Online music distribution in post-Napster World
What are the competitive impacts of Napster on online distribution of music? How do they affect traditional companies?
Napster introduced a revolutionary change to the way music was distributed conventionally. Music companies worked with the artists to produce music. Thereafter they invested heavily into burning the music CD’s, marketing and advertising of the music and managing the distribution of the music to end customers via retailers. Retailers incurred staffing and real estate and costs. In contrast to this, Napster was able to bring together over 60 Million users who would share their collection of music to the remainder of the user base. In doing so, the reach and range of music distribution was significantly raised. Strong Community Feeling, word of mouth effect and High customer awareness led to low cost of marketing for Napster.
Technological improvements in improved broadband speed, internet penetration, and advent of newer portable devices further incentivised the users to use music sharing in comparison to buying the same music from retail stores. For the first time, music was practically available on demand to customer: as, when and where required for free. The online channel also introduced a possibility of attracting advertisement and other complimentary business models that would earn back revenue in comparison to a CD distribution model where there was no scope to make additional revenue by any other means.
Having said that, this was a model that was very easy to replicate and numerous new players emerged online providing similar services to customers. The model also infringed on the licensing agreements of music distribution as recording companies contested that music sharing accounted to music piracy. As customers came to expect music to be available for free, the online sharing portals were increasingly hard pressed to make viable revenue generating model.
This had far reaching detrimental impact on the traditional companies
Napster introduced a revolutionary change to the way music was distributed conventionally. Music companies worked with the artists to produce music. Thereafter they invested heavily into burning the music CD’s, marketing and advertising of the music and managing the distribution of the music to end customers via retailers. Retailers incurred staffing and real estate and costs. In contrast to this, Napster was able to bring together over 60 Million users who would share their collection of music to the remainder of the user base. In doing so, the reach and range of music distribution was significantly raised. Strong Community Feeling, word of mouth effect and High customer awareness led to low cost of marketing for Napster.
Technological improvements in improved broadband speed, internet penetration, and advent of newer portable devices further incentivised the users to use music sharing in comparison to buying the same music from retail stores. For the first time, music was practically available on demand to customer: as, when and where required for free. The online channel also introduced a possibility of attracting advertisement and other complimentary business models that would earn back revenue in comparison to a CD distribution model where there was no scope to make additional revenue by any other means.
Having said that, this was a model that was very easy to replicate and numerous new players emerged online providing similar services to customers. The model also infringed on the licensing agreements of music distribution as recording companies contested that music sharing accounted to music piracy. As customers came to expect music to be available for free, the online sharing portals were increasingly hard pressed to make viable revenue generating model.
This had far reaching detrimental impact on the traditional companies