18.4 MP3's diffusion depended on innovations in related areas
As well as being small and portable, MP3 devices have a number of additional competitive advantages. Digital compression allows the size of recordings to be significantly smaller without noticeable loss of sound quality so the capacity of portable devices can be much greater. Compatibility with computer systems means that music can be acquired from the internet or from a CD and easily manipulated into a sequence desired by the user.
Although MP3 players had been around for a number of years it wasn't until 1998 when Winamp was offered on the internet as a free music player that the MP3 craze started to take off. This was given a boost in 1999 by the appearance of a website called Napster. Napster offered file-sharing software that allowed individuals to access each other's hard drives and thereby exchange their digital music collections. This so-called peer-to-peer communication created a virtual community of music enthusiasts that grew rapidly.
In the past the copying of music with audio recorders wasn't highly visible and the recording technology could be used legitimately in ways that didn't involve any infringement of copyright. So the recording industry had no effective means of preventing infringement and settled for receiving a royalty from manufacturers of recording devices.
However with Napster using a public forum such as the internet to encourage the ‘theft’ of intellectual property the recording industry acted to have it shut down for encouraging copyright violation. Napster was ordered to cease operating in 2001 by a US court following a lawsuit brought by the Recording Industry Association of America. Napster was subsequently relaunched as a commercial MP3 provider but even before its closure it had become clear that there was a large market for MP3 audio. Users of file-sharing software quickly found alternative sources for swapping music and by 2003 unauthorised downloads of songs across the internet was estimated to be around 2 billion per month.
But the commercial sector had noticed the activities of these MP3 innovators and it wasn't long before a kind of official infrastructure started to appear. Apple launched its iTunes Music Store with 500 000 songs in 2003 in collaboration with the major music companies, mainly to boost the sales of its new iPod player (Figure 75). The availability of legitimate downloadable music helped the iPod to become the most popular electronic gadget bought on both sides of the Atlantic that Christmas. Other companies planned to follow Apple's example in 2004, including Sony, Microsoft, Coca-Cola and Wal-Mart. Like Apple these companies are not just interested in making money from selling music but also hope to use this innovation to sell others such as MP3 players, music editing software and so on. The diffusion of one innovation can help sell another.