May 2004 (Revised March 2005)
Case
HBS Case Collection

Music Downloads

By: David B. Yoffie and Deborah Freier

Format:Print
| Pages:3

Abstract

Examines the competition between competing music formats. In the '90s, the MP3 format challenged the traditional means of music distribution by allowing for storage of near CD-quality recordings at 1/10th of their previous size. The threat to traditional distribution was credible due to the proliferation of complementary technologies, such as online digital music players (e.g., Real Networks' RealPlayer, Microsoft's Windows Media Player, and Apple's iTunes) and MP3 players and other portable digital music players. File-sharing web sites like Napster made MP3 files available for free downloading, enraging the recording industry, which took legal action. Although Napster was driven out of business, piracy continued to threaten the industry as users continued to download more than a billion songs a week from similar file-sharing programs. Legal music download stores, which paid between $.65 and $.79 per song to music companies and sold music files in encrypted formats to prevent file swapping, were developed. Slowing the adoption of these services were competing digital music audio formats from Apple, Microsoft, and Real Networks.