Given the events of the last decade, it's hard to believe that back in 2000 the music industry was positively bullish. Music revenue for the year climbed to a robust $14.3 billion. Meanwhile Seagram mogul Edgar Bronfman Jr., who had acquired PolyGram in May 1998 for $10.4 billion, flipped his combined company, including Universal Music Group, to French utility company Vivendi for a cool $34 billion. As we enter 2010, recorded music revenue dipped to $8.5 billion in 2008, album sales have continued to drop in 2009 and major labels such as Warner Music Group and EMI Music Group are struggling to stay afloat and appease their shareholders.
The brand-new century got off to an auspicious start with the explosion of the boy band craze with 'N Sync's No Strings Attached selling a record 2.4 million albums in its first week in March 2000, with 1.1 million sold the first day. How ironic that the era would be bookended with the untimely death of Michael Jackson (and the resulting media-fueled sales explosion), whose meteoric career served as a template for the teen phenomenon.
The surging sales from the likes of 'N Sync, the Backstreet Boys and teen diva Britney Spears then allowed Zomba Label Group's Clive Calder to exercise an option to sell the 80 percent of the company Bertelsmann AG didn't own back to the German media conglomerate for approximately $3 billion in spring 2002 — the last of the big cash-outs.
Even in those robust times there were hints of trouble on the horizon, or more specifically, the growing threat of cyberspace. In 1997 a San Diego, Calif.-based computer entrepreneur named Michael Robertson launched a company based on an audio compression system known as MP3 (MP3.com), while in 1999 Shawn Fanning, a 19-year-old Northeastern University student, developed an innovative file-sharing system dubbed Napster, which allowed users to exchange downloaded songs, creating a free music search engine and playback. Backed by the RIAA, in 2000 the major record labels and artists — most famously, Metallica's Lars Ulrich — turned to the courts for relief, citing massive copyright infringement and ultimately succeeded in dismantling Napster. Vivendi Universal ended up acquiring what remained of MP3.com in 2001 for a bargain-like price of $372 million.
Of course just as some pundits predicted, the demises of Napster and MP3.com, which attempted to forge agreements with the music industry, opened the floodgates to a plethora of rogue digital sites such as Kazaa, LimeWire, BitTorrent, and Gnutella, some of which exist to this day.
That wasn't the only threat facing the major labels. In 2000 the Federal Trade Commission, accusing the record industry of price-fixing, forced labels to do away with "minimum advertised price," which had threatened to take away co-op ad dollars from retailers who sold albums below cost. The ruling cleared the way for big-box retailers such as Walmart, Target and Best Buy to use CDs as loss leaders, helping lead to the demise of dedicated music retailers such as Tower Records and Musicland.
It took a music business outsider — Apple's Steve Jobs — to provide a digital solution, with the first iPod appearing in stores in October 2001, and the iTunes Store launching April 28, 2003, with a catalog of more than 200,000 songs available for 99 cents each. As of 2009, a total of 220 million iPods have been sold to date and iTunes' catalog is now at more than 11 million tracks and, according to the NPD Group, digital downloads now account for 35 percent of all music sales, with iTunes being the country's largest music retailer representing 25 percent of all sales. Sales from downloads are predicted to equal those from CDs by the end of 2010.
Simon Cowell's "American Idol" emerged as the most successful primetime music-oriented TV series in history. Since its debut in June 2002, the show has yielded GRAMMY-winning artists Kelly Clarkson and Carrie Underwood while cutting across both demographics and pop music genres. In addition, the recent popularity of music-oriented video games such as "Guitar Hero" and "Rock Band" has introduced a whole new generation to classic rock, culminating in a Beatles version of the latter game, which coincided with the successful release of remastered digital versions of the band's entire catalog this past September.
In late 2003 Bronfman re-emerged, putting together a group of private investors to acquire Warner Music Group for $2.6 billion. Guy Hands' Terra Firma equity firm bought EMI Music Group for $5 billion in May 2007 but unfortunately the purchase took place just before the economic crisis put a chill on investors, forcing the company into a possible takeover by its own lender, Citigroup.
The Recording Academy continued to honor the best in music through its annual GRAMMY Awards telecast. In 2000 the show found a new home in Los Angeles at Staples Center and has remained there since, save for the memorable 45th GRAMMY Awards at Madison Square Garden in New York in 2003. An eclectic mix of artists representing all genres performed throughout the decade, drawing millions of viewers, including signature GRAMMY performances such as Beyoncé and Prince (2004), Kanye West and Daft Punk (2008), Radiohead and the USC Marching Band (2009), Eminem and Elton John (2001), and Mary J. Blige and U2 (2006), among others. Alison Krauss, who took home five GRAMMYs with Robert Plant at the 51st GRAMMY Awards, was the top-winning artist of the decade with 16 GRAMMYs, followed by U2 with 15.
As the decade drew to a close, the music industry found itself back on the offensive with labels attempting to sign artists to all-inclusive 360-degree deals, which include participation in various artist revenue streams such as touring, merchandising and publishing. The proposed merger of Live Nation and Ticketmaster is still being examined by the Justice Department, with a decision expected early in 2010. Despite the turmoil, the volatile live music business has continued to grow, with global revenue increasing 10 percent to $25 billion in 2008.
Social networking sites such as MySpace, Facebook and Twitter — along with more sophisticated smartphones and handheld devices that download and play music — have grown in popularity and reach during the latter part of the decade. YouTube has emerged as a powerhouse music video repository, generating more than 10 million views for a live-streamed U2 concert in October and an astounding 100 million views within nine days of Susan Boyle's performance of "I Dreamed A Dream" from "Britain's Got Talent" this past April. On Dec. 8 Universal Music Group, along with Sony Music Entertainment and Google, launched Vevo, a dedicated site for artist-related content housed on YouTube.
Google recently introduced its own initiative, joining with MySpace for search results that include full song streams and links to purchase them. Another popular European start-up, Spotify, seeks to succeed with an ad-supported subscription model in the United States, where previous incarnations such as Rhapsody and the now Best Buy-owned Napster have sputtered.
While the industry has weathered many a storm this past decade, recorded music, traditionally resilient, is more ubiquitous than ever and public interest has only increased. Like all content-fueled businesses — from newspapers to books and movies — the recorded music industry is at a transformative crossroads, dealing with the 21st century mantra of access over physical ownership. As the proverbial canary in the coal mine, recorded music has been the guinea pig for many of these changes, and more revolutions in how the business operates are sure to come.
(Roy Trakin has been senior editor at HITS magazine since he still had hair, and has written for every defunct rock publication that did and didn't matter. He is also the author of biographies on Jim Carrey, Tom Hanks and Sting.)