Hacking the Market

Abstract

When Michael Robertson was looking to promote his idea of selling music as MP3s via his new venture MP3.com, he found the labels to be cold to the idea. They were disinterested, seeing little benefit in these low-quality compressed audio files. When Napster sought licensing, a similar situation occurred: told by the courts that they required a license to operate, they found the price set to be unattainably high and eventually liquidated whilst their only industry ally, BMG, was punished with liability for Napster’s actions and their eventual consumption into Vivendi. When Niklas Zennström and Janus Friis’ arranged meetings with music and film licensing groups in the US they found themselves not in negotiations as arranged but at the receiving end of accusations and threats. During the rise of media’s digital distribution, the media industry was out of the loop and intended to stay there, a decision which at the time, made perfect sense.

If you had Coca-Cola coming through the faucet in your kitchen, how much would you be willing to pay for CocaCola? There you go. That’s what happened to the record business.

(Doug Morris, CEO of Universal Music Group, quoted in Mnookin, 2007)