the music industry

Copyright infringement is a pervasive problem that has become increasingly more severe as the pace of technological innovation has accelerated. The more sophisticated the technology and the greater the access it provides to many forms of content, the more opportunities there are to circumvent the law and take that which has been created by others.

From Napster to iTunes Fast-changing, often fickle public tastes make music recording a risky business. Revenue is dependent on hot songs and is volatile. But in 1999 a huge and totally unexpected game-changer hit the industry: Online music file-swapping.

Singlehandedly, an 18-year-old college kid, Shawn Fanning, almost brought down the whole music industry. Fanning put together peer-to-peer (P2P) software so that his dorm buddies could swap audio files among themselves. With this P2P there was no central infrastructure and no cost for people to download music to their personal computers. Fanning named his free-wheeling system Napster, after his childhood nickname. Young listeners, the main market for recorded music, saw it as a user- friendly application that allowed them to exchange music worldwide for free.

Recording companies, operating in decades-old formulas for manufacturing and marketing high-profit pop culture, did not recognize Napster’s potential to eliminate the entire retailing structure for the music industry. By the time they caught on, Napster’s 25 million users had 80 million songs on their hard drives. They stopped buying music they could swap for free, and retail music sales dried up. Established music outlets such as Sam Goody’s and Musicland closed within months. Recorded music sales in the United States plummeted from $14.6 billion in a year to $6.9 billion

in 10 years—a loss of more than half.

The Recording Industry Association of America (RIAA), which represents the recorded music companies, finally went to court against Napster. In 2005, the U.S. Supreme Court sided with the RIAA. It agreed that Napster facilitated illicit copying of protected intellectual property and that this constituted copyright infringement. Napster and other file-swapping services could no longer legally operate.

The anti-Napster intervention of the U.S. Supreme Court, the record industry, and Steve Jobs’ launch in 2001 of Apple’s iTunes gave the recording industry at least temporary respite from the downloading craze. Songs are purchased from iTunes and can be downloaded to Apple’s handheld iPod playback device. ITunes was convenient, and unlike Napster, had consistent fidelity, excellent sound quality, and avoided the viruses plaguing Napster, Kazaa, Grokster, and other P2P sources. Apple’s new format compressed music efficiently, downloaded faster, and consumed less disk space.

With iTunes, people could sample songs with a single click and then download with another click at 99 cents a song. In iTunes’ first week, Apple stock spiked 27%, due to 1 million songs that were downloaded. By 2008, Apple was largest U.S. music retailer. Although the recording industry complained that the Apple’s 30% commission is unreasonably high, the company held fast on the commission. By 2014, the total sales had passed 25 billion. But in October 2014, it was reported that iTunes sales had dropped at least 13% due to free streaming services like iTunes Radio and Pandora and the option of cheap, unlimited subscriptions

The iTunes model has been imitated. Amazon created a music download service in 2008 and Google in 2011. Even back then, they all had huge catalogs: Apple, 20 million songs; Amazon, 17 million; Google, 13 million.

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