Listening to 🎵 Jesus Walks by Kanye West
In my last article Spotify: Rediscovering Music I introduced Spotify and my stellar experience streaming music on the platform. This is the first review of the 9-part series — Spotify: A Product Story for vital business, and product lessons.
In this article we would be exploring the history and evolution of the music industry.
Napster
In 1999, 19year old Sean Parker and his co-founder created a Peer to Peer(P2P) interface that enabled users easily share MP3 files with other users on the platform. The only problem was that most of the time the MP3 files they downloaded were not owned by them. Hence, piracy.
Previously music listeners had to buy a CD or cassette of a song they like. The ability to download a song for free was revolutionary. At its peak, Napster had about 80 million registered users.
Napster VS Metallica
In 2000, the metal bank Metallica discovered a demo of their song ‘I Disappear’ had leaked and about 30 radio stations were playing the song. This was before the song was finished and released. On closer inspection, they further discovered that their entire collection of albums was pirated and on Napster with 335k users. They filed a lawsuit against Napster.
In 2001 a court in California ruled in favor of Metallica, ordering Napster to delete every Metallica track on their 335k users’ devices.
As this was technically unfeasible, “Napster voluntarily ended service and filed for bankruptcy”.
Now that users had tasted the freedom and access of MP3 files on P2P platforms, they were not going back. Users wanted Access — the ability to play music ‘on demand’ without owning it.
This led to widespread piracy, and a corresponding loss of revenue for the music companies.
Listening to 🎵 Never Let Me down by Kanye West
A Vital Framework
Matthew Ball is a media strategist and former global Head of Strategy for Amazon Studios. Matthew posits that there are 3 different phases for competition for media services.
1st Phase — Enabling Access — The first way media companies compete is by enabling access to a content in a way that was not previously available. This is usually made possible by innovation.
2nd Phase — Content Differentiation — As competition quickly catches up with the access-related innovation, the next stage of competition is in providing differentiated/exclusive content.
3rd Phase — Platform — “Rather than being a single business delivering a show, or a product, a media company can compete as a platform, by letting users create content for them”.
Keep this framework in mind as we would continuously return to it throughout this series.
A Fundamental Change
For decades the music industry ‘operated in the same way’ — Cassettes replaced Vinyl, and CDS replaced cassettes. This was till the MP3 file type showed up. Music was no longer tied to a physical object. As an MP3 file, songs can be infinitely copied and shared.
This fundamentally changed the way users accessed music.
A change in access meant a change in how the company grows, and how it monetizes.
But with free access to every music, why should users pay? Thus began a search for the right business model to support this disruption in the music industry.
Conclusion
In this piece we examined the evolution of the music industry, the impact of Napster, and a key framework for analyzing media businesses. This framework can be applied to understand Netflix, Disney+, YouTube, and Spotify (which is the focus of this series).
In the next article, we would examine the story of Spotify’s first product — The Desktop App.
Listening to 🎵 Feeling by LADIPOE and Buju
Newsletter Update
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