Excerpt from Freeloading: How Our Insatiable Hunger for Free Content Starves Creativity, by Chris Ruen

The Future, on Repeat

On a January morning in 2010, nervous congregants gathered in a San Francisco auditorium. They awaited revelation, if not rapture. Silicon Valley’s far-flung diaspora joined the revival from afar, holding virtual vigil. With bent backs and glazed eyes, they stared at the live video feed streaming across their computer screens. Soon, the prophet of the information age would reward his followers and offer a new vision unto the people.

Inside the auditorium, eager eyes darted back and forth across the stage, straining to see their digital media savior. There he was! Applause thundered: dressed in his uniform of black turtleneck and blue jeans, Steve Jobs finally entered from stage left.

The oracle of Apple Inc. began to enumerate the many charms of his latest revelation: the iPad. The new tablet computer represented an entirely new category of digital device, splitting the difference between the smartphone’s elegant mobility and the laptop’s utilitarian power. Tablets took the totality of digital media consumption and made it truly mobile. Digital web browsing, email, photos, video, music, games, and books were hardly new, but having such an optimized, sleek, intuitive device with which to obtain and consume it all was revolutionary.

“Let me show you what it looks like. I happen to have one right here,” Jobs said.

Like a postmodern Moses declaring new holy law, he walked to the lip of the stage and held out the diminutive iPad for its first inspection by his followers. They gave thanks, hooting and whistling up to the stage. Jobs stepped back to detail the features of his new brainchild, highlighting its big, beautiful touchscreen.

“Holding the Internet in your hands,” he said. “It’s an incredible experience.”

But now that the prophet had offered the ability to hold the past, present and future of human expression in our hands—what would we do with it: create or destroy?

By 2010, the new age of digital media had already presented difficulties for traditional creative industries. With the iPad adding to the mix, would magazines, newspapers, books, television, and film reap sustaining profits from digital metamorphosis? Some believed the industries themselves would be reaped, sacrificed to the gods of progress. But not David Carr, media columnist for the New York Times.

In a column entitled “A Savior in the Form of a Tablet,” Carr enthusiastically gushed: “The tablet represents an opportunity to renew the romance between printed material and consumer…somewhere between the iTunes model and the iPhone app store… there may be a model for print.” In an issue of Wired magazine dedicated to the emergence of tablets, editor-in-chief Chris Anderson—otherwise an evangelist for “free” business models—proclaimed the dawn of a new age for digitized media, one where “tablets can show media in a context worth paying for.” Rupert Murdoch temporarily suspended his battles against content aggregators and Google to call the iPad “a wonderful thing… If you have less newspapers and more of these… it may well be the saving of the newspaper industry.”

But would consumers actually be willing to open their wallets for content after years of getting much of it for free online? The gale-force winds of technological change had already blown many media professionals to the precipice. Now the iPad threatened to push them over the edge.

Once the Internet became ubiquitous in the 2000s, newsstand, subscription, and advertising revenue dropped steadily as consumers migrated to the web for free news, information, and classified listings. Total paid newspaper circulation sunk by six million from 2005 to 2008, and print advertising revenues deflated by a whopping $13 billion—a contraction of nearly thirty percent. While newspapers searched for an emergency parachute to ease their free fall, online advertising revenues offered little more than a cocktail umbrella. By 2008, merely eight percent of newspaper advertising revenues came from online content. Publishers, accustomed to the “analog dollars” of print, struggled to make due with online advertising’s “digital pennies.”

As if that were not ominous enough, in came the Great Recession of 2008.

Consumer budgets wilted. In the following year, overall print revenue dropped another twenty-eight percent. Even online ad revenues, modest but thought certain to grow, absorbed double-digit losses as total advertising revenue plummeted another $10 billion. Institutions of the news such as The San Francisco Chronicle and The Seattle Post-Intelligencer ceased printing. The New York Times, once thought invincible, became so cash-strapped that it took out a $250 million emergency loan from Mexican billionaire Carlos Slim, laid off employees, and axed sections. Magazine publisher Condé Nast shuttered historic titles and slashed its total budget by twenty-five percent in the face of sinking ad revenue.

Aside from optimists like David Carr, who had faith that new digital models would save us all, another school of thought emerged. Stewart Brand’s famous edict “Information wants to be free” was its guiding light. For these people, the notion that any industry needed to be “saved” was misguided and pathetic. Technology was not responsible for anything, much less the salvation of old, inefficient industries rendered useless by the market. If historic institutions failed, even ones as important to society as robust journalism, it was the underlying industries’ own fault for not adapting fast enough or for no longer serving a purpose in the eyes of the marketplace. Institutional death was a necessary cost of progress.

“Technology giveth and technology taketh away,” BoingBoing editor Cory Doctorow declared. Others in this unsentimental sect adopted a more condescending and altogether nasty attitude. In the issue of Wired magazine devoted to the iPad, the editors gave “Fake Steve Jobs,”a pseudonymous blogger well known in Silicon Valley, the last word on the iPad’s potential impact for print industries. His entry, “Go Save Yourself,” read:

“The New York Times sucks just as bad on Kindle as it does on paper. That, in fact, is the real problem with the New York Times: it sucks and everyone knows it, except, apparently, the dumb fucks who write for the New York Times…The iPad isn’t about saving newspapers. It’s about inventing new ways of telling stories, using a whole new language—one that we can’t even imagine right now… the truth is you guys really need to die so we can clear the way for the new guys.”

This endnote to Wired’s exploration expressed a digital mob’s readiness to drag old institutions to the village green for a good, old-fashioned stoning. But the mob never bothered to consider what these supposedly outmoded institutions would be replaced with. Instead, they blindly embraced the holy commandment that all digital content shall be open, free, and shared. Their vision of participatory, open-source digital creation and consumption (commonly called Web 2.0) preached that technology would bless us so long as we dutifully laid our offerings of labor and creativity before it for the good of the “hive.” We would be rewarded, eventually, with progress and prosperity. The digital sect promised revelatory new business models, wealth creation hitherto unseen, an explosion in creative culture, and an evolution in modes of expression so fantastical we “can’t even imagine” them.

“Now would be the time to embrace the Internet,” Tech Crunch’s Michael Arrington said of the iPad release. “But the New York Times, the Wall Street Journal and others are running in the opposite direction with (iPad) apps that have no hyperlinks and/or require a fee to get access.”

Blasphemy!

The Web 2.0 crowd rejected the notion that consumers would ever pay for digital content, which after all could be easily copied and redistributed for free. It was an antiquated expectation to believe people would pay, pathetically out-of-touch with basic economic and technological reality.

The writer and BoingBoing editor Cory Doctorow openly mocked Carr’s attitude: “Everyone in journalism-land is looking for a daddy figure who’ll promise them that their audience will go back to paying for their stuff. The reason people have stopped paying for a lot of ‘content’ isn’t just that they can get it for free, though: it’s that they can get lots of competing stuff for free, too.”1 Doctorow had a point. In a worldwide Nielsen survey of consumers in 2009, seventy-nine percent said they’d avoid any website with a paywall, assuming they could find the same content free someplace else.

Whether idealistic notions of the Internet were being violated or not, pragmatists countered that publishers had a perfect right to charge for content and that consumers, regardless of what they might say in surveys, had already proved themselves willing to pay for their digital content.

“Five years ago,” wrote David Carr, “almost no one paid for music online and now, nine billion or so songs sold later, we know that people are willing to pay if the price is right and the convenience is there.”

But even if newspaper and magazine publishers could cajole their readers to pay for iPad subscriptions or submit to paywall fees, would the resulting model be sustainable? Not according to Australian media commentator Eric Beecher: “Like almost everyone else who works in the journalism industry, I desperately hope the iPad and similar devices will save newspapers from economic irrelevance.” Upon studying the numbers, Beecher found minimal savings in eliminating printing and delivery costs, little to no profitability in low-cost digital subscriptions, and only modest increases in advertising revenues. “None of which,” he concluded, “is to refute the idea that the iPad is a wonderful device that will bring joy and utility to millions of people. It just won’t—and can’t—save the economic fate of journalism.”

“I fear the ship for most publications may have already sailed,” wrote Infoworld’s Robert Cringely. “People are too used to getting subpar content for free…. The premium rates publications charge(d) for print advertising subsidized a great many things—like teams of researchers, fact checkers, copy editors, and multiple line editors—that online ad models simply don’t support…. Does quality matter? Or have we passed the point of no return, where fast and cheap trumps fast and good, and everything else be damned?”

Media professionals assumed the digital revolution was unstoppable: a force of societal progress or doom. Another columnist from the New York Times, Tim Egan, managed to strike a middle ground between these factions. Egan tempered his excitement for tablets, reminding readers that, despite the iPad’s potential, still another danger lurked amidst the shadows of digital content.

“There were nine million illegal downloads of copyright-protected books in the closing months of 2009,” he wrote.

As eReaders took their first toddling steps toward widespread adoption in 2010, twenty-eight percent of eReader owners already admitted to downloading eBooks from illegal file-sharing services. In the days immediately following the release of iPad, when Apple had sold a mere 300,000 units, downloads of unlicensed eBooks via bittorrent protocols jumped by a whopping seventy-eight percent. In 2010, one company readied a “book ripper” that could automatically scan an entire book for eReader use in a few minutes, ostensibly making eBook piracy as easy as copying a CD and uploading it to a file-sharing service. File-sharing sites for books, based upon the same model as Napster, began popping up. With a quick Google search of a book’s title, in most cases an unlicensed copy could be quickly had for free.

Though newspapers offered free (and legal) online content for years, the specter of piracy hung over that industry like an ashen cloud. A Pew survey found that seventy-five percent of newspaper executives, most notably those of the New York Times, were planning to institute paywalls for their digital content. “These days, print piracy is a trivial issue,” said The Economist, “since most general news articles are given away free. If newspapers and magazines begin charging people to read their output, the pirates are likely to turn up, and quickly.”

The pirating of large files like movies and television series was already a problem for entertainment studios and stood to accelerate as bandwidth and connection speeds exponentially increased. Downloading a season of a television show would soon be as quick and easy as downloading an MP3, while iPads and high-definition screens made the cinema a less sought-after experience.

Digitization threatened all content industries. The advent of the iPad opened the way to a world where digitized cultural content could be optimally consumed, illegally and conveniently, for free. What did this mean? The doors to the future, both exciting and ominous, flung open with such force as to altogether come unhinged, shattering commercial barriers between content creators and consumers forever.

The Times’s Tim Egan tried to stay positive amidst the ongoing disruption. “I have to place my trust in readers,” he said. “Tactile readers, e-readers: Save us all! Never give up on the power of the written word.”

Nine years before unveiling the iPad, Steve Jobs had listed the many charms of another revelatory new product: the iPod. The new personal MP3 player turned consuming digital music into something hip and intuitive. The immensely successful CD format, which had taken music industry revenues to historic peaks at the turn of the millennium, became antiquated with the snap of Jobs’s fingers.

If the iPod made CDs obsolete in the eyes of many, Napster turned the very concept of paying for music into something deserving to rot in the dumpster, along with yesterday’s refuse like the 8-track and VCRs. Napster would go down in history as the first great peer-to-peer (P2P) service for uploading and downloading digital content outside the sanctioned realms of capitalist commerce. It also signaled the first battle in a perpetual war over the fate of digital content.

Multitudes adopted this paradigm shift. By early 2001, Napster claimed a membership of twenty-six million users. Though it was shut down by the Ninth Circuit Court of Appeals the following summer, other services like Grokster and Audiogalaxy filled the vacuum left by Napster’s demise.

By further popularizing digital music consumption, many rightly feared the iPod would encourage file-sharing. Steve Jobs responded by categorically condemning music piracy. “Stealing music is not right,” he told Bloomberg Businessweek in 2003, “and I can understand people being very upset about their intellectual property being stolen. But the stick alone isn’t going to work.” 2 He understood that any attempts at copy protections would only be decrypted by young hackers and rendered useless. Jobs rejected any digital lock-and-key restrictions, such as Digital Rights Management (DRM), which blocked content owners from indiscriminately copying files.

“Piracy is not a technological issue,” Jobs said. “It’s a behavior issue.”

But it was also true that, by neglecting to block unlicensed content, the iPod made music piracy more desirable for consumers. In a world in which digital content was seemingly in infinite supply, Apple exploited the demand for hardware that could store thousands of songs and make them easily consumable. Steve Jobs played a starring role in the drama of music piracy. More than anyone, he destroyed the music industry as we knew it. More than anyone, he was actively trying to save it, too.

Jobs included a sticker on each new iPod that implored the customer: “Don’t Steal Music.” Translated into four languages, that plea did nothing to stem the tide or behavioral underpinnings of file-sharing. So, for his next attempt to assuage illegal MP3 consumption, Jobs offered what seemed to be a logical answer in 2003—the iTunes Store. Consumers finally had a reliable online store where they could efficiently sample and purchase individual MP3 tracks for 99¢ and albums for around $10.

“We’re trying to compete with piracy,” Jobs told the Associated Press at the time. “We’re trying to pull people away from piracy and say, ‘You can buy these songs legally for a fair price.’”

Jobs trumpeted to Fortune, “It will go down in history as a turning point for the music industry. This is landmark stuff. I can’t overestimate it!”

Monetization was achieved: the new model—discovered! Consumers were handed expanded choice, convenience and lower prices while record labels rejoiced over lower distribution costs and an expanded market of listeners. The dream of digital commerce finally found its path to realization. No more were we tied to point-of-purchase retail, wasteful packaging or shipping costs. In this world of digital commerce, anything seemed possible. And that proved to be its hazard.

Digital sales initially skyrocketed, leading to optimism from the music industry that profits from physical products would someday be supplanted by digital revenues. But the de-bundling of albums into the sale of individual tracks eroded the potential for such profits as physical sales careened into a free fall. After only ten years, US music industry revenues shriveled from over $14 billion a year to less than $7 billion. From 2000 to 2009, total US album sales (physical and digital) plummeted by fifty-two percent, from 785 million to 374 million units. When the Recording Industry Association of America analyzed the decade using 2011 dollars, the plight of the industry looked even worse. Per capita, Americans in 2009 spent just one third of the amount of money they devoted to recorded music in 2000, from an all-time high of $71 per consumer to a modern-era low of $26.

Meanwhile, piracy expanded in scope and acceptance. David Carr may point to the ten billion songs purchased from the iTunes Store in its first seven years, but compare that to the forty billion tracks pirated worldwide in 2009 alone. Though numerous legal streaming services, subscription sites, and MP3 stores emerged over the years to offer digital consumers both convenience and affordable pricing, an astounding ninety-five percent of music downloads in 2010 were pirated (the same percentage as in 2009). And according to a 2009 study, only about three percent of the music found on the average person’s iPod had been purchased via the industry-standard iTunes Store. Even aggregate digital music sales, thought destined for sustained growth, appeared ready to flatline in 2010.

“We are at one of the most worrying stages yet for the industry,” Mark Mulligan of Forrester Research lamented in early 2011. “Music’s first digital decade is behind us and what do we have? Not a lot of progress…. As things stand now, digital music has failed.”

The industry appeared to be locked in a downward spiral. No new business models had appeared to save the day. Record stores closed by the thousands. Record labels merged or went out of business. Chicago’s Touch and Go Records, arguably the most influential independent record label of the ’80s and ’90s, abruptly closed down. According to a report conducted by the International Federation of the Phonographic Industry (IFPI), a global advocacy group for the music industry, the total number of people employed as professional musicians in the United States fell by seventeen percent from 1999 to 2009 as piracy migrated from the margins and into the mainstream.

Even live concert tours, once considered “the savior of the music business,” saw a historic downturn in 2010. Across the world that year, despite the global economy gaining some steam after the Great Recession, live concert revenues, attendance, and the number of shows all declined by double-digit percentages. In North America, the concert business was comparably worse. The industry that supported one of humanity’s greatest treasures crumbled before our eyes. After a decade of trying, no one knew what to do about it or even what to think.

As seventy-five million tablet computers, mostly iPads, were projected to be sold in the US alone by 2012, every creative industry had reason to cast a wary glance at the music industry and shudder at the prospect of their own digital doom. 8 Meanwhile, millions of technologically savvy consumers accepted piracy as the new norm. They enjoyed the bounty of free, high-quality entertainment waiting at the end of a few mouse-clicks, but what sort of future were they helping to build?

 

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Chris Ruen is an author from Brooklyn whose essays and criticism have appeared in The New York Times, Slate, The New York Press and Sterogum. He is a former Contributing Editor for the internationally-distributed Cool ‘Eh Magazine and has covered music culture for Tiny Mix Tapes, a Minneapolis-based online music magazine. While studying at the University of Minnesota, he founded The Wake, a student magazine that went on to earn national recognition in 2006 as “Best Campus Publication” by the Independent Press Association. Ruen’s authorial debut, FreeLoading: How Our Insatiable Appetite For Free Content Is Starving Creativity, was published in 2012 by O/R Books.