Appetite for Self-Destruction

302 Pages·2007·1.25 MB·English

by  Steve Knopper

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Copyright © 2009 by Steve Knopper
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Library of Congress Cataloging-in-Publication Data
Knopper, Steve.
Appetite for self-destruction: the spectacular crash of the record industry in the
digital age / Steve Knopper.
p. cm.
Includes bibliographical references.
1. Music trade—History. 2. Sound recording industry—History. 3. Compact disc
industry—History. I. Title.
ML3790.K57 2009
384—dc22 2008038739
ISBN-13: 978-1-41659455-0
ISBN-10: 1-4165-9455-8
Visit us on the World Wide Web:
http://www.SimonSays.com
For Melissa and Rose
“A strategic inflection point is a time in the life of a business
when its fundamentals are about to change…. Strategic
inflection points can be caused by technological change but
they are more than technological change…A strategic
inflection point can be deadly when unattended to.
Companies that begin a decline as a result of its changes
rarely recover their previous greatness. But strategic
inflection points do not always lead to disaster. When the
way business is being conducted changes, it creates
opportunities for players who are adept at operating in the
new way.”
—Andrew S. Grove, Only the Paranoid Survive

“Look out, honey, 'cause I’m using technology
Ain’t got time to make no apology.”
—Iggy Pop and James Williamson, “Search and Destroy”
Contents
Cast of Characters
Prologue 1979–1982
Disco Crashes the Record Business, Michael Jackson Saves the Day, and
MTV Really Saves the Day
Chapter 1 1983–1986
Jerry Shulman’s Frisbee: How the Compact Disc Rebuilt the Record
Business
• Big Music’s Big Mistakes, Part 1: The CD Longbox
Chapter 2 1984–1999
How Big Spenders Got Rich in the Post-CD Boom
• Big Music’s Big Mistakes, Part 2: Independent Radio Promotion
• Big Music’s Big Mistakes, Part 3: Digital Audio Tape
Chapter 3 1998–2001
The Teen Pop Bubble: Boy Bands and Britney Make the Business Bigger
Than Ever—But Not for Long
• Big Music’s Big Mistakes, Part 4: Killing the Single
• Big Music’s Big Mistakes, Part 5: Pumping Up the Big Boxes
Chapter 4 1998–2001
A Nineteen-Year-Old Takes Down the Industry—with the Help of Tiny
Music, and a Few Questionable Big Music Decisions
• Big Music’s Big Mistakes, Part 6: The Secure Digital Music
Initiative
Chapter 5 2002–2003
How Steve Jobs Built the iPod, Revived His Company, and Took Over the
Music Business
• Big Music’s Big Mistakes, Part 7: The RIAA Lawsuits
Chapter 6 2003–2007
Beating Up on Peer-to-Peer Services Like Kazaa and Grokster Fails to Save
the Industry, Sales Plunge, and Tommy Mottola Abandons Ship
• Big Music’s Big Mistakes, Part 8: Sony BMG’s Rootkit
Chapter 7 The Future
How Can the Record Labels Return to the Boom Times? Hint: Not by
Stonewalling New High-tech Models and Locking Up the Content
Notes
Acknowledgments
Cast of Characters
CBS Records
Walter Yetnikoff, president, 1975–1987
Tommy Mottola, president, 1988
William Paley, CBS Inc., CEO, 1986–1995; died 2003
Laurence Tisch, CBS Inc., president, director, chairman of the board, 1988–
1990; died 2003
Dick Asher, deputy president, 1979–1983
Frank Dileo, promotion director, Epic Records, 1979–1984; manager, Michael
Jackson, 1984–1990
George Vradenburg, senior VP, general counsel, 1980–1991
Jerry Shulman, market researcher, VP of marketing, Legacy founder, general
manager, 1973–1999
Bob Sherwood, Columbia Records president, 1988–1990
Sony Music Entertainment, purchased CBS Records, 1988
Walter Yetnikoff, chairman, 1987–1990
Michael “Mickey” Schulhof, chairman, 1991–1995
Tommy Mottola, president, 1989–1998; chairman and CEO, 1995–2003
Don Ienner, president, Columbia Records, 1989–2003; president, US division,
2003–2006; chairman, 2006
Michele Anthony, senior vice president, executive vice president, chief
operating officer, 1990–2004; president and chief operating officer, 2004–
2006
Al Smith, senior vice president, 1992–2004
Fred Ehrlich, Columbia Records, vice president, general manager, 1988–1994;
VP, general manager, president, new technology and business development,
1994–2003
David W. Stebbings, technology director, also for CBS Records, mid–1980s–
1995
Jeff Ayeroff, copresident, WORK Group, 1994–1998
Jordan Harris, copresident, WORK Group, 1994–1999
John Grady, Sony Music Nashville, president, 2002–2006
Phil Wiser, chief technology officer, 2001–2005
Mark Ghuneim, Columbia Records, VP, 1993–2003; senior VP of online and
emerging technologies, 2003–2004
Sony Corp.
Akio Morita, cofounder, as Tokyo Telecommunications Engineering
Corporation, 1946; died 1999
Norio Ohga, various positions, including president, chairman, CEO, 1958–
2003; served as chairman, Sony Music Entertainment, 1990–1991
Michael “Mickey” Schulhof, joined mid-1970s; president, CEO, 1993–1996
Toshitada Doi, headed digital team, beginning in 1980; later executive VP
Marc Finer, director of product communications, late 1970s–1988
John Briesch, VP audio marketing, 1981–present Nobuyuki Idei, CEO, 1999–
2005; chairman, 2003–2005
Sir Howard Stringer, chairman and CEO, American division, 1998–present;
overall CEO, 2005–present Phil Wiser, chief technology officer, 2005–2006
Sony BMG
Rob Stringer, UK division, chairman, CEO, 2004–2006; president, Sony Music,
2006–present Michael Smellie, BMG, chief operating officer, 2001–2004;
chief operating officer, 2004–2005
Andrew Lack, chairman and CEO, Sony Music, 2003–2004; chief executive
officer, 2004–2005; nonexecutive chairman, 2005–present Rolf Schmidt-
Holz, nonexecutive chairman, 2004–2005; chief executive officer, 2005–
present Thomas Hesse, BMG, chief strategic officer, 2002–2004; president,
global digital business, 2004–present Steve Greenberg, president, Columbia
Records, 2005–2006
Joe DiMuro, BMG and RCA Records, senior VP, 1998–2004; executive VP of
strategic marketing, 2004–2006
Warner Music/Warner Communications
Steve Ross, Warner Communications, CEO, president, chairman, 1972–1990;
Time Warner, CEO, 1990–1992; died 1992
Mo Ostin, president, Reprise, then Warner Music, 1967–1995
Joe Smith, Warner, president, 1972–1975; Elektra Records, chairman, 1975–
1983
Doug Morris, Atlantic Records, president, 1980–1990; cochairman and co-chief
executive officer, 1990–1994; Warner Music, president, chairman, 1994–
1995
Ahmet Ertegun, Atlantic Records, founder, 1947; died 2006
Jac Holzman, Elektra Records, founder, 1950; Warner Bros. Records, senior
VP, chief technologist, 1973–1982; Warner Music, consultant, Cordless
Records creator, 2005–present Elliot Goldman, Warner Communications,
senior VP, 1982–1985
Bob Krasnow, Elektra Records, president, 1983–1994
Howie Klein, Reprise Records, president, 1996–2001
Stan Cornyn, various positions, including senior vice president and
founder/CEO of new media, 1958–1990
Bob Merlis, publicist, senior VP of worldwide communications, early 1970s–
2001
Jeff Gold, executive VP, general manager, 1990–1998
Robert Morgado, chairman and CEO, 1985–1995
Michael Fuchs, chairman and CEO, 1995
Danny Goldberg, chairman, 1995; Atlantic Records, president, 1994–1995,
senior vice president, 1992–1994
Roger Ames, chairman and CEO, 1999–2004
Paul Vidich, vice president, strategy, business development, and technology,
1987–2004
Kevin Gage, vice president, strategic technology and new media, 2000–2005
Edgar Bronfman Jr., chairman, chief executive officer, 2004–present AOL
Time Warner
Gerald Levin, Time Warner, chairman and CEO, 1993–2001; AOL Time
Warner, CEO, 2001–2002
Bob Pittman, chief operating officer, 2001–2002
Barry Schuler, AOL, chairman and CEO, 2000–2003
William J. Raduchel, senior vice president and chief technology officer, 2001–
2002
George Vradenburg, general counsel, executive VP for global and strategic
policy, 1997–2002
EMI Records Group
Joe Smith, president and CEO, 1987–1993
Charles Koppelman, chairman and CEO, 1994–1997