Early years The first free,
high-fidelity online music archive of downloadable songs on the Internet was the
Internet Underground Music Archive (IUMA), which was started by Rob Lord, Jeff Patterson and Jon Luini from the
University of California, Santa Cruz in 1993.
Sony Music Entertainment Japan launched the first digital music store in Japan on 20 December 1999, entitled Bitmusic, which initially focused on
A-sides of singles released by Japanese domestic musicians. The realization of the market for downloadable music grew widespread with the development of
Napster, a music and
file sharing service created by
Shawn Fanning that made a major impact on the Internet scene in 2000. Some services have
tethered downloads, meaning that playing songs requires an active membership. Napster was founded as a pioneering
peer-to-peer (P2P) file sharing Internet service that emphasized sharing audio files, typically music, encoded in
MP3 format. The original company ran into legal difficulties over
copyright infringement, ceased operations and was eventually acquired by
Roxio. In its second incarnation Napster became an online music store until
Rhapsody acquired it from
Best Buy on 1 December 2011. Later companies and projects successfully followed its P2P file sharing example such as
Gnutella,
Freenet,
Kazaa, Bearshare, and many others. Some services, like
LimeWire,
Scour,
Grokster,
Madster, and
eDonkey2000, were brought down or changed due to similar circumstances. In 2000,
Factory Records entrepreneur
Tony Wilson and his business partners launched an early online music store, Music33, which sold MP3s for 33
pence per song. In the end, consumers chose instead to download music using illegal, free file sharing programs, which many consumers 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. The demand for
digital audio downloading skyrocketed after the launch of
Apple's iTunes Store (then called
iTunes Music Store) in April 2003 and the creation of portable music and
digital audio players such as the
iPod. These players enabled music fans to carry their music with them, wherever they went.
Amazon launched its
Amazon MP3 service for the US in September 2007, expanding it gradually to most countries where Amazon operates.
Rise An increasing number of new services appeared in the 2000s that enabled musicians to sell their music
directly to fans without an intermediary. These types 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, there had been a boom in "boutique" music stores that cater to specific audiences. 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 released on compact disc (CD). , the largest online music store was 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 (e.g.,
record shops selling CDs). In the early 2010s, online music stores—especially iTunes—experienced a marked increase in sales.
Consumer spending shifted away from the purchase of CDs 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 instituted "Complete My Album", which offered a discounted price on the full album when a consumer had already purchased one or more songs. Furthermore, with the rising popularity of
Cyber Monday, online music stores have further gained ground over other music distribution sources. iTunes rolled out an
Instant Gratification (
instant grat) service, in which some individual tracks or
bonus tracks were made available to customers who have pre-ordered albums. The instant-grat tracks have changed the criteria for the UK
Official Charts's singles. In 2013,
David Bowie's "
Where Are We Now?" was not allowed to chart because it was a pre-order for the album
The Next Day, but Official Charts later ruled that effective February 10, 2013, certain instant grats could be allowed to appear in the Top 40. Instant grats have also been offered on other online music stores including Amazon and Spotify. ==Compared to file sharing==