You can read the first chapter after the jump.
THE PLIGHT OF THE MUSIC INDUSTRY
The MP3 (Moving Picture Experts Group, Audio Layer III) was created by German company Fraunhofer-Gesellshaft in 1989. However the MP3 was not truly popularised until the creation of the first MP3 playback engine in 1997 known as the 'AMP,' the engine was then ported to Windows and titled 'WinAmp' and allowed MP3 playback to take place on a computer. The technology arrived just before the release of Napster. The introduction of the MP3 was a truly groundbreaking innovation for many reasons; Biersdorfer (2006:77) stated it allowed users to “compress a song into a file small enough to be uploaded, downloaded, emailed, and stored on a hard drive.” MP3's were of a much smaller size than any other audio file around at the time and their small size meant less hard drive space was used and more music could be kept on a computer. The introduction of MP3 players enhanced the MP3's use even further.
Wolff (2000) defines Peer-to-Peer (P2P) technology as “a type of transient Internet network that allows a group of computer users with the same networking program to connect with each other and directly access files from one another's hard drives.” In 1999, Napster was the first P2P file sharing services to reach the mainstream. Martin (2005) explained how Napster worked, “users would compile a list of the MP3 files they were willing to share. This list would be updated every time a user would log onto the internet. An index computer (i.e. index server) would store this list, and users would access files based on the index.” Napster allowed users to share their MP3 collection with people all over the world using the internet. This was the start of the digital downloading era as we know it. However, the record industry felt that the distribution of these MP3's was illegal and the RIAA filed a lawsuit against Napster. Palmer (2006:64) stated that the software contributed to copyright infringement by others and did not charge Napster directly with this. The RIAA won the case and Napster was officially ordered to shutdown and pay costs to record labels in December 2001. It was, however, a full two years before the introduction of legal digital downloading was introduced. This may have been because the record companies were unwilling to embrace the new technology when there was a real opportunity to use this new technology to their advantage. It was not the case that everyone in the industry hated this new technology though. Dave Matthews of Dave Matthews Band stated “Napster is the future, in my opinion. That's the way music is going to be communicated around the world. The most important thing now is to embrace it,” and there were many other artists with the same opinion. If the record companies had listened to the artists and not been too afraid of the new technology, they could have offset the effect that Napster had on the industry.
A big innovation in digital music was the introduction of iTunes in 2001. Simon (2009) said that Apple's Steve Jobs was one of the first to see the P2P network as more than an illegal nuisance and decided to develop a new application using the same ideas that Napster had originated. They acquired the rights to use the code from MP3 application Soundjam and incorporated many of the programs original features (visualizers, plug-ins, online retrieval of album data and drag and drop playlist creation) into the first release of iTunes back in January 2001. From the products original launch Apple decided to release the product as a free download and also had it pre-installed on all new Macs. Jobs (2001) said of iTunes at its release "it's miles ahead of every other jukebox application, and we hope its dramatically simpler user interface will bring even more people into the digital music revolution." The shift from CD's to MP3's was starting to take effect, but this was only a start. The release of iTunes 4 in 2003 was when the biggest shift started to take place. This was because of the introduction of the Music store to the application. The music store brought a catalogue of 200,000 songs from the major record labels to iTunes which could be bought absolutely legally. The figure that iTunes was achieving was pretty impressive, with over a million downloads in the week proceeding its launch, and over 10 million downloads within the first 4 months. iTunes continues to dominate the digital music field. Roth (2010) says the service now has over 12 million songs available to customers, and as of February 2010 has sold over 10 billion songs.
Petchey and Papagiannidis state that there are three main business models used by independent and also major record labels to distribute their music online. These are; the a la carte, the subscription and the streaming business model. The a la carte model (also know as pay per song) involves customers being charged per song download, Apple's iTunes and Amazon music store are an example of this. The subscription model involves customers paying a subscription fee to listen to a library of music for a certain period of time. This type of model is offered by Napster (who also provide the A la carte model.) The final model is the streaming model. This model allows for the customer to stream the music online, but they must be connected to the internet to be able to listen. Originally customers would have had to pay a fee to use a service like this, however recently, services such as Spotify have offered users free streaming of a huge catalog of music. All three have their benefits, to users as they provide different options to suit individual users needs. Each individual model also has its advantages for record labels, providing them with different avenues of income. Depending on the record label, they may choose to use all three models or to specifically just tailor the label to use one of the three.
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