Napster, the first trailblazer in digital music offerings, merged with Rhapsody, now the largest on-demand music service in the US on December 1. In 1999, Napster launched as a peer-to-peer file-sharing program that quickly drew the ire of the music industry. The music industry was now faced with a profit-reducing supply and demand issue - consumers wanted to listen to just one to two tracks on a twenty track album, and were only willing to pay for those tracks. Over the next 12 years, Napster would be hit with multiple lawsuits and fall out of favor, eventually being replaced in the market by Apple's iTunes store with its $0.99 per song model (which would also change).
The merger between the two companies gives Rhapsody the Napster subscribers and other assets to boost its user base. Rhapsody currently has 800,000 subscribers who pay $10/month for unlimited music downloads. This horizontal integration has been typical of older technology firms that need to combine in the face of newer technology companies whose models (like Apple) and branding have earned them significant market share.
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