Digital Crisis: When and where for the Games Industry?

The key event that emphasised the first Digital Crisis in the music industry was the emergence of Napster in 1999.

Napster was the music industry’s worst nightmare; it provided a simple and efficient way for music fans to share music files between each other. Napster removed all of these traditional barriers to music discovery and distribution. Napster was a simple idea; it held a list of tracks available on other users hard drives and then pointed the computers towards each other.When files were exchanged they went directly from computer to computer (peer-to-peer). The software had started to be distributed by Sean Fanning on June 1st 1999 to around 30 of his friends. The software quickly spread virally to music fans and had around 1 million users at the end of 1999.

Napster ushered in the peer-to-peer revolution as Napster itself only provided a list of who was logged onto the service and the files that they were prepared to share from their hard drives. This crucial element would present the most challenging problem to the music industry in the years that followed. As Brafman and Beckstrom noted in “The Starfish and the Spider”, Napster typified the decentralized nature of music distribution on the internet. If one Napster user was removed then the content would quickly be made available by another user, like a starfish being able to grow a new leg.

Due to the decentralized nature of Napster, the music industry was presented with little choice of targeting Napster directly. The problems were all the more apparent as the primary users of the service were educated college students who had broadband internet connections. In 1999 it was noted that Napster was consuming 30% of internet bandwidth at the Universities of Oregon State and Florida State. In May 2008 it was estimated that peer-to peer was using 44% of all internet bandwidth despite huge advances in bandwidth speeds in the 9 year interim. US colleges started to ban the use of Napster as it was pushing their internet services to breaking point. The high watermark for Napster came in 2001 when there were an estimated 80 million people using the service. At this point it was clear that Napster had entered the mainstream, and that it amounted to IP theft on an industrial scale. Pandora’s Box was well and truly opened and the Long Tail was born as noted by Moon (2005);

In short, the free service was a feast for music aficionados looking for something rare or esoteric, as well as budding music fans looking to build a collection of the latest hits.

Paradoxically, this description would have been the answer to all of the music industry’s prayers, an active and connected community who were voraciously discovering and consuming music. Unfortunately this was fuelled by the fact that it was available for free, thereby giving birth to the Freesumer

In 1999, The Recording Industry Association of America (RIAA) started proceedings against Napster. In 2000 Metallica also brought a lawsuit against the company. Immediately, on a global basis, digital downloading was being widely discussed and explored by more consumers than ever. Metallica’s thoughts were clear, as drummer Lars Ulrich said at the time:

… From a business standpoint, this is about piracy. The trading of such information – whether its music, videos, photos or whatever – is, in effect, trafficking in stolen goods

This was a key point that would be returned to throughout the first digital music decade, as Steve Jobs (Apple) noted in 2003 when discussing the necessity for digital rights management (DRM):

We don’t believe it’s possible to protect digital content … What’s new is this amazingly efficient distribution system for stolen property called the Internet — and no one’s gonna shut down the Internet …So what you have to do is compete with it.

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