On October 23, 2001, Steve Jobs took the stage in Cupertino, Calif., to announce what he called a “breakthrough digital device”—the first iPod. It had five gigabytes of storage and cost $399.
Critics were not convinced. The name iPod itself was mocked as “Idiots Price our Devices” and “I Prefer Owning Discs.” But the iPod was not just another MP3 player, like many people claimed. It was the first device that made the music industry’s transition to the digital world possible.
In 2001, consumers had already begun listening to MP3’s instead of CD’s, but rarely legally. In June 1999, peer-to-peer file sharing service Napster launched, and six months later it was facing a lawsuit from Metallica, the first of many from the recording industry. But despite the lawsuits, people kept downloading. Napster usage peaked at 26.4 million users before shutting down in July 2001. Still, in less than two years, Napster created an unstoppable force in the music industry.
Napster had its flaws. Besides the fact that it was illegal, it was also slow and unreliable. But the popularity of Napster revealed a relatively untapped market for digital music. And so Apple stepped in with iTunes, a more functional (and non-free) version of what Napster tried to create. When the iTunes Music Store opened, Apple was the only legal vendor of major label music on the Internet. Its success made digital music mainstream and gave law abiding citizens an alternative to shady downloading.
And then came the iPod. While it wasn’t the first MP3 player on the market, its connection to iTunes presented an easy, organized, and legal transition to digital music. As the iPod gained popularity, the culture it created continued to upset tradition within the music industry. People bought fewer albums and more singles. Up-and-coming artists could break out without a record deal.
While iTunes provided a solution to the problems of illegal downloading, it didn’t eliminate the problem entirely. Napster not only made music free—it made people believe that music should be free. A 2010 survey by Forrester Research found that only 44 percent of Internet users, and 64 percent of those who download digital music, believed music was worth paying for. This attitude was reflected in album sales worldwide during the past decade. From 2000 to 2010, album sales dropped 56 percent.
While some people saw this decline as a “lost decade” for music, others saw it as an opportunity. People clearly were looking for access to free music, which they now felt they had a right to, and the music industry needed a way to cash in. While advertisement-based Pandora caught on quickly, subscription services like Rhapsody, which has fewer than one million subscribers, never really took off.
Despite the troubled start of subscription streaming services, Daniel Ek, the CEO of Spotify, saw the proliferation of smartphones as the perfect opportunity to make streaming music viable. Spotify allows users to stream unlimited music for free for the first six months. After the first six months, however, non-paying users will be limited to 10 hours of music per month and at most five plays of the same song. Launched in the United States in July, Spotify and its American users are still in the free-of-charge honeymoon period. After that, Spotify is hoping they can finally be the one to convince Internet users to pay for music. Competitors to Spotify are popping up everywhere, and rumors have begun that Google, Amazon, and Apple are all working on their own plans to get into the game. If services like these truly start to take off, the effect could be a transition away from music ownership altogether.
Ten years after the announcement of the iPod, the music industry is a far cry from what it was in the early 2000s. The iPod may not have been the first MP3 player, but it was the one that encouraged people to transition into the digital era of music. It raised the expectations of consumers who now expect to be able to easily put 10,000 songs in their pocket. Even if the classic iPod itself has become outdated, the phenomenon that it started has already had an immeasurable impact on the music industry.
