Grab More Market Share: How to Wrangle Business Away from Lazy Competitors

The Music Industry Ignored an Obvious Trend. Apple Didn't

A similar misstep was made by formerly dominant music companies like Sony, Universal, Columbia, DreamWorks, A&M records, and others. The big dogs of music were partying like it was 1999—especially in 1999. Traditional CD producers and manufacturers owned the best artists, the most comprehensive distribution channels, and the best promotional vehicles. Artists like Mariah Carey, Robbie Robertson, and Whitney Houston were signing record deals worth $80 million to $125 million dollars.

In June of that same year, 20-year-olds Shawn Fanning and Sean Parker were developing a file sharing software program that would allow college students to freely trade MP3 music files. They called it Napster. Fanning and Parker knew all too well that there is nothing more appealing than free music to a college student (unless it's free beer coupled with free music).

Napster, of course, went viral. At its peak, the tool had 25 million users sharing 80,000 million songs. Of course, the artists who wrote the music considered this so-called sharing to be stealing. Lawsuits were numerous and usually successful, since copyright violations had taken place. Despite appeals, the Ninth Circuit court shut Napster down in July 2001.

While Napster had lost the fight, it had unequivocally derailed—and therefore transformed—the music industry. Listening to music via an MP3 sounded just as good as the CD. Even better, it meant that listeners could arrange their ...