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.
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The Internet's first free high fidelity online music archive of downloadable songs was the Internet Underground Music Archive.[1] IUMA was started by Rob Lord, Jeff Patterson and Jon Luini from the University of California, Santa Cruz in 1993[2]
In 1998, Miami entrepreneur Ivan J. Parron, president of successful web development company Internet Marketing Consultants, Inc., 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 music clip or music video and purchase the MP3 format download. It sold single songs for $.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) and the creation of portable music and digital audio players. This enabled music fans to take their music with them, wherever they went.
Recently, there has been a boom in "boutique" music stores that cater to specific audiences.
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 3rd 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.
A more recent development allows the instant downloading of radio-songs, as they are broadcast, straight to a mobile phone in less than 60 seconds. This technical innovation from Sweden, called DROPme, represents a different channel and consumer behavior relative to the online services.
As of April 2008, one of the largest online music service is iTunes Store with around 80% of the market.[3] On April 3, 2008 iTunes Store surpassed Wal-Mart as the biggest music retailer in the US, a milestone in the music industry as it is the first time in history that an online music retailer exceeds those of physical music formats.
Much controversy surrounds this issue, so many or perhaps all of these points are disputed.