Fraunhofer Institute for Integrated Circuits IIS
Fraunhofer Institute for Integrated Circuits IIS

Marketing

In addition to being a unique technology, mp3 also owes its success to the marketing efforts of the development team that guided mp3 to market success against all odds. The developers never lost the conviction that mp3 would be the future – even at the beginning of the 1990s when success was yet to come and the consumer electronics industry was reluctant to give it a chance.

Harald Popp: “In the mid-90s, our vision was that everyone should be able to carry around their music collection with them on a small portable device, and be able to play it back at any time. This was at a time when many experts wouldn’t even give mp3 a second look: according to them, there would never be any portable device capable of accommodating the complex demands of mp3. Even so, our development of the technology had clearly shown us that mp3 and portable music players were the way forward.”

 

David vs. Goliath: The marketing of mp3

Fraunhofer IIS started selling professional equipment to radio stations while mp3 was still in development. Previously, stations had to rent expensive dedicated lines to broadcast audio recordings between studios. But thanks to the new equipment from Fraunhofer IIS, stations were now able for the first time to broadcast audio recordings in high quality using the standard ISDN telephone network – saving them money. Fraunhofer IIS, on the other hand, invested the revenue from equipment sales into the ongoing development of mp3.

Once the mp3 standard had been finalized, many of the big consumer electronics companies weren’t interested in the format, either because they didn’t believe that mp3 could be a success, or they had developed their own formats that they wanted to bring to market.

First prototype of an mp3 player (Solid State), © Fraunhofer IIS

Viral Marketing and the first prototype

From 1996 onwards, the Fraunhofer researchers targeted the Internet as their marketing platform where users could download the first version of the mp3 encoder software for a fee. This quickly led to the mass distribution of mp3.

This “viral marketing” was far from conventional: the Internet was still in its infancy and its sales potential was almost untapped. But already, the problems were the same as they are today. The plan was to make money by selling the mp3 software online. This this business model, however, rapidly sunk when an Australian student bought the software using a stolen credit card number and made it publicly available. Fraunhofer’s software business was destroyed at a stroke. Nevertheless, the mp3 software spread like wildfire across the internet.

It was also at this time that the spread of music encoded in mp3 took off, most often in breach of copyright. The Fraunhofer researchers made known their unreserved commitment to the protection of intellectual property and their opposition to music piracy. But they also continued to stress that in order to successfully distribute music in digital format via legal channels, these products and services had to be user friendly.

That’s why, in 1999, Fraunhofer IIS participated in the Secure Digital Music Initiative launched by the music industry to combat music piracy using copy protection systems.

The researchers also played an active role in the development of mp3 devices, teaming up with German company Micronas as early as 1994 to develop the first mp3 decoder chip and showcase the first prototype mp3 player. This prototype was the size of a cigarette packet and had one megabyte of storage space. The Fraunhofer developers presented the revolutionary device at many international trade shows, proving in the process that mp3 can be successfully incorporated into devices and is by no means too complex for a portable music player.

Finally, mp3 was a surefire success: all the content was there and portable music players a reality.

Harald Popp: “Our marketing strategy completely paid off: mp3 became a success even though few believed in it and big companies and radio stations attempted to push it out of the market. It soon became a global standard, and no manufacturer could afford to ignore it any longer. We’d made it!”