Music Digital Business Model Innovation

The advent of compress audio file format and networking technology has changes the landscape of music industry. Ever since the emergence of Napster, the free peer-to-peer file sharing network was perceived as a threat to major music labels. The decline of physical sales of CDs is ascribed to the increasing and uncontrollable number of unauthorized copies available by using P2P technologies. As a result, majors as well as industry associations took action to protect the recorded music industry though both legal and technological approaches, including lawsuits targeted at infringing companies and users of P2P networks, active lobby for reinforcement copyright law, and implementation of Digital Rights Management. However, the development of digital technology and broadband penetration also open a window of business opportunity, as it enables music to be consumed "anywhere, anytime". Digital music is on the rise even though it currently accounts only 10% of the total market. In the paper, I identify three main components in the whole system, ie organization, technology and market (consumers). By analyzing the interaction between the three parts, I find that the tradition business model is undergoing a dual transition in terms of content carrier and distribution process. Further I elaborate on the Apple iTunes store case study to show that legitimate online music market is forming and digital technologies facilitated new business model for online music market.