The End of the MP3?

Last month the Fraunhofer Institute for Integrated Circuits ended its licensing program for the MP3 digital file format. This probably means that the MP3 format will begin fading away to be replaced over time by newer file formats. MP3 stands for MPEG Audio Layer III and was the first standard that allowed for the compression of audio files without loss of sound quality. The US patent for MP3 was issued in 1996 by Fraunhofer and since then they have collected royalties for all devices that were able to create or use files in that format.

While it might seem a bit odd to be reading a blog about the end of a file format, MP3 files have had a huge impact in the tech and music industries that they are partly responsible for the early success of the Internet.

The MP3 file revolutionized the way that people listened to music. In the decade before that there had been a proliferation of portable devices that would play cassette tapes or CDs. But those devices did not really bring freedom to listen to music easily everywhere. I can remember the days when I’d have a pile of tapes or CDs in the car so that I could listen to my favorite music while I drove. But the MP3 file format meant that I could rip all of my music into digital files and could carry my whole music collection along with me.

And the MP3 digital files were small enough that people could easily share files with friends and could send music as attachments to emails. But file-sharing of MP3 files really took off in 1999 when Shawn Fanning, John Fanning, and Sean Parker launched the peer-to-peer network Napster. This service gave people access to the entire music collections of huge numbers of others. Napster was so popular that the traffic generated by the platform crashed broadband networks at colleges and caused havoc with many ISP networks.

In 2001 Apple launched iTunes, a service where people could legally download MP3 files. Apple used the MP3 format initially but in 2003 changed to the AAC format, probably mostly to avoid paying the MP3 licensing fees. Internet traffic to iTunes grew to be gigantic. It’s hard to remember when the Internet was so much smaller, but the transfer of MP3 files was as significant to Internet traffic in the early 2000s as Netflix is today.

Napster, along with Apple iTunes, revolutionized the music industry and the two are together credited with ending the age of albums. People started listening to their favorite songs and not to entire albums – and this was a huge change for the music industry. Album sales dropped precipitously and numerous music labels went out of business. I remember the day I cancelled my subscription to Columbia House because I no longer felt the need to buy CDs.

Of course, Napster quickly ran into trouble for helping people violate music copyrights and was driven out of business. But the genie was out of the bottle and the allure of sharing MP3 files was too tempting for music lovers. I remember musician friends who always had several large-capacity external hard drives in their car and would regularly swap music collections with others.

One of the consequences from ending the licensing of the MP3 format is that over time it’s likely that computers and other devices won’t be able to read the MP3 format any longer. MP3s are still popular enough that the music players on computers and smartphones all still recognize and play MP3 files. But the history of the Internet has shown us that unsupported formats eventually fizzle away into obscurity. For example, much of the programming behind the first web sites is no longer supported and many of today’s devices can no longer view old web sites without downloading software capable of opening the old files.

It’s interesting that most people think that once something has been digitized that it will last forever. That might be true for important data if somebody makes special effort to save the digitized files in a place that will keep them safe for a long time. Bu we’ve learned that digital storage media are not permanent. Old CDs become unreadable. Hard drives eventually stop working. And even when files are somehow kept, the software needed to run the files can fall into obscurity.

There are huge amounts of music since 2000 that has been created only in a digital format. Music by famous musicians will likely be maintained and replayed as long as people have an interest in those musicians. But music by lesser-known artists will probably fade away and much of it will disappear. It’s easy to envision that in a century or two that that most of the music we listen to today might have disappeared.

Of course there are the online music streaming services like Spotify that are maintaining huge libraries of music. But if we’ve learned anything in the digital age it’s that companies that make a living peddling digital content don’t themselves have a long shelf life. So we have to wonder what happens to these large libraries when Spotify and similar companies fade away or are replaced by something else.

Taxing the Internet

Numismatics_and_Notaphily_iconStarting on September 1, Chicago is trying something new and will be adding a 9% tax onto almost every service provided on-line. The city, along with the state of Illinois, is having huge budget problems and they are obviously leaving no stone unturned in looking to fill the tax coffers. But Chicago is the first local jurisdiction in many years that is trying to tax Internet-based services, something that will have wide repercussions.

So what are they trying to tax? The short answer is every information service that uses the Internet. For instance, the tax would apply to services that provide searchable databases—things like the LexisNexis system used by lawyers to find legal cases and precedents. As the data we use moves to the web this is a huge source of potential revenue for the city. Consider all of the services around today that charge people to access data. The Ordinance lists services like access to consumer credit reports, real-estate listings, car prices, stock prices, economic statistics, weather statistics, job listings, resumes, company profiles, consumer profiles, marketing data—any information or data that has been compiled, entered, and stored in a provider’s computer and then sold to others. The tax is also going to apply to taxable leases of personal property that include “cloud computing, cloud services, hosted environment, software as a service, platform as a service, or infrastructure as a service.

This tax does not apply to buying things over the Internet; it is not a sales tax on tangible assets, for instance, it would not apply to all of the physical products bought from Amazon. It would instead apply to companies like Netflix and Spotify and any other web service that sells electronic products. It would be up to the companies selling the onlune services to collect the tax and to remit the revenues to Chicago.

Obviously this new law will be challenged because it taxes a whole lot of things for the first time. It will also be interesting to see if this law is infringes on the protections provided several times by Congress in the Internet Tax Freedom Act as well as multiple times by the FCC, most recently as part of the Net Neutrality ruling.

But the city might have found a clever loophole. They are not taxing Internet access, but rather are taxing access to information and information services that happens to be stored somewhere else and then delivered over the Internet. It will be up to courts to sort out that nuance (or for Congress to pass a new law which is more specific).

One has to think that this law is very bad for businesses in Chicago. A 9% tax on anything is significant. Businesses spend huge amounts of money today on access to online databases and on cloud-based services that are moving their own information to the cloud. In effect, this law would tax companies for accessing their own data that they have chosen to store somewhere other than at their own business. I would not be surprised if this law drives businesses that spend heavily for such IT functions out of the city.

This also affects most people who live in the City directly. Almost everybody today who has an Internet connection buys some service over the web, be that a movie service like Netflix or Amazon prime or a music service like Spotify or Apple.

This kind of tax potentially adds a lot of cost for on-line service providers. Every town, county and state in the country has a different basis for assessing sales and service taxes like this one, and so this is going to require companies like Spotify to incorporate the tax assessment and collection process when they sell a subscription – something they don’t do today.

One would think that there will be a lot of avoidance of such a tax. It’s not hard for a business with multiple locations to be billed from a location that doesn’t get the tax. And since most on-line services don’t verify people’s addresses, somebody living in Chicago could most likely avoid these fees just by telling a Spotify that they live somewhere else. It’s hard to think that the City is ever going to be able to dig deep enough into online transaction to ever audit this.

But the real issue is not how the people in Chicago will deal with this. I am sure people and businesses there will take steps to avoid the new taxes if possible. The bigger issue is that other localities will copy the Chicago example if this holds up in Court. There is an old maxim that politicians have never seen a tax they don’t like, and so its not hard to foresee this tax spreading all over the country. And that is going to add costs to the online services we buy today, and since more and more things are migrating to the cloud this will become even more significant over time.

The Soundtrack of Our Lives

beatles3Today is my 365th blog entry, and while that has taken over a year and a half to publish that represents a full year worth of short essays. I am going to use this personal milestone to step out of my normal daily blog and talk about something that has been on my mind. It’s still something that is somewhat tech-related but it’s also quite personal and I bet most of you reading this will see yourself in here somewhere.

I want to talk about how I grew up with music and how the web has changed that experience. I was prompted to think about this a few days ago when on the last day of my recent vacation I played four Beatles albums end-to-end. That’s something I haven’t done for a while because the modern music experience doesn’t favor listening to whole albums.

I did this using a modern music web site, Spotify. This music service provides millions of songs on their service but also lets me import and integrate my own music library. I generally let Spotify mix up my music and use it like a radio station, but instead I listened straight through Magical Mystery Tour, Revolver, Rubber Soul and Sgt. Pepper’s Lonely Heart Club Band. And as I listened I got that old feeling of listening to music linearly like when we plopped albums onto a turntable and listened to them end-to-end. The satisfaction of listening this way came from the fact that I knew the words to every song, having listened to these albums many times, but I also always knew what song was coming next. My brain not only stored all of the lyrics of these Beatles songs, but also the play order on the albums.

This was refreshing to me since I hadn’t done this for a while. It was like meeting a long-lost friend. But it made me think about the difference in the personal experience of music today versus music back then. When I was young we obviously did not have millions of songs at our disposal. What we had instead was the radio, music stores and friends with album collections. Radio was pretty vibrant in those days, particularly when I moved to Washington DC, and it introduced you to a lot of great music. You would listen as much as you could to the radio or to friend’s collections to see what you liked and then you made an investment in buying an album. Since none of us had unlimited funds, the choices you made became the music that you listened to over and over (and over). You got to know certain artists really well.

I remember the great satisfaction once a month when I had enough excess funds to make a trip to the music store. This would always be on a Friday night and I would linger from bin to bin making the choices that I knew I would have to live with. Whether I had enough money to buy one album or half a dozen, these trips were one of the highlights of every month. And while buying a few albums at a time was somewhat limiting, it didn’t stop me over the years from migrating from classic rock, to punk, to folk, to reggae, and to new wave with many other side trips.

But then jump forward to today. Spotify, iTunes and other music services are more geared to songs than albums. I look at my daughter’s play list and she has one or two songs from hundreds of artists rather than a lot of a stuff from a few of them. And to some degree I have jumped on the same bandwagon because there is such an immense library of music available, including many of those things that I almost bought years ago on a Friday night buying trip. I can now indulge every musical whim.

But this smorgasbord of choices makes our music into a personal radio station. What I notice is that my daughter and wife drop and add songs all of the time, making their play list fresh and different. Artists are sampled and if something tickles their fancy it gets added to the playlist, and if it gets boring it goes. This is so different than the linear experience where you listened to an album with its good songs, bad songs and great songs and you came to know and love them all.

I’m not being nostalgic because I love the options that Spotify offers me. One of my favorite activities when I have a spare hour is to just leap from song to song, from artist to artist and listen to music I’ve never heard before. That is a freedom that was not there in the analog days. But I do lament the loss of intimacy and commitment that came from choosing an album and choosing an artist. That became your music and you listened to it and you learned it and it became ingrained in your mind and in your soul. Every person’s album collection was different and we each created our own personal soundtrack to accompany our lives.