The Mixtape as Disruptive Technology
For those who don't know, I'm an MBA student at one of the most prestigious business schools in the United States. Unfortunately for me (and for the majority of my classmates), the recent downturn in the global economy has tightened the job market. Although most music fans couldn't care less about the disappearance of Lehman Brothers and Bear Sterns, the oncoming depression has had an interesting effect on some of the conversations I've had during job interviews. Because I'm primarily concentrating on consulting firms, the vast majority of my professional exchanges over the past few weeks have revolved around strategy and risk for distressed industries. And, since my résumé prominently features both the International Mixtape Project and a few music publications to which I've contributed, the conversations tend to move swiftly towards the music business—hardly the industry most directly affected by the global economic crisis, but a troubled model nonetheless.
Without fail, technological disruption always comes up during these conversations. For those unfamiliar with the term, disruption is when a new way of doing things makes the old way of doing things nearly obsolete. Sometimes disruption is instantaneous, and sometimes it takes a few years (for more information, I recommend "Disruptive Technologies: Catching the Wave" by Bower and Christensen in Harvard Business Review from January-February 1995). Regardless, disruption has been a huge factor in the music industry since mp3 digital sound files and Apple's iPod instigated the rapid decline of compact disc sales in the U.S. and Europe in the early 2000s. I postulate during my interviews, however, that the dynamic duo of mp3s and iPods have a distant cousin in the mixtape. Furthermore, I hypothesize that the recording industry, therefore, had nearly 20 years notice that demand for this type of technology was out there and on its way to change everything.
Essentially, home-recordable cassette tapes and inexpensive dubbing technology, first made popular in the early-1980s, were the original death knell of the stagnant, stodgy music industry. The widespread assumption has long been that consumers started taking money out of the pockets of artists and labels when they turned to intangible digital formats like mp3 for acquiring and carrying content and that the music industry's myopia was a result of the belief that people wanted higher and higher quality sound. I posit that the trend started when consumers who had already bought a record, tape, or CD from their local Sam Goody store started picking bits and pieces of the album to re-record and give away as a mixtape. More importantly, the consumer in both cases isn't really avoiding payment, but is instead demonstrating new ways to consume.
This unto itself isn't stealing—it's exercising ownership. Really, how different is a mixtape from the fixed up beater car that I gave away to my roommate in Boston when I moved to Washington, D.C.? Both the mixtape and the car have parts from different sources that were once bought new but are identical to parts in other cars and mixtapes. Both the mixtape and the car were re-assembled as an expression of taste and functionality. Neither has an identical twin. Neither works as well as the original. And both were given away for free with the goal of temporarily standing in for a full-price substitute. However, unlike the auto industry, which has always encouraged and taken part in the second-hand market, having realized early on that selling parts, service, and trade-in value was a great way to "expand the pie" (a business term meaning generate revenues where there previously was no opportunity), the music industry came down on compilation tapes as illegal reproductions and classified mixtapers as thieves.
In the long-run, this attitude foreshadowed the recording industry's behavior surrounding the boom in peer-to-peer filesharing in the early-2000s. Given the opportunity to expand the pie by contracting with the technologists who designed, coded, and popularized disruptive digital platforms like Napster and Kazaa for free, almost all the major labels pressed charges against both the inventors and the users. Essentially, they criminalized the individuals who disrupted the music industry by pushing the compact disc format into obsolescence (similar to the way CDs made vinyl records obsolete) instead of taking advantage of the opportunity to develop a business platform around the fast-moving new technology. What kind of strategy calls for banning a higher quantity, lower cost, higher margin, higher product turnover, higher product legacy, expansion-intensive sales model? The worst part is that the origins of the consumer behavior had been around forever, but the technology to match it was just arriving, meaning the labels wouldn't have to wait or pay for adoption (as they had to with CDs)—mixtapes had pretty much done their job for them. Although it's difficult to look back two decades to figure out how the formal music industry could have monetized the burgeoning mixtape movement, it's not too great a stretch to assert that the industry turned its back on two major customer value drivers just as they were being revealed: the ability to mix content and the freedom to share.
-- Ryan Mixtape, 10/28/2008