The Digital Music Distribution Revolution\' Fraunhofer and MP3 In 1991, Fraunhof

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The Digital Music Distribution Revolution' Fraunhofer and MP3 In 1991, Fraunhofer IIS of Germany developed an algorithm that would set in motion a revolution in how music was distributed, stored, and consumed. The algorithm (commonly referred to as a codec) allowed compression of digital audio to approximately one-tenth of its original size with minimal compromise in audible quality. The format also enabled song information such as the song title and artist to be embedded within the file. This format for compressed audio files was later dubbed MPEG-1 layer 3-a k.a. MP3. By 1995, software programs were available that enabled consumers to convert tracks from compact discs to MP3 files. This technology transformed how music could be manipulated-a song was now a file that could be kept on a hard drive, and the file was small enough to be shared over the Internet. The MP3 format became wildly popular by users sharing their music online, and software companies began releasing many variants of MP3 encoders (utilities that compress files into MP3s) and decoders (utilities that play back MP3s). Hardware manufacturers decided to cap- italize on this new trend and several hardware MP3 players began appearing on the market With the growing popularity of the file format, Fraunhofer was faced with a dilemma- should it enforce its patent on the use of the MP3 algorithm and attempt to collect royalties for its use, or should it allow users and software/hard- ware manufacturers to make free use of the algorithm, allowing the momentum of the format to build? If it was to limit the use of the algorithm, it faced the risk of established rivals such as Microsoft and Sony developing competing formats, yet if it allowed free use of the algorithm, it would be difficult to profit on its invention. Fraunhofer decided to pursue a partially open licensing approach, partnering with Thomson Multimedia as the exclusive licensing representative of MP3 patents in 1995.2 Thomson, in turn, negotiated agreements with several compa- nies including Apple, Adobe, Creative Labs, Microsoft, and many others. Such a broad base of MP3 licensees (100 by April 2001) provided consumers with easy

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The factors that determine the success of iPod & iTunes pertain to the appeal of product / service offerings of apple. One of the factors is coolness which appeals to the younger group of the target section. Emphasis must also be made on smart strategies adopted by apple which has been instrumental in developing strong relationships with record labels. These record labels have been identified as a cool factor and were able to see visible prospects. Other factors can include widely adopted & popular media formats, competitive pricing & possibility of licensing agreements with record labels by means of which a comprehensive solution could be provided wherein a one stop shopping portal would be offered to the consumers.

Currently playing of non – iTunes songs on iPod has been permitted by apple. The restriction can happen only when the users’ burn music to blank CD’s. In this case, non iTunes songs would not be written on storage media due to restrictions imposed by apple. But apple must permit iTunes songs to be played on non iTunes compatible MP3 devices. Currently the imposition of this decision would not be relevant as apple has already achieved 73% of the mp3 player’s market share due to relaxation on restrictions which were imposed on playability of the media formats.

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