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How the LOVE of MUSIC Has Changed Our BUSINESS WORLD Over the Last Decade, There Was a Giant Refresh in the Business World

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How the LOVE of MUSIC Has Changed Our BUSINESS WORLD Over the Last Decade, There Was a Giant Refresh in the Business World How the LOVE OF MUSIC has changed our BUSINESS WORLD Over the last decade, there was a Giant Refresh in the Business World: Many destroyed Value Chains Business Innovation everywhere Various new Markets with new Leaders Empowered & emancipated Consumers This is the story about how the love of music laid the Foundation for many Innovations in the past 12 years, turning the Business World upside down. Told by Thorsten Faltings @faltings Chapter 1 First there was MP3 From 1982 on the Fraunhofer Institute in Erlangen (Germany) was researching for a method to store digital audio data. Karlheinz Brandenburg developed the MP3 file format for audio data compression together with Gerhard Stoll (IRT- Germany), Yves- François Dehery (CCETT- France), Leon Van de Kerkhof (Philips Nederland) and James Johnston (AT & T-USA). In 1999, music fans mainly listened to prerecorded CDs on disc players. Portable MP3 players were still largely unknown. Only for some early adopters of tech-savvy music fans, the new audio format had already taken hold - the digital MP3. The small size of MP3 files enabled peer-to-peer file sharing of music ripped from CDs, which would have previously been nearly impossible. Chapter 2 The Foundation of Innovation Back in 1999 Shawn Fanning at the age of 19 was a student at Northeastern University in Boston when he had the idea for a computer program that would make sharing MP3s easier by allowing users to see a directory of songs stored on other members' computers. He called it Napster. After months writing the program, Fanning released it to a group of about 150 friends and internet relay chat acquaintances. Napster's fame spread by word of mouth, and it soon had 10,000 to 15,000 users. But once the program was featured on Cnet's Download.com site, the number of users soared into the millions. Reasons Why Napster was useful: It helped people discover new music Artists who were once unheard of gained recognition Acoustic and various versions of the same song were available The more peers online, the broader the spectrum of music and more. Napster gave everyone in the world a frictionless, convenient way to get content. "It probably was the single-most-important event as far as media consumption on the internet is concerned," (Phil Leigh, Internet Media Analyst) Chapter 3 Disrupting the status quo The Recording Industry Association of America (RIAA) denounced music "sharing" as equivalent to theft, and filed a lawsuit against Napster in November 1999 (and against thousands of customers over the coming years) for stealing music. Heavy metal band Metallica also filed a lawsuit against Napster in 2000. "With each project, we go through a grueling creative process to achieve music that we feel is representative of Metallica at that very moment in our lives, ..." said Metallica drummer Lars Ulrich in the accompanying press release. “What record companies don’t really understand is that Napster is just one illustration of the growing frustration over how much the record companies control what music people get to hear, ...“ „Why should the record company have such control over how he, the music lover, wants to experience the music? From the point of view of the real music lover, what’s currently going on can only be viewed as an exciting new development in the history of music.” (Prince 2000) QUESTION From the music lover‘s perspective was it really „free“ back in 1999/2000 to download music from Napster with a 28K Modem blocking the phone line, with some music files being corrupt, and no flat-fee and Broadband in sight? Apart from Prince one company understood that for many customers the main purpose of using Napster wasn‘t stealing music. The customers instead wanted a seamless solution to search for music, find, download and listen to it. And they were willing to pay for a successful solution. The name of the Company was Apple. “...The choice we‘ve made, was music. Now, why music? Well, we love music! And it is allways good if you do something you love.“ „More importantly, music is a part of everyone‘s life. Music has been around for ever. It will always be around. This is not a speculative market. (...) It‘s a very large target market all around the world. It knows no boundaries.“ (Steve Jobs during the Introduction of the first iPod 2001) „With the best-selling iPod, which debuted in 2001, and through the iTunes Music Store, which launched in 2003, Apple Inc. and CEO Steve Jobs capitalised on consumers' newfound freedom to control their media.“ (Mike McGuire, Gartner) TheClosed! RIAA achieved the final victory against Napster in July 2001 but couldn‘t stop the revolution. Chapter 4 Impact & Developments Impact #1 The Love of Music was Enforcing Technological Developments „Napster in its heyday also was cited as one reason consumers were getting high- speed internet access. Since then, continued broadband adoption rates have paved the way for the success of popular online video sites such as YouTube and Hulu.“ (Phil Leigh, Internet Media Analyst) Impact #2 The Love of Music was Laying the Foundation for Social Networks Analysts say today's internet landscape - with millions of consumers downloading songs from the iTunes Music Store, watching videos on YouTube or Hulu and networking on social media sites like Facebook - can be traced back to the day in early June of 1999 when Fanning made Napster available for wider distribution. Impact #3 The Love of Music was Stimulating Business Model Innovation Napster laid also the foundation to Business Model Innovation which are challenging old paradigms: Napster „gave“ something away for „Free“ which paved the road for various successful Business Models like „Freemium“ and the logic of a peer-to- peer network illustrated the possibility to deliver „Less of More“. The Idea later described as „The Long Tail“ Impact #4 The Love of Music was Influencing Copyright-licenses free of charge I'm not sure what influenced Lawrence Lessig, Hal Abelson, and Eric Eldred in 2001 to found the non-profit organization Creative Commons (CC), but if Napster hasn‘t played a role, I would wonder. Creative Commons was invented to create a more flexible copyright model, replacing "all rights reserved" with "some rights reserved". In 2008 Nine Inch Nails successfully released their latest Album „The Slip“ under a CC-Licence over the Internet. Also Wikipedia is one of the notable web-based projects using one of its licenses. And even this Presentation would not have been possible in this form without CC. Impact #5 The Love of Music was Disrupting the Traditional Media Industry "What did Napster give everyone in the world? It gave them a frictionless, convenient way to get content.“ „Napster helped change the mindset of a generation that now sees digital forms of all media, from music to newspapers, as more convenient.“ „You can argue that everything that happened since has been a reaction to Napster.“ (Mike McGuire, Gartner Industries' Media Team) Due to the Distribution Channel Internet, new forms of Copyright, continuously shrinking costs for Bandwidth, Computing Power and Memory Space the exclusive „right“ to produce and distribute content such as Information, Music and alike was taken from the traditional media irrevocably. Impact #6 The Love of Music was Inspiring New Markets and new Market Leaders Apple has understood best to grasp customer needs and anticipate social and technological developments. Apple performed a metamorphosis from a computer company into a media company now offering an attractive platform for digital content of all kind. Impact #7 The Love of Music also had an Impact on the New Marketing Reality „Marketing’s control over branding, messaging and positioning are in unprecedented decline as peer- to-peer, crowd sourced, and affinity-based community interactions gain increasing influence.“ (Accenture Interactive, Point Of View Series 2010) Chapter 5 The Result: A NEW BUSINESS WORLD Business Innovation is everywhere Customers are empowered Marketing became conversation Apple is melting the competition More Music is being produced than ever before! And traditional media companies are still caught in their old Business Models and Value Chains. #1 MP3 enabled peer-to-peer file sharing Recap of music #2 Napster gave everyone in the world a frictionless, convenient way to get content #3 This was disrupting the Music Industry and influencing: Technological Developments Social Networks Business Model Innovations Empowered Customers New Marketing Reality #4 The new Giant Apple was inspired #5 The exclusive „right“ to produce and distribute content was taken from traditional media irrevocably You've made it this far. Thanks for your attention and sharing! Thorsten Faltings Business Development Consultant Happy to help you through today's Marketing & Business Revolution Let‘s network! @faltings Also featured“on facebook.com/faltings SlideShare.net slideshare.net/faltings linkedin.com/in/faltings fa.ltings.de [email protected] Credits: Photos Websites 1. tfaltings.de - Pipi „P!nk“ Langstrumpf Flickr.com 2. tfaltings.de - Bowie in a Boombox Wikipedia.com 3. www.se2009.eu - Karlheinz Brandenburg - Photo: Margareta Stridh/Regeringskansliet Wired.com 4. Flickr/Shawn Fanning aka Napster/Joi Ito accenture.com 5. Flickr/Tower of Terror, aka CDs/William Hook 6. Flickr/Diamond Rio PMP300/nrkbeta rateyourmusic.com - A Timeline on 7. Flickr/IRC on my TRS-80/Blake Patterson Technology, Social, and Legal Battles 8. Wikipedia/Screenshot Napster in 2001 that have changed in how we 9. Wikipedia/Diagram Napster Unique Users receive and use music. 10. Flickr/Green Hell/Mark Wainwright 11. Flickr/Prince!/Scott Penner www.tech-faq.com - What Happened 12. Flickr/Even If/Fey Ilyas to Napster 13. Flickr/Money/Andrew Magill 14. www.wide-wallpaper.de/Apple Logo 15.
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