Napster first knocked the music industry on its rear a few years ago by allowing millions of people to freely "swap" digital music files, a practice the courts frowned on, essentially driving Napster offline. While illegal downloading still occurs, millions of people are paying to acquire music legally from Apple Computer's iTunes, Rhapsody, the re-launched Napster and even sites operated by mega retailers such as Wal-Mart. Now mighty Microsoft has jumped into the game, and its deep pockets, tech savvy and take-no-prisoners management could change the game for consumers and competitors. Who are you betting on?
September 2, 2004
There is no doubt that Apple has changed the course of the digital music industry. When the world was embroiled in the debate over peer-to-peer file-sharing's legality, Apple skirted the entire issue and launched an online music store. With the Recording Industry Association of America (RIAA) suing individual file-traders by the thousands, many music lovers turned to Apple's store, relieved to have a legal way to download songs. But even with the wild popularity of its iPod, and millions of songs sold, the iTunes store has yet to be very profitable. Though it has an established lead in the digital music market, Apple will have to fend off serious competition in order to hold its ground.
It was only a matter of time before the software behemoth entered the music download space. And Microsoft certainly has come onto the battlefield with a heavy arsenal. Bill Gates, for one, thinks his company's ability to offer video along with audio will be its biggest opportunity to take a bite out of Apple's market share. Microsoft has formed partnerships with three device makers, all of which are releasing combo audio/video players that support MSN Music. We can count on Microsoft, which rarely settles for second place in any of its ventures, to fight tooth and nail to become a leader in the music market.
RealNetworks has taken some heat in the last few weeks for its all-out campaign against Apple. First, the company "hacked" Apple's FairPlay code, allowing songs bought from the RealPlayer Music Store to be played on an iPod. They followed by dramatically dropping the cost of songs, and finally launching a petition to get music fans to support an open standard for digital music files and devices. How these bold moves will impact the company's success in the market is unclear, but by bringing the issue of interoperability to the forefront, they have drawn a line in the sand and music service providers will be forced to choose a side.
Once the quintessential rebel of the Internet, Napster is finally playing by the rules, though the new Napster is a mere shadow of the company it once was. CD-burning software maker Roxio bought the Napster brand in a bankruptcy auction, sold the old Roxio business and relaunched Napster as a paid music service. Analysts are split on whether the new Napster has a chance of succeeding in the music market, and its recent partnership with Microsoft puts it in an awkward spot, positioning the company as both a partner and direct competitor of the software giant.
Regardless of the many paid music services that have popped up, there remains an enormous network of music lovers who believe their music should come for free. The popularity of free file-sharing networks, like Kazaa and Morpheus, has waned but has hardly disappeared. Despite continued lawsuits brought on by the RIAA, and proposed legislation that would shut down P2P services, file swappers take heart in a recent ruling by a federal appeals court that stated file-sharing services are, in fact, legal. Unless these networks are shut down entirely, the industry can count on many would-be customers taking the risk and downloading free music to their hearts' content.