million-seller” is near obsolescence, that’s a bit of good news indeed.

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