They only achieved to reach 100.000 paying customers which represented revenue of $15 million in 2002. It is nothing compared to the millions of users who roam the web daily in search of new music content.
Nevertheless, rapidly the music industry understood that the Internet is not actually the enemy, but a new, alternative, means of music distribution and that this new vehicle will grow over time. Thus the need for each member of the industry to implement on the Internet and to make its artists available as the forecasts predict that the Internet will represent 20 percent of the music business by 2007. One of the major competitive advantages of the internet over the traditional music CD sales is the number of titles available. For example in a Virgin Megastore you can find around 100.000 titles. On the internet, even a small provider such as CDnow offers over 200.000 CDs. In consequence, several record labels have decided to offer their entire song catalog online. Finally, the music industry also understood that the price would be an issue especially because you can get all the songs for free.
This is the main reason why Sony and Universal Music for example, decided to lower their prices to 99 cents the single download. Even though, the market analysts remain skeptical regarding the users' shift from free to single fee music. However, the Recording Industry Association of America (RIAA) claims that with more awareness of the legal threats of downloading music without paying any right to either the artists or the labels and to the poor quality of pirated music files, the customers will ultimately chose the single fee option, especially since portable devices such as the Ipod are designed to be fully compatible to the online distribution and guarantee a high sound quality.
An evaluation of different positioning of existing players (competitors) within the marketplace
Today there are 4 major websites - each one of them connected to one or several of the "Big Five" of the music industry (five record labels which are the global giants in the music industry: Universal Music Group, Sony Music Entertainment, EMI Group, Warner Brothers Music, BMG Entertainment) - which are leading the market of downloadable music on the Internet: iTunes Music Store, MusicMatch, Napster and Rhapsoy.
Each one of these websites is associated to a larger company: iTunes with Apple, MusicMatch with Yahoo, Rhapsody with Real and Napster with the RIAA and offers to the customer an application that can be used on the pc to download and read the music files and this application can also be adapted to the portable device in order to directly download the music file "to go". This meaning that the competitive forces - Bargaining power of suppliers, Bargaining power of buyers, Barriers to entry, Threat of substitute, Rivalry among existing competitors - that were driving the traditional music industry have changed: bargaining power of suppliers decreased as it is now possible for the artists to go online with their own music without having to pass through the old channels of distributions, bargaining power of buyers has largely increased as it is possible for them to get music for free and thus the record companies have to align in order to offer good