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The recording industry should thank Apple

In an interview with "Wired Magazine," Universal Music Group CEO Doug Morris claims that the record industry didn't know what to do about the burgeoning digital music explosion. But the historical record suggests otherwise.

This month's Wired feature on Universal Music Group CEO Doug Morris--which was posted online--has received a lot of commentary, most of it damning Morris as representative of a clueless and mortally wounded industry. The following quote, in which Morris talks about the dawn of the MP3 era, has drawn particular interest:

"There's no one in the record company that's a technologist. That's a misconception writers make all the time, that the record industry missed this. They didn't. They just didn't know what to do." He goes on to explain that he wasn't even tech-savvy enough to know who to hire, explaining that anybody with a decent story would have gotten by him.

I won't call Morris a liar--he was probably just focused on traditional music-company concerns like finding marketable acts and packaging them for mass consumption. (Who can blame him--he probably got into the music industry because he loved music, not computers.)

But my memory of history is very different from his. For various reasons--increasing hard drive size and broadband penetration being the main ones--the original file-trading version of Napster took off in 2000. By 2001, Universal (then known as Vivendi Universal after its parent company) had teamed up with Sony to build and promote a music downloading service called Duet, later renamed Pressplay. Around the same time, the other three big labels--Warner, EMI, and Bertelesmann (which has since merged with Sony Music)--had teamed up with RealNetworks to create their own subscription-based service, MusicNet. Meanwhile, the labels sued Napster for copyright infringement and eventually got the company shut down--a tactic they've pursued against many other unathorized sites and file-trading networks and software applications since.

In other words, a mere year after Napster took off, Universal and the other labels had a digital strategy: create their own digital music services then sue competitors out of business. So somebody at the labels knew something about the burgeoning digital music market. The problem is that Pressplay and MusicNet failed because they sucked. The split among labels meant that neither service had a decent catalog, both were overpriced, and neither intially supported transferring songs to MP3 players. From a computer-conscious music fan's perspective, it appears that the labels purposely crippled their early digital efforts in hopes that their lawsuits would succeed, the genie would be put back into the bottle, and they could forget about this annoying Interwebs thing and go back to selling plastic discs with ridiculously high margins.

Now, Universal is going after Apple, complaining that its success with iTunes has given it too much power. Universal is licensing its catalog to iTunes on a case-by-case basis, is offering DRM-free MP3s to other sites, and is considering its own service, Total Music, which would rely on device makers to subsidize subscription fees. But Apple's the only reason the labels sell any music online at all--iTunes showed the importance of having a decent catalog, reasonable prices and usage restrictions, and an easy and intuitive end-to-end experience from purchase through playback. Consequently, 22 percent of all music--not digital music, all music--sold in the U.S. this year is expected to move through iTunes.

I'm not saying the labels should automatically do whatever Apple tells them to do, but complaining about the one bright spot in your distribution picture doesn't seem like a particularly smart move.