Paul Kedrosky's Infectious Greed. A VC. MIT Enterprise Forum. Both Sides of The Table - M. Suster. Fred Cavazza. Clay Shirky. Fifteen years ago, a research group called The Fraunhofer Institute announced a new digital format for compressing movie files. This wasn’t a terribly momentous invention, but it did have one interesting side effect: Fraunhofer also had to figure out how to compress the soundtrack.
The result was the Motion Picture Experts Group Format 1, Audio Layer III , a format you know and love, though only by its acronym, MP3. The recording industry concluded this new audio format would be no threat, because quality mattered most. Who would listen to an MP3 when they could buy a better-sounding CD at the record store? Then Napster launched, and quickly became the fastest-growing piece of software in history. If Napster had only been about free access, control of legal distribution of music would then have returned the record labels. How did the recording industry win the battle but lose the war? The people in the music industry weren’t stupid, of course. But who faces that choice?