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Online Music Industry

Online Music Industry. 311: Fall 2003. Background/History. 2000: MP3 format released Lots of web sites made files available Easy to shut down for record industry Napster Files on people’s own computers Central file list – got sued and shut down Kazaa

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Online Music Industry

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  1. Online Music Industry 311: Fall 2003 (c) Jakob Iversen, 2003

  2. Background/History • 2000: MP3 format released • Lots of web sites made files available • Easy to shut down for record industry • Napster • Files on people’s own computers • Central file list – got sued and shut down • Kazaa • No central file list – cannot be held liable for illegal use when there’s also legal uses – plus they’re located offshore • PressPlay • Legal downloads - $10/month no burning ($1 per song for burning) • iTunes • Legal downloads - $1 per song (c) Jakob Iversen, 2003

  3. Web site Web owner makes files available User types in web address, downloads file from web server Centralized P2P Users make part of their hard disk available to other users Some systems have central list of all files Other systems propagate searches among clients Files downloaded directly from other client Decentralized P2P vs. Network (c) Jakob Iversen, 2003

  4. Porter’s Value Chain From Fundamentals of Information Systems, Ralph Stair and George Reynolds, 2003, p. 20. (c) Jakob Iversen, 2003

  5. Porter’s Value Chain for online music From Fundamentals of Information Systems, Ralph Stair and George Reynolds, 2003, p. 20. (c) Jakob Iversen, 2003

  6. Problems for the Music Industry • Most investments made upstream, but revenue comes downstream • Kazaa: 240 million users, 890 million files traded between 4.3 million users. • 31% drop in CD sales since mid 2000 • An estimated 40 million Americans have traded songs online • Ownership of CD burners has risen threefold since 1999 • 40% of music consumers own CD burners (c) Jakob Iversen, 2003

  7. Recent Events • RIAA sued 261 users of KaZaa • Including a 12-year old honors student living in subsidized housing in NY • UMG slashed prices to $13 • Many new legal download sites announced (Sony, RealNetworks, Microsoft) (c) Jakob Iversen, 2003

  8. Opportunities • New media, new markets • Closer ties between artists and users • Better way to discover other music you may like • The movie industry fares a lot better! • Movies are cheap to buy, lots of extras on DVDs, decent download alternative on the way (c) Jakob Iversen, 2003

  9. Questions • Is filesharing legal? Ethical? A Problem? • Have you used filesharing? • Would you use filesharing in the future? • What should the music industry do now? (c) Jakob Iversen, 2003

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