In 1917, Albert Einstein posited that light could be amplified and stimulated to form a powerful beam. In 1958, simultaneous with a pair of Soviet physicists, Columbia University scientists Drs. Arthur Schawlow and Charles H. Townes, who had earlier built the maser, a microwave amplifier, outlined the workings to the "laser" – Light Amplification by Stimulated Emission of Radiation. Two years later, Theodore Maiman actually built the first working laser. But it would be another 20 years before the laser was incorporated into a practical consumer product. By 1981, the vinyl LP was more than 30 years old and the phonograph more than 100 years old.

It was obvious that the public was ready for a new, technologically advanced audio format. Sony, Philips and PolyGram, led by Philips' researcher Kees Schouhammer Immink, collaborated on a new technology that offered unparalleled sound reproduction – the compact disc, or CD. Instead of mechanical analog recording, compact discs were digital, the music was encoded in binary code onto a five-inch disc covered with a protective clear plastic coating and read by a laser.

Unlike fragile vinyl records, the CD would not deteriorate with continued play, was less vulnerable to scratching and damage from incidental everyday handling, held twice as much music and didn't need to be flipped over. The CD was an immediate sensation when it was introduced to the public in 1982. In 1988, sales of CDs surpassed vinyl records, practically ending the turntable business, and then passed the pre-recorded cassette as the country's top format for prerecorded music in 1996.The popularity of the CD enabled manufacturers to sell a flurry of new stereo components that were tagged "digital ready." Many new receivers contained either optical or coaxial digital inputs – or both – and a number of companies experimented with digital speakers that did not require a connection to an amplifier.

But the CD could only play back digital music. Now accustomed to the perfection of digital music playback, consumers demanded the ability to record digitally as well. In 1986, Sony introduced digital audio tape (DAT), followed by MiniDisc in 1992. Philips countered that same year with digital compact cassette (DCC).
None of these formats caught on simply because none of them were CD. The recordable CD was unveiled in 1990, but the first consumer CD-R decks would not be introduced to the public until the mid-1990s.

Several companies have tried to improve the already high fidelity of the CD. In 1999, the multi-channel Super Audio CD and DVD-Audio formats were introduced.
The CD also was far more portable, and portable CD players soon replaced the personal cassette player as the best traveling music solution. But despite improvements in shock resistance, the personal CD player was still quite bulky and required a consumer to carry a large collection of CDs. The CD was far more practical and portable than vinyl records and had far more fidelity that the compact audio cassette, but it wasn't the perfect portable music solution. 

MP3
Once renting movies on videotape became common in the early 1980s, consumers started hungering for ways to replicate the movie experience in the home. To answer this demand, TV manufacturers began to produce TVs with larger screens. Until October 1986, when Mitsubishi became the first manufacturer to offer a 35-inch TV, the largest TV available was 27-inches. The biggest direct-view TV made was 40-inches. The problem was that a 40-inch screen was about as big as a CRT could get. In order to get a bigger picture, manufacturers began to experiment with projection and flat panel technology.

In the mid-1980s, Deutsche Telecom began development of ISDN deployment in Europe. The conglomerate asked Dieter Seitzer, a professor at Germany's Erlangen University and head of the Fraunhofer Institute for Integrated Circuits, to research 118 deploying high quality, low bit-rate audio coding over these digital lines. Seitzer appointed researcher Karlheinz Brandenburg, a specialist in mathematics and electronics who had been researching music compressing methods since 1977, to head the project, officially dubbed EUREKA Project EU147, Digital Audio Broadcasting (DAB).

By April 1989, Brandenburg's team, which included Bernhard Grill, Thomas Sporer, Bernd Kurten and Ernst Eberlein, had received a German patent on their new code, which was able to shrink a digital music file down to 12 times its original size without any appreciable sonic quality loss. Three years later, the algorithm was integrated into the new MPEG 1 specification and renamed MPEG 1 Audio Layer 3, shortened to MP3. In 1996, Fraunhofer was granted a U.S. patent.

The first software MP3 player, the AMP MP3 Playback Engine developed by Tomislav Uzelac of Advanced Multimedia Products, appeared in 1997. A year later, two university students, Justin Frankel and Dmitry Boldyrev, ported AMP to Windows and created Winamp for the Windows operating system. Winamp boosted the visibility of MP3 to mainstream PC users.

Following on the heels of MP3 came other music "codecs," short for COmpressor/DECompressor, such as Windows Media Audio (WMA), Advanced Audio Coding (AAC), Liquid Audio and MP3 Pro. Because MP3 was the first and most well known format, its name was co-opted to denote all compressed digital music files.

MP3 files became portable in 1998 with the introduction of the Rio 300 from Diamond Multimedia, which used a small removable flash memory card to store compressed music files. But the digital music revolutionary really took off in October 2001, when Apple introduced its stylish iPod MP3 player series, which included a model with a 20 GB hard drive – enough to hold nearly 5000 songs – in a player smaller than a deck of playing cards. Along with the iPod was Apple's iTunes online music store, which offered individual song downloads for 99 cents each or entire albums at $9.99. Most players today use either a removable flash memory card that can store up to around 500 songs, or a miniature hard drive that can store upwards of 20,000 tracks.

A small record label, Sub Pop Records, was the first to post downloadable MP3 music files in February 1999. Later that year, an 18-year-old Northeastern University dropout named Shawn Fanning created a program that allowed consumers to trade MP3 files stored on their own local hard drives with other music files stored on other consumers' hard drives. This file swapping program was called Napster, a nickname Fanning got because of the way he tucked his nappy hair under a baseball cap.

Distributed on the Web, Napster was soon attracting millions of users around the world and got Fanning on the cover of several national magazines, all to the consternation of the music industry. While consumers had traded audio cassette copies of albums or CDs for years, the volume was not high enough to impact sales. But record companies attributed dipping CD sales to the millions of tracks being traded on Napster and its ilk every hour, and believed that file swapping was theft of copyrighted material. File swappers and even a few artists believed that they were creating audiences for new music that might not have otherwise existed and making available recordings unavailable on CD.

In December 1999, the Recording Industry Association of America (RIAA) sued Napster for copyright infringement. In February 2001, Napster was forced to discontinue distribution of copyrighted files and six months later shut down. But in the meantime dozens of other so-called Peer-to-Peer (P2P) music file sharing sites had popped up such as Grokster, Kazaa and Gnutella. The RIAA then went after the music swappers themselves. In April 2003, the RIAA successfully sued college students running campus file swapping programs, and in September 2003, it brought the first of a wave of suits against 261 alleged file swappers.

The campaign of the record industry to stamp out music file sharing has not dampened consumer enthusiasm for small portable MP3 players, which allows music lovers to carry practically their entire music collection around with them. MP3 players with even more copious 40-GB drives began appearing in 2003, along with a growing number of legal online music services owned by equipment makers, record labels and software programmers that soon could cause the disappearance of the local record store. Even Napster resurfaced with a more traditional – and legal – music download site in 2004, which featured a new subscription-based model in addition to traditional pay-per-download service.

To battle the emerging digital download market and to make CDs a more desirable alternative, several major record labels launched the Dual Disc format, essentially a CD and DVD combined. The CD side included both the standard digital version of the record along with pre-ripped and copy-protected compressed tracks, while the DVD side contained music videos and other bonus features. Used in a computer DVD drive, a consumer also gained access to the artist's website and updated information.

Several companies also have begun introducing so-called home audio servers, components equipped with a CD and/or DVD player and a large hard disk drive designed to store thousands of compressed digital music files. These home audio servers are designed not only to store entire collections of music, but to distribute the music through home networks, both wired and wireless, to multiple locations around a home and, via the Internet, to other locations.