Online music store

An online music store is an online business which sells audio files, usually music, on a per-song and/or subscription basis. It may be differentiated from music streaming services in that the music store offers the actual music file, while streaming services offer partial or full listening without actually owning the source file. However, music stores generally offer partial streaming previews, some even with full length.

History

The Internet's first free high fidelity online music archive of downloadable songs was the Internet Underground Music Archive. IUMA was started by Rob Lord, Jeff Patterson and Jon Luini from the University of California, Santa Cruz in 1993.

In 1998, Miami entrepreneur Ivan J. Parron founded and launched Ritmoteca.com as one of the early online music store business models. It allowed visitors to visually search through a jukebox-style catalog of over 300,000 songs organized by albums, listen to a 30 second music clip or music video and purchase the MP3 format download. It sold single songs for $0.99 and entire album downloads for $9.99. The company's revolutionary graphical user interface opened the door to signing distribution deals with Universal Music Group, Sony Music Entertainment, Bertelsmann Music Group and Warner Music Group. These agreements gave the company online digital distribution rights for artists such as U2, Madonna (entertainer), Britney Spears, Enrique Iglesias and Jay-Z. The company concept had originally been for the consumer to download an Mp3 and burn it onto a CD. However, early MP3 players from companies like Creative Labs began to appear.

The realization of the market for downloadable music grew widespread around the time of Napster, a music and file sharing service created by Shawn Fanning that made a major impact on the Internet scene during the year 2000. Some services have tethered downloads, meaning that playing songs requires an active membership.

The major record labels eventually decided to launch their own services, allowing them more direct control over costs. Sony Music Entertainment's service did not do as well as was hoped. Many consumers felt the service was difficult to navigate and use. Sony's pricing of US$3.50 per song track also discouraged many early adopters of the service. Furthermore, as MP3 Newswire pointed out in its review of the service, users were actually only renting the tracks for that $3.50. After a certain point the files expired and could not be played again without repurchase. The service quickly failed.

Undaunted, the record industry tried again. Universal Music Group and Sony Music Entertainment teamed up with a service called Duet, later renamed pressplay. EMI, AOL/Time Warner and Bertelsmann Music Group teamed up with MusicNet. Again, both services struggled, hampered by high prices and heavy limitations on how downloaded files could be used once paid for. In the end, consumers chose instead to download music using free file sharing programs, which many felt were more convenient and easier to use.

Non-major label services like eMusic, Cductive and Listen.com (now Rhapsody) sold the music of independent labels and artists to keep in the game, however digital audio download demand skyrocketed after the launch of the iTunes Store (then called iTunes Music Store) in January 2001 and the creation of portable music and digital audio players. This enabled music fans to take their music with them, wherever they went.

Amazon launched its MP3 service for the US in September 2007, expanding it gradually to most countries where Amazon operates

Current market

There are also an increasing amount of new services popping up that enable musicians to sell their music directly to fans without the need for a third party. These type of services usually use e-commerce enabled web widgets that embed into many types of web pages. This turns each web page into the musician's own online music store. Furthermore, recently, there has been a boom in "boutique" music stores that cater to specific audiences.

As of April 2008, the largest online music store is the iTunes Store, with around 80% of the market. On 3 April 2008, the iTunes Store surpassed Wal-Mart as the biggest music retailer in the United States, a milestone in the music industry as it was the first time in history that an online music retailer exceeded those of physical music formats.

Recently, online music storesâ€"especially iTunesâ€"have seen a marked increase in sales. Consumers are beginning to shift away from the purchase of compact discs (CD's) in favor of purchasing albums from online music stores, or more commonly, purchasing individual songs. The iTunes platform has been the main reason for this shift, as it originally sold every song in its library for 99 cents. Historically, albums would be sold for about five times the cost of a single, but iTunes was selling every song for a tenth of the price of an album. However, in order to increase album sales, iTunes has instituted a program titled "Complete My Album," which offers a discounted prices on the full album, if a consumer has already purchased one or more songs. Furthermore, with the arising popularity of Cyber Monday, online music stores have further gained ground over other music distribution sources.

Compared to file sharing

Much controversy surrounds this issue, so many or perhaps all of these points are disputed.

Advantages

• The sale of licensed content adheres to copyright law
• More consistent and higher-quality metadata, because the entering of the metadata is more centralized and done by groups with financial interests.
• Music download companies are more accountable to users than creators of file-sharing programs
• Centralized repository of music makes it easier to find the songs you want.
• Notably, Apple Computer CEO Steve Jobs claimed in his introduction of the iTunes Store that downloading from file-sharers is theoretically working for less than minimum wage - "By spending an hour of your time to save less than four dollars, he calculated, 'you're working for less than minimum wage!'".

Disadvantages

• Many major online music stores only offer music in one audio format.
• Most online music stores sell music encoded in a lossy file format, compared to an audio CD. For the most part, music that is sold in lossy MP3 format is not sold at higher bit rate encoding.
• Few, if any, online music stores offer music in lossless, metadata-enabled formats such as FLAC, but instead stick to WAVE or AIFF files in which no metadata can generally be embedded. In contrast, lossless rips of CDs in FLAC format are widely available on the web for illegal downloading.
• Some stores use Digital Rights Management technology, which limits the use of music files on certain devices. The restrictions vary between different services, and sometimes even between different songs from the same service.

Internet radio

Online music stores receive competition from online radio, as well as file sharing. Online radio is the free distribution of webcasts on the Internet via endless streaming. Listeners can create customizable "stations" based on a genre, artists, or song of their choice. Notable Internet Radio service providers are Pandora, Last FM and recently Spotify, with Pandora being the largest. Pandora holds 52% of the market share in Internet radio, with 60 million registered users and almost one billion stations from which users can choose.

Radiohead

On October 10, 2007, English rock band Radiohead released the album In Rainbows as a download. Listeners were allowed to purchase the album for whatever price they wanted to pay, legally allowing them to download the album for free. About one-third of people who downloaded the album paid nothing, with the average price paid being £4. After three months online the album was taken down by the band and physically released in the CD format.