Look at that. That is the biggest crowd
MTV has ever, ever had. Why? Two words, Backstreet Boys. In the '90s, it was a great time to be in the music business. Things were booming. And as a result, expensive
parties, big launches. Yeah, that was part of the culture. This was the era of NSYNC
and the Backstreet Boys. This was the era where a single hit could sell you 10 million albums plus. They were just printing money. You had the great sales
of CDs over that period dwarfing whatever had happened
in the industry before. The profits coming in were massive. It was a hell of a lot of fun. From my viewpoint, we were gonna get better and better all the time. We really didn't foresee the
change in the technology. We'll be telling you
tonight about a method of compressing audio data called MP3. And that was the end
of everything we know. The birth of the MP3 was a seminal moment for all of media and entertainment. It would completely
change the music industry. Completely disrupt it. It opened up people's minds
to what the future would be. Don't steal our music! Its music is free for downloading. The music industry is not viable. Movies, books, television,
nothing creative has any value anymore. The music industry simply did not embrace the magnitude of the change and it failed. You can't fight progress. You can't fight technology. The MP3 totally changed
people's relationship to the internet, to culture,
to how society works. It's a fact that was so much bigger than just the music industry. Would you say that you love audio? You just love it? Oh sure, oh sure. I have to admit I got older,
so I'm not as critical in listening as I've
been some decades ago, but I definitely love
music and love audio. And I have to say with all this great reproduction technology, the best is still to sit in a concert hall
to hear real musicians. When people call me the father of MP3, I always have to add, "No, no,
I was, as you sometimes say, "standing on the shoulders of giants." But my original contribution is really some of the basic ideas to MP3. The story of the MP3 really
begins in West Germany back then in the early
'80s and even late '70s. People started trying to compress music, including my own thesis
adviser, Dieter Seitzer. Dieter Seitzer was a visionary
who came up with the MP3. He was seeing the original
digitization of music with a compact disc and thinking, instead of manufacturing
millions upon millions of plastic discs, why
don't we store all the data in one centralized
computer and then stream it to people in their homes. So he applied for a patent
to use the phone system to transmit music. 1982, that's when they
first had this idea. But they had a huge problem. The compact disc took
about a million bytes of information to store
one second of audio. And the pipe they were
trying to send it through, the telephone, could only
do about 128,000 bytes. For this to work, they somehow
had to magically shrink the size of the compact
disc by 90% or more. The patent examiner looked at it and said, "No, it's not possible." Essentially, almost everyone
thought this was impossible. There's no way to do this. But around '87 or '88, Dieter Seitzer's brilliant graduate student, Brandenburg, made a breakthrough by taking advantage of this sort of obscure
academic discipline. Psychoacoustics. The human ear has a
lot of inherited flaws. For example, two tones
that are close together in pitch will begin to
cancel each other out. And therefore he realized
much of the information in the compact disc was irrelevant. The ear couldn't actually hear it. So he devises a series
of mathematical models to eliminate all of those
inefficient bits of data that you will never hear. And in so doing, he was
in fact able to shrink the music by an extraordinary amount. What was done in the end exceeded the expectations of everybody. The functionality of what they put up was relatively limited. You had to go and get a
serial number where you paid and licensed it to unlock
full functionality. But the way the software
underground worked in the '90s is that, practically, these serial numbers
were available anywhere. We tried writing, "Look,
this is stolen software. "We will send the public
prosecutor after you." Which of course doesn't
really work these days. It starts to percolate
out of the academic audio and computing sphere
into the broader public. And by '96, the pirates find out about it. The year's about 1997, 1998. I'm in seventh grade. A school friend of mine
said, "Hey there's a way "you can listen to music
for free on your computer. "Check this out." After I discovered my first MP3, it blew the floodgates wide open. That's all I did every single
day, every single night. I was the founder of the MP3 piracy group known as Audio Punks. We specialized in
everything from punk rock, to ska, to hardcore and heavy metal. We had downloaders from
Indonesia, Japan, or Russia, you name it, people are downloading. Back then in the late '90s,
if you wanted to find MP3s, you would go into IRC channels. It was a series of chat rooms that were hidden and invite-only. I eventually found these
great little channels that have membership solid
by enforcing a upload ratio where you had to upload
three songs, or two songs or whatever number, in
order to download one song. So I would pool money
together with my friends in order to get a CD. Rip a CD, and then
compress that into an MP3. And then we would spend all
night uploading the album, putting it out on the internet. We were eventually able to
keep repeating the process and have almost an
assembly line structure. And in our prime, we had probably close to a thousand albums in our catalog. Man, it was almost like a full-time job just dedicated to these song files. Did you ever think like, wow, this is kinda like I'm
stealing from these artists. Did that ever occur to you? You know, in the late '90s we were idiots. We were kids. You know, I started this when I was 12. I didn't know what I was doing. It wasn't called piracy back then. It was just file sharing. In the late '90s, my
staff started monitoring the online space and we really did see a significant amount of
interest in MP3 all of a sudden because of its ability
to compress a music file. The latest advance, called
MP3, comes via the internet. It's the future of music and audio. I'm sure that there are
millions of you out there who not only understand what digital downloading technology is about, but who use it daily to
great personal advantage. I think there really wasn't any sort of panic in the industry
in the early days. My team did look at it
and see it as not really as much of a threat as an opportunity. We used to call it the celestial jukebox. Celestial jukebox was a theoretical construct at the time. Every song ever made was gonna be in what we call the cloud right now, and would be instantaneously available to anyone on the planet simply by pressing a button on your gizmo. But the industry really did
not embrace that opportunity. I think when we first heard the term MP3 we didn't really know
if that was important or how it might be important. And even if it was important,
how'd it affect us? But there was an awareness
that the digital revolution was coming and anybody who
was in a senior position had to say how do we
make this work for us? We began trying to find
a way to legitimately sell music on the internet. What systems do we develop? How do we deal with how we sell it? How do you price it? Sony Music said today it'll be the first major recording company to sell new releases through the internet. These virtual singles will be released at the same time as
CDs go into the stores. We were working at it. But the senior executives, they still had the mentality of you needed a hard good. And that was the basis of their business. The music industry was making gobs of money selling CDs. That's the bottom line. So companies like mine, mp3.com, that went to them and said, "Hey, we wanna work with you. "Let's figure out something that gives "the consumer some value
and gives you some value." They didn't want to hear any of that. They tell me, "No, the computer is for "word processing and spreadsheets." They couldn't see it. We had meeting after meeting after meeting with companies with proposals for new technological ideas. Generally who knew absolutely nothing about how the record business works, which made it difficult
for them to express how it was good for us. So basically all of this
stuff was for naught. And then peer-to-peer came
along and changed everything. I just stopped going to school. I left my dorm room. I didn't tell any of my friends. I just stopped going. I knew that if I had told them what I was planning on doing, they would have convinced me not to do it. Or they would have questioned
my decision to leave. In 1999, observing that
file sharing was fun, but was not easy, Shawn Fanning and Sean Parker come around and create Napster. They were two teenagers hanging around an IRC chat channel swapping MP3 files. Now at the time, there
were all these MP3 files being created, but there was no sort of central index where you could
go download them easily. And so Fanning said, "Why don't I create "a new technology that will connect "all these files together?" Something called a peer-to-peer server. My computers appear, and
your computers appear. The files that are on your computer, I have access to them and vice versa. So it was like the
ultimate file trading tool. And it facilitated really low friction sharing of music. Parker's role was essentially the face of the organization. Fanning wrote the code. Fanning kind of did all the technical and computer side stuff. I was spending two or three days in a row sitting at a machine writing code. I'd pass out on the desk or on the floor. It was just a blur. This is a guy who just sat in the basement and cranked for six months. It was the first computer
program he ever wrote. He went out and bought
a Visual Basic book, knew what he wanted to get
to and just kept at it. He was not to be deterred. And, of course, it took off. My head of anti-piracy, Frank Creighton, came into my office and
said, "I've just found "the most fascinating thing." It was Napster. I put in, you know, Madonna's "Holiday." I was like, "Whoa, that's pretty amazing." That's like the celestial jukebox. We've been talking about this for years. We immediately contacted them and said, "Ya know, really cool system, but you're "infringing on copyright." "Well, if you send us a
list of all of your songs "we'll make sure that none
of them are on there." I said, "All right, just start with "the Billboard Top 200 songs. "Take those off." They said, "Okay, fine, we'll try that." Well, they didn't. And it just grew and grew and grew. It's called Napster. And it's by far the fastest way to download music from the internet. It allows anyone to copy thousands of musical selections for free. And it's spread so quickly that it's clogging computer networks on hundreds of campuses. So this became hugely
popular overnight basically. It was really one of the first viral apps. The hysteria over Napster culminated in, I would say, an RIAA board
meeting in February of 2000. It was in Los Angeles at
the Four Seasons Hotel. I will never forget this day. All of the heads of the labels, literally the titans
of the music business, were in that room. I had somebody wheel in a
PC and put some speakers up and I started doing a name that tune. Give me your last five biggest hits. Every single song that somebody named was available on Napster. Well, give me some old ones, like what, you know, name older artists. That was on there. Okay, now tell me what
you're releasing next week. And sure enough, you
know, 20 of the top new yet to be released songs
were on there as well. We used to have this line
in the record business that there was sort of nothing
a good hit couldn't fix. There was no screw up a
good hit couldn't fix. There was no amount of
money lost on a deal that a good hit couldn't fix. I think that was the
moment when people said, "Ooh, maybe a good hit
can't fix this one."
19 hours long? I'll pass.
This has some great production value. Those German audiophiles back in the 80s partied BIGTIME! Thank you!
Really interesting if your into the music industry