Simple: without a critical mass of portable music players, mp3s were still an inferior good. You couldn’t bring them anywhere. You couldn’t listen to them in your car. You couldn’t listen to them when you went for a run. You couldn’t listen to them on a plane. You couldn’t DJ a party with them, not without lugging a ten-pound computer everywhere. Yes, you could burn mp3s to a compact disc—hundreds of them, actually—but a lot of CD players weren’t equipped to play the files, and even for those that were, navigating through a menu of hundreds of files on a compact disc player was cumbersome and unwieldy. So, yes, mp3 piracy was driving album sales . . . for a time.

But if you had a reliable mp3 player, things would be different. You could throw your CDs in the garbage and port everything to a pocket-sized hard drive. You’d never have to buy a compact disc again. It all depended on how RIAA vs. Diamond played out.

After successive rounds of appeals and counterappeals, the lawsuits came to an end. It was a split decision, with a victory against Napster but a loss against Diamond. Peer-to-peer networks were driven underground, but the mp3 players remained on store shelves. Napster’s servers went offline in July 2001, and, following a mad rush of eleventh-hour downloading, the public had hundreds of millions of mp3 files stranded on their home computers, and no easy way to get them off. The stage was set for a remarkable upheaval, one that would permanently obsolesce the compact disc and catalyze the transformation of a niche technology player into the largest company on earth.

The music industry had won the wrong lawsuit.

CHAPTER 10

After five years of neglect, Thomson figured out its stake in the mp3 was worth something. In April 1999 the company relocated Henri Linde to California during the height of the dot-com boom, and opened a dedicated office for him with a staff of six. Business was merely brisk at first, but turned electric after the favorable result in RIAA vs. Diamond. Big Gadget finally moved, with Japanese money displacing Korean.

Any device that could play an mp3 had to pay. Linde signed deals with dot-coms, software vendors, chip manufacturers, game designers, car stereo vendors, and hundreds of start-up ventures. In the first four years he’d worked as licensing manager he’d signed less than twenty deals. In the next four he signed more than 600. The only holdout was Sony. Inside the company a civil war had broken out between its consumer electronics arm and the music labels it owned.

Somehow, still, Brandenburg managed to keep a low profile. In two separate magazine articles about the mp3 published around this time, American journalists misidentified MPEG founder Leonardo Chiariglione as the technology’s inventor. Charles C. Mann, writing for The Atlantic, claimed Chiariglione “led the development of a standard means for converting recorded sound into digital form, which is now called MP3,” and Mark Boal, writing for Brill’s Content, called Chiariglione “the father of the mp3.” In fact, Chiariglione only chaired the MPEG competition—he didn’t participate in it. The journalists had confused the referee for one of the players, and neither of their stories mentioned Brandenburg’s name.

The errors were understandable, perhaps. The complicated tale of MUSICAM’s politicking against Fraunhofer was not the stuff of long-form glory. Still, it wasn’t the kind of thing that happened to Napster’s Shawn Fanning, or even Winamp’s Justin Frankel. The narrative of the college freshman starting a revolution from his dorm room was more seductive than the narrative of the middle-aged audio engineer spending a dozen years in a listening lab, and even large corporations tended to fall for it.

In June 1999, AOL announced it was purchasing Nullsoft, the company Frankel had founded to distribute the Winamp player. Bernhard Grill, 38, had spent the last 12 years of his life developing and shepherding basic research to the consumer marketplace. He was the real innovator, and it was he who had coded the first mp3 player. Frankel, 19, had made a Xerox copy of this software and added a function that let you edit playlists. After the AOL transaction he was worth 59 million dollars.

Only the German press managed to identify the true psychoacoustic pioneers. That was thanks to Fraunhofer, whose PR department promoted the mp3’s success as a triumphant outcome for the taxpayer. They even put Brandenburg on the cover of their annual report. Of course, their story wasn’t accurate either: it described the mp3’s victory as a historic inevitability, relying as it did on superior German technology. The official Fraunhofer timeline didn’t mention Napster, the mp2, the cracked shareware demos, or the Scene. It didn’t even mention the word “piracy.” There was instead a single line that referred to “widespread adoption of the standard on the Internet.”

Buried in the financial information of that same report was a clue to the magnitude of the windfall: Fraunhofer was pulling in more than 100 million dollars annually in licensing money, and would continue to do so for the next ten years. Brandenburg would never reveal his exact stake, but it was a percentage later described by Henri Linde as “nice.”

Linde had leverage and began to apply it. Microsoft had been one of the earliest Fraunhofer licensees, but that had been on an experimental basis. In 1999 it decided to bundle Windows Media Player with the rest of the operating system. Linde, now in California, worked out a long-term deal. A few months later an administrative assistant in Fraunhofer’s operations department was opening the mail when she came across a check. This wasn’t the first time this had happened. While most companies paid electronically, Microsoft was still stuck in the era of paper money. The company had been a licensee for a long time, and this check looked just like dozens of others she had processed—save, that is, for the rather unusual number of zeroes tacked on the end of the field marked “Amount.”

Suspecting a misprint, she called Peter Dittrich, Fraunhofer’s director of operations. After examining the check, Dittrich too suspected a clerical error. He called the audio research department to see if Brandenburg knew what was up.

Herr Professor Brandenburg, said Dittrich, we have a check here for you.

Yes, said Brandenburg.

It’s from Microsoft, said Dittrich.

Yes, said Brandenburg.

The thing about this check, said Dittrich, is that it’s rather, um, large.

Yes, said Brandenburg.

He then explained that Linde’s licensing agreement with Microsoft’s was on a per-unit basis—meaning that, from now on, whenever anyone in the world bought a computer with Microsoft Windows installed on it, Fraunhofer got paid.

Certain risks remained. Microsoft had not become the largest company on earth by mailing large licensing checks to obscure German research institutions, and even as it paid for the mp3 it was seeking to replace it. For years, Microsoft had been developing its own psychoacoustic coding standard at its research campus in Redmond. In August 1999 it introduced Windows Media Audio, a proprietary format that tended to beat the mp3 in audio quality tests. Of all the threats to his success, this was the one Brandenburg feared most. He had seen Microsoft use its operating system dominance to drive competitors like Netscape and WordPerfect off the desktop, and he felt that they could do it again to him.

Grill was less worried. He believed Microsoft was too late. Fraunhofer’s first-mover advantage was insurmountable, and after Napster, there were hundreds of millions of mp3 files in existence—probably even billions. He knew this war had been won a long time ago, not at some engineering roundtable or inside some corporate meeting room, but on an escalator in a mall in Los Angeles.