Internet Marketing Case Study Comparison: Napster and Apple Itunes

Internet Marketing Case Study Comparison: Napster and Apple iTunes

Introduction to Napster

Napster was created by Shawn Fanning, a 19-year-old student at Northeastern University, in an attempt to help his friend find music downloads on the internet. Napster, an independent peer-to-peer (P2P) file sharing service, was initially launched between 1998 and 1999. Its P2P technology enabled participants to easily share their MP3 music files with other users. By February of 2001, “…Napster use peaked with 26.4 million users worldwide…” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 319).

However, the Napster file sharing service didn't last very long due to the “lack of control on the transfer of copyrighted material across its network” (Harris). Faced with copyright lawsuits in March of 2001, backed by the Recording Industry Association of America (RIAA), the original Napster was ordered to “cease trading of copyrighted material” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 320). Although Napster complied with this injunction, they offered to make a deal with the implicated record companies to pay their prior copyright fees and change Napster into a legal music subscription service. In 2002, when Napster filed for Chapter 11 bankruptcy, their assets were liquidated and purchased for $8 million by Bertelsmann AG, a German media company (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 320). Later, the Napster brand name was purchased by Roxio, Inc. and re-launched in 2003 for legal music downloads (Napster, Inc. History).

Napster as a Legitimate Internet Music Subscription Service

In November of 2002, Roxio Inc., a manufacturer of CD-creation and digital-media software, emerged the winner in bankruptcy court, paying $5 million for the Napster name and its intellectual property (Napster, Inc. History). With their acquisition of Napster and PressPlay, another digital music service created by Sony and Universal, Roxio began building an online music subscription service (Napster, Inc. History). In 2003 the new Napster was released as Napster 2.0 (Harris).

Apple iTunes, Napster’s Direct Competitor

SoundJam MP, a digital encoding program, was developed by Bill Kincaid and released by Robin Casady and Michael Greene in 1999 (Simon, 2009). In 2000, SoundJam MP was acquired by Apple and renamed iTunes. At Apple, SoundJam's user interface was restructured and released on January 9, 2001 as iTunes 1.0.

Today, iTunes is the most popular program for legal downloading, “with almost an 80% market share in the digital music industry” (TopTenReviews.com). This success is attributed to a combination of its immense advertising budget, its synergy with other Apple products, and the fact that it comes installed