Music industry as a whole faced disruption by the Internet. Traditionally pre-recorded music was distributed and sold. That was substituted by file sharing, downloadable tracks and more recently cloud-based streaming. This has affected the revenues of the music industry.

The MP3 Format

In the mid 1990s, the MP3 format provided a means to store audio in a compressed format that was far smaller than uncompressed audio . In those days, hard-drives and portable music players had lesser storage capacities. The compressed format enabled people to store music tracks on their personal computers and portable devices. It became easy to create your own compact discs (CDs) mixed compilations .

File Sharing Platform

There was national progression from music CD’s to the Internet-based peer-to-peer file sharing applications. Napster launched it in 1999. Such applications proliferated. Mostly these were illegal. It cannibalized sales of traditional music distributor platforms. There was litigation against the offending companies and individual customers. Still, the pirated music gets downloaded.

Apple : iTunes

Apple is one of the first companies to try to legitimize downloading of individual tracks. It opened its  iTunes music store in 2002 to complement its iPod device. It was an immediate success. Five million plus songs were downloaded in the first two months. It was an attractive proposition to the customers–they can download legally and have access to preferred songs without buying an entire album.

Cloud Computing

The rapid rise in broad band speed and penetration in recent years has opened up the possibility of cloud computing, which allows access to files without the need for local storage. There are start ups such as Spotify and Groove Shark which allow access to an almost endless database of music to users, which can be pushed to computers and other devices which are internet–connected .

The business model is based on subscription services and advertising while a user listens. Spotify technology development began in 2006. The founding company is based in Stockholm, Sweden. The technology was launched for public access in 2008. It was by invitation. In 2009, it launched free registration. The parent company has moved from Stockholm to London. It has now tied up with social media sites. Unlike Napster, Spotify owns music rights, through agents. However, Spotify is over -dependent on social media.
Convincing users to pay for music, any music , has been a growing challenge since the introduction of the cassette tape. (Isacc Dinner kenan – Flagler Business School)