How Steely Dan and the National Hockey League Revolutionized Music

In the spring of 1995, with their state funding running out, the Germany-based Fraunhofer team traveled to industry trade shows across Europe and America to promote the mp3 standard. They had a customized booth, with brochures and demonstrations of the technology, but there wasn’t much interest. Struggling to attract potential customers, they kept hearing the same thing: the mp3 was “too complicated.” Meanwhile, across the trade show floor, the mp2 booth was three times the size of their own, and mobbed. Philips had done its job well, dumping promotional money into its own product while undermining the competition.

In head‑to‑head listening tests the mp3 remained superior. Only Fraunhofer couldn’t get anyone to participate in such tests anymore—MPEG had run those competitions, and everyone knew the results. Standardization of computer hardware had made team member Harald Popp’s expertise less relevant, so Karlheinz Brandenburg, the head of audio research, reassigned him to sales. In his pitch, Popp told potential customers about the mythology of the “complexity problem” and about the “political” nature of the MPEG decision, but some of his explanations sounded more like excuses.

They were saved in the end by a guy named Steve Church. Bernhard Grill, a programmer, had first met him at a trade show in Las Vegas the previous year. The CEO of a start‑up called Telos Systems, Church was a former radio talk show host and studio engineer who saw a market for improving the quality of audio broadcasting. Like Brandenburg and Grill, he didn’t trust MPEG, as he had seen these “impartial” standards committees make biased decisions before. He agreed to an independently refereed head‑to‑head listening test between the mp2 and mp3, and was startled by the results.

The mp3 was way better! Shortly after the demonstration, Church called back to the home office in Cleveland and arranged to repeat the experiment over a newly installed digital telephone line. The demonstration material was an encoding of Steely Dan, a band as beloved in Ohio as it was in Bavaria. Telos became the mp3’s first—and for some time, only—enterprise‑scale customer. Church commissioned several hundred mp3 conversion boxes called Zephyrs, the size of VCRs, capable of streaming mp3 audio in real time. He then turned around and licensed these to his biggest customer: the National Hockey League.

Here, finally, was a stroke of good fortune. One of the key reference materials in Bernhard Grill’s menagerie of exotic sounds was a recording of a German‑league professional hockey game. The sound of scattered clapping had always been a challenge for the encoder, particularly when set against a dynamic soundscape of scraping skates and brutal, bone‑crushing checks. The sample was a small snippet of on‑ice action, followed by a few seconds of indifferent applause. Grill had listened to it hundreds of times, isolating the encoding errors and working with Brandenburg to implement fixes. The NHL was the perfect customer: the mp3 had been specifically calibrated to the sound of the game.

But the league had certain technical requirements, and these took months to meet. By the time the units finally shipped in late 1994, the hockey players had gone on strike. That year’s shortened season didn’t officially begin until January 20, 1995—the official start date of the mp3 revolution in North America. The fastest game on ice was not widely understood to be a pioneer in digital acoustics, but as the first puck dropped on center ice that year, fans of the Blackhawks and the Red Wings were an unwitting audience on the cutting edge.

It wasn’t until after the 1995 decision in Erlangen that income from the sales finally began making its way to Fraunhofer, arriving just in time to save the mp3 team. The Zephyr racks allowed radio broadcasters to save thousands of dollars an hour on satellite trans‑ mission costs, and were installed in every pro ice arena in North America. Telos’ revenues quadrupled, and Steve Church became a zealous advocate for the technology. Soon he was in talks with every major North American sports league. But Fraunhofer received only a small cut. The licensing agreement they’d negotiated with Church charged on a per‑unit basis, and there were only a few hundred stadiums to sell to. The mp3 was alive, but on life support; to earn substantial profits, the technology would need many more licensees.

For Brandenburg, that meant a continued push for the home consumer. Earlier in the year, he had directed Grill to write a PC application that could encode and play back mp3 files. Finished within a few months, Grill dubbed it the “Level 3 encoder,” or “L3Enc” for short. The program fit on a single 3.5‑inch floppy disk. L3Enc represented a new paradigm of distribution, one in which consumers would create their own mp3 files, then play them from their home PCs. For the home audio enthusiast, the requisite technology was just arriving. Introduced in late 1993, Intel’s powerful new Pentium chips were the first processors capable of playing back an mp3 without stalling. Plus, the new generation of hard drives was enormous: with storage capacity of nearly a gigabyte, they could store almost 200 songs. The biggest limitation was still the encoding process. Due to MPEG’s forced inclusion of the cumbersome MUSICAM filter bank, even a top‑of‑ the‑line Pentium processor would take about six hours to rip an album from a compact disc.

No one at Fraunhofer quite knew what to do with L3Enc. It was a miraculous piece of software, the culmination of a decade of research, capable of taking 12 compact discs and shrinking them to the size of one, unencumbered by any digital rights management. On the other hand, the speed limitations of encoding made it cumbersome. After some internal discussion, Brandenburg made an executive decision: to promote the mp3 standard, Fraunhofer would simply give L3Enc away. Thousands of floppy disks were made, and these were distributed at trade shows through late 1994 and early 1995. Brandenburg encouraged his team members to distribute the disks to friends, family, colleagues, and even competitors.

Meanwhile, Popp continued to make scattered sales of the encoding racks, mostly to curious academics and broadcasting professionals. But the door was open to anyone who called, and that summer they met with another struggling entrepreneur, a former fiber‑optic cable technician turned music impresario named Ricky Adar. Like Seitzer, Adar had hit on the idea for a “digital jukebox.”

Adar believed that in a few years you’d be able to download music directly over the Internet and dispense with the compact disc entirely. The hitch was that audio files were large, and would have to be compressed considerably for the approach to scale. Fraunhofer, of course, had spent years working on exactly this problem. Even so, when Adar arrived at their offices, he wasn’t hoping for much. Given his past experience with audio compression, he expected the mp3 to be a tinny and unusable bust.

Instead, it reproduced CD music with near perfect fidelity at one‑twelfth the size. Adar was astonished. The mp3 seemed a marvel beyond technical comprehension. An entire album at only 40 megabytes! Forget planning for the future—you could implement the digital jukebox right now!

“Do you realize what you’ve done?” Adar asked Brandenburg after their first meeting. “You’ve killed the music industry!”

From How Music Got Free by Stephen Witt, published on June 16, 2015 by Viking, an imprint of Penguin Publishing Group, a division of Penguin Random House LLC. Copyright by Stephen Witt, 2015.