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The Fish-tank Phenomenon: The Power of Creative Individuals in Music and Wagering

8 September, 2015 - 14:12

While there are a lot of junk as well as stupid schemes placed on the internet, there are also an incredible number of good ideas developed by individuals (often a teenager in their bedroom) that can now finally see the light of day through this medium. In the latter half of 1998, the ground shifted in the music business when MP3 arrived on the Web. MP3 is short for Moving Picture Experts Group Audio Layer III or “MPEG3”, and is a compression format that shrinks audio files with only a small sacrifice in sound quality. MP3 files can be compressed at different rates, but the more they are scrunched, the worse the sound quality. A standard MP3 compression is at a 10:1 ratio, and yields a file that is about 4 MB for a three-minute track. MP3 started life in the mid-1980s, at the Fraunhofer Institut in Erlangen, Germany, which began work on a high quality, low bit-rate audio coding with the help of Dieter Seitzer, a professor at the University of Erlangen. In 1989, the Fraunhofer Institut was granted a patent for MP3 in Germany and a few years later it was submitted to the International Standards Organization (ISO).

In 1997, a developer at Advanced Multimedia Products created the AMP MP3 Playback Engine (essentially a piece of software that plays MP3 recordings), which is regarded as the first serious MP3 player. Shortly after the AMP engine was made available on the Internet, two university students, Justin Frankel and Dmitry Boldyrev, took the AMP engine, added a Windows interface and dubbed it "Winamp." In 1998, when Winamp was offered up as a free music player, the MP3 craze began: Music enthusiasts all over the world started MP3 hubs, offering copyrighted music for free. Before long, other programmers also began to create a whole toolset for MP3 enthusiasts. Search engines made it even easier to find the specific MP3 files people wanted, and portable Walkman-size players like the Rio let them take MP3 tracks on the road after first downloading them on to a computer hard drive and then transferring them across.

When Napster became available on the Internet in 1999, it allowed anyone with a connection to find and download just about any type of popular music they wanted, in minutes. By connecting users to other users' hard drives, Napster created a virtual community of music enthusiasts that has grown at an astonishing pace. Developed by a twenty-year old student named Sean Fanning, Napster boasted some twenty million members throughout the world by the end of 2000.

The common thread through all of the above online music history is the absence of any major, for-profit recording company in any of the technological developments. Indeed, the only role played by any of the incumbents was that of stifling, or attempting to stifle, progress. The major innovations came from academic institutions, students, and penniless enthusiasts whose only real resources were talent, persistence, creativity…..and an internet connection. Sean Fanning was a young, not very wealthy student, and not the research department of a major recording company. A firm’s next serious competitor might not be a multinational conglomerate, but an individual operating from home. This individual now has a unique mechanism for bringing good ideas to market.

Similarly, Andrew Black invented Betfair and changed sport wagering forever. He never worked for a government totalisator or pari-mutuel agency, nor was he availed of the significant resources of one of the major traditional bookmaking firms. He was simply a very talented individual, frustrated that trying to pick a winner was difficult enough without having the odds truly stacked against the player. There had to be a better way – and that way was through the internet. Neither Sean Fanning nor Andre Black had previous experience of the industries that they changed forever, and neither had worked for any of the established incumbents previously. The incumbents’ only action was to try to smother the innovations that they saw as threats, rather than opportunities at best, or at worst, the writing on the wall. Recent evidence is that their attempts at suppression have failed miserably.