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1. How the
LOVE OF
MUSIC
has changed
our
BUSINESS
WORLD

2. 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

3. 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

4. Chapter 1
First there was MP3

5. From 1982 on the
Fraunhofer Institute
in Erlangen
(Germany) was
researching for a
method to store
digital audio data.

6. 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).

7. In 1999, music fans mainly listened to
prerecorded CDs on disc players.
Portable MP3 players were still largely unknown.

8. Only for some early adopters of tech-savvy music
fans, the new audio format had already taken
hold - the digital MP3.

9. The small size of MP3 files enabled peer-to-peer file
sharing of music ripped from CDs, which would have
previously been nearly impossible.

10. Chapter 2
The Foundation of Innovation

11. 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.

12. He called it Napster.

13. After months writing the program, Fanning released
it to a group of about 150 friends and internet relay
chat acquaintances.

14. 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.

15. Reasons Why Napster was useful:
It helped people discover new music
Ar tists 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.

16. Napster gave everyone in the world a
frictionless, convenient way to get content.

17. "It probably was the single-most-important event
as far as media consumption on the internet is
concerned,"
(Phil Leigh, Internet Media Analyst)

18. Chapter 3
Disrupting the status quo

19. 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.

20. 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.

21. “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)

22. 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?

23. Apart from Prince one company understood that for
many customers the main purpose of using Napster
wasn‘t stealing music.

24. The customers instead wanted a seamless solution
to search for music, find, download and listen to it.

25. And they were willing to pay for a successful solution.

26. The name of the Company was Apple.

27. “...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)

28. „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)

29. Closed!
The RIAA achieved the final victory against Napster
in July 2001 but couldn‘t stop the revolution.

30. Chapter 4
Impact & Developments

31. Impact #1
The Love of Music was Enforcing
Technological Developments

32. „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)

33. Impact #2
The Love of Music was Laying the
Foundation for Social Networks

34. 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.

35. Impact #3
The Love of Music was Stimulating
Business Model Innovation

36. 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“

37. Impact #4
The Love of Music was Influencing
Copyright-licenses free of charge

38. 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.

39. 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.

40. 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.

41. Impact #5
The Love of Music was Disrupting the
Traditional Media Industry

42. "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)

43. 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.

44. Impact #6
The Love of Music was Inspiring
New Markets and new Market Leaders

45. 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.

46. Impact #7
The Love of Music also had an Impact on the
New Marketing Reality

47. „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)

48. Chapter 5
The Result:
A NEW BUSINESS WORLD

49. Business Innovation is everywhere

50. Customers are empowered

51. Marketing became conversation

52. Apple is melting the competition

53. More Music is being produced than ever before!

54. And traditional media companies are still caught
in their old Business Models and Value Chains.

55. #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

56. 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
faltings@ymail.com

57. 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. Youtube/Steve Jobs presenting first iPod 2001/Screenshot
16. Flickr/Ciber Cafe/Lars Kristian lFem
17. Flickr/The new concept of friendship/Sylvain Latouche
18. Flickr/Lessig_CC/Simon Bierwald
19. Flickr/Creating Ghosts I-IV/Nine Inch Nails
20. Flickr/A smile a day keeps the pain and the doctor away/Zitona
21. Flickr/an old design 02/Hector
22. Flickr/Apple Retail Store Fifths Avenue/Víctor Martín
23. tfaltings.de - Lena Meyer-Landrut
24. Flickr/The rough strength & the law sense . ./Joël Evelyñ & François
25. Flickr/Retro Texture/Sarai