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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:



    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

    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.
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)
Closed!
The 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
                       faltings@ymail.com
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

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How The Love of Music has changed our Business World

  • 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
  • 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)
  • 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
  • 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