People Innovation Excellence

[Case Study] Copyrighted Digital Music Distribution Towards A Healthy Industry

Year: 2007

Case number: 107-1005-001

Case Author: Andreas Raharso; Rudi Chatab

Course Major: Marketing

Related Topics: Channel Strategy

Teaching Note Availability: –


Music Industry Architecture changed dramatically with the introduction of the MP3 format, which was started in April 1989 by Fraunhofer Institute when it patented the new audio format. Compressed audio could now be easily transferred from PSTN (Public Switch Telephone Network) through a dial-up connection.

CD Audio format and analog cassette were substituted by the MP3 audio format, which is approximately one-tenth of the size of a CD Audio file. The MP3 format can be stored in any available portable storage such as USB flash, burned to a blank CD, or even transferred to any MP3 player like iPod and smart phone.

However, one drawback is the MP3 audio format is so flexible then anyone can easily copy or duplicate the digital song, leading to copyright infringement. File sharing technology, namely peer-to-peer (client to client) such as NAPSTER is a nightmare to any recording label.

The two approaches for digital music distribution are copy protection in which DRM (digital right management) technology is used, and the copyright protection where accountability is used for each customer with the support of watermarking technology.

The issue of copyrighting in Indonesia’s music industry has been a long and forgone story. Based on 2004 data from The Age website, Indonesia ranked 4th in the illegal music industry market, worth as much as US$ 89 million (as much as 80% of the total music industry)


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