In September 1992, I created what I believe to be the first 'home digital recording studio'. The other band members nicknamed me 'Digital Yoda'. At first, I took offense to the name, but eventually embraced it as I realized I had pioneered digital home recording.
Since that time, the music industry has seen a dramatic shift in the supply and demand curves. In 1993, I created one of the first websites and put the first record company on the World Wide Web. In 1994, I introduced the first subscription streaming/download service in the world. By 1995, I had introduced the first pay-per-download service. At that time, we were the first company to accept credit card payments after dealing directly with FirstData (Mastercard/Visa). By 1997, we determined it was more economical to give the music away for free. By 2000, we had over 40,000 songs in our catalog available for free download/streaming. BMI, ASCAP, and the RIAA all tried to stop us. They failed. It was during this time that Napster and other peer-to-peer services also made free music available. Spotify was the music industry's answer.
Summary of the Economics:
The music industry has experienced a dramatic shift in its supply and demand curves since the 1990s. This transformation began in 1994 with the introduction of the first subscription streaming and download service, followed by the first pay-per-download service in 1995. These services were pioneering in their acceptance of credit card payments, facilitated through direct dealings with FirstData (Mastercard/Visa).
By 1997, it became evident that offering music for free was more economical, leading to a catalog of over 40,000 songs available for free download and streaming by 2000. Despite efforts from BMI, ASCAP, and the RIAA to halt these operations, they were unsuccessful. Concurrently, peer-to-peer services like Napster emerged, making free music widely accessible. Spotify later became the music industry's response to this disruption.
The underlying economics of the music business shifted significantly, driven mainly by changes in the supply curve rather than demand. While demand for music has remained relatively stable, the advent of digital distribution allowed millions of new artists to release their music, dramatically increasing the supply. This surge in supply caused the price of music to plummet to near zero. Consequently, the reduction in music prices is not the fault of Spotify or any other platform, but rather a result of the vastly increased supply of music available online.
Thank you for listening,
Digital Yoda