Digital Downloads: Not Just Competing With Free 3 Sep 2010, 7:30 pm

In general, the standard iTunes and Amazon MP3 album prices are less than what you'd pay for physical CDs at most retailers, with the exception of "loss leader" pricing at big box stores. And eMusic prices are even lower. But as many have noted, your best bet for picking up cheap digital music is used CDs.

I was reminded of this when my friend Michael posted a picture and list on Facebook of his sweet haul from Reckless Records in Chicago:

The Assembly - Paranoia Will Destroy Ya $.49
Catherine Wheel - Chrome $.49
Jimi Hendrix - The Ultimate Experience $1.99
Blur - Think Tank $.99
The Juliana Hatfield Three - Become What You Are $.49
S.O.D. - Speak English Or Die $1.99
The Smoking Popes - Get Fired $1.99
The Patsy Cline Story - $1.99
Van Halen - Best of Volume 1 $.99
Black Sabbath - Paranoid $1.99
Kiss - Destroyer $1.99
The White Stripes - Elephant $1.99
Bloc Party - Silent Alarm $1.99
Beck - Sea Change $1.99
Mellow - Another Mellow Spring $.49
Office - A Night At the Ritz - $.99
Go Go's - Greatest $.49
Fleetwood Mac - Greatest Hits $1.99
R.E.M. - Dead Letter Office $.99
Hole - Live Through This $.99
Primal Scream - Give Out But Don't Give Up $.99
Blur - 13 $.99
Matthew Sweet - In Reverse $.99

Sure, it's crapshoot as to what you'll discover on any given visit to a used CD store (though you can always find this Jesus Jones release), but my guess is that almost all of these titles would reach the top of the Amazon MP3 chart if offered as daily specials at the above prices.

tags: digital music used CDs iTunes eMusic Amazon MP3

Words and Music: Why Are Digital Books Already More Popular Than Digital Music Downloads? 22 Jul 2010, 11:45 pm

Amazon.com, of course, doesn't represent the entire book market. Yet Monday's Amazon press release, which revealed that the company now sells 143 Kindle books for every 100 hardcover books sold, makes it clear that consumers are embracing digital books at a much faster rate than digital music.

So why has a book format introduced years after commercial digital music downloads already gained greater commercial acceptance? Some quick thoughts about the possible reasons why:

1. Existing Content
If you buy an iPod, you need something to put on it. Most music fans already own CDs that can be easily converted to mp3s. (We'll get to free/pirated music in a bit.) But you can't readily transfer your existing books to an e-reader. And even if you could, most people don't re-read their favorite books in the same way they listen to their favorite music over and over again. Frequent readers always need fresh content.

2. The Flexibility of CDs
When it comes to purchasing new music, the main advantage to buying digital downloads is the immediate delivery. However, if you're not in a hurry, purchasing a physical CD gives you much more flexibility. It delivers higher-quality sound files that can be converted into the file format of your choice, you can play the disc itself, and it serves as a back-up copy of the original WAV files.

3. The Unbundling Effect
The introduction of commercial digital downloads was more than a new medium/delivery format. It also meant that consumers were no longer forced to purchase an entire album if they only wanted one or two songs from that album. Perhaps the cherry picking of favorite tracks has contributed to modest growth of digital music sales relative to the total amount of music purchased on CD. With e-books, consumers don't have the option of cherry picking, and it seems unlikely that they'd do so, even if e-books could be purchased by the chapter. (With the exception of textbooks, as a comment to this post noted.)

4. Digital Books Are Relatively Cheaper Than Digital Albums?
Scratch that one. I started to write that unlike the prices of digital albums relative to CDs, digital books are almost always considerably cheaper than physical books. But a quick glance at Amazon's Kindle chart reveals that many of the bestselling digital books (like this one) are actually more expensive than the paperback or even hardback versions. This, however, might be a recent change -- before Amazon was forced to accept the agency model, it was selling many digital books as $9.99 loss leaders.

5. More Options for Free Music/Demographics
Two thoughts here: While there are hundreds of thousands of free, legal e-book titles, new releases are probably harder on P2P networks than new music.

There's also a demographic angle to consider. My guess is that, on average, the biggest consumers of music are younger than the biggest consumers of books. And, on average, younger consumers have less money, are more tech savvy, and are less likely to have qualms about not paying for copyrighted material. Older consumers, on the other hand, have more disposable income, are less tech savvy, and might be uncomfortable downloading pirated e-books, even if they were as readily available as music. Please don't get me wrong -- these are all broad generalizations. I'm not saying that all young people refuse to pay for music or that anyone over 40 doesn't have the know-how to download from a P2P network (or that young people don't read and older people don't listen to a lot of music). But if these general trends are true, they might have contributed to the faster growth of the digital book market.

What did I miss? If you have any other ideas or thoughts about why the switch to digital books is progressing faster than the changeover from CDs to music downloads, please leave a comment.

related: Digital Books vs. Digital Music

tags: digital music digital books e-books Amazon.com AMZN Kindle

Friday Fun: The Layaways and The Man From U.N.C.L.E. 9 Jul 2010, 10:02 pm

My band the Layaways has never released a video, but thanks to Rumble Fish music licensing, which provides content for YouTube's AudioSwap functionality, there are currently several dozen videos with our music on YouTube. We receive a fraction of a cent for each play, though it hasn't been much of a moneymaker so far. Our quarterly royalty checks have all been for less than $10, but you never know...

This is my favorite of the lot: Someone edited together a bunch of scenes from The Man From U.N.C.L.E. to highlight the, uh, romantic tension between the two leads, Robert Vaughn and David McCallum. He used "I Got You Babe" by Sonny and Cher as the soundtrack, but after receiving a take-down notice from Warner Music, substituted "Silence" by the Layaways. It's somewhat random, but in quite a few places the lyrics actually seem to work with the video:



tags: digital music YouTube The Man From U.N.C.L.E The Layaways

Monday Odds and Ends 28 Jun 2010, 7:55 pm

This year's Bandwidth Conference is scheduled for August 19th and 20th in San Francisco.

A couple of new music listening tools: ExtensionFM is a browser extension for Chrome that creates a library of the mp3s on the pages you visit. And Playlistify creates and generates playlists for Spotify.

Finally, if you missed it, last month's Fingertips commentary on free music is definitely worth a read.

tags: digital music free music

C'est Lala Vie 17 Jun 2010, 8:24 pm

It's been two and a half weeks since Apple shuttered Lala.com and it's not an exaggeration to say that I miss the site every day. The "hear any song once for free" model was just about perfect. I'd stream albums while reading music reviews at Pitchfork, listen to tracks before deciding how to spend my monthly allotment of eMusic downloads, and it was always the first place I'd go to listen to a new (or old) album that I read about it. There are, of course, other options for streaming music online, but everything I tried in the past was inferior to the Lala experience. I had no luck with my Napster subscription (just couldn't get the music player to work on my PC), though I suppose I should try a Rhapsody or MOG subscription.

The question now is how much of Lala's functionality will Apple incorporate into iTunes. While much of the recent speculation has been about the cloud/digital locker feature, a digital locker functionality seems unlikely. Unless Apple follows the Google approach of pulling data from users' hard drives, the major label groups are likely to balk at cloud-based iTunes libraries. (See EMI's long-term harassment of Michael Robertson over digital lockers.) But what I'd most like to see in iTunes is some sort of music streaming capability, if only the "one-time free stream" option that Lala provided.

Historically, the economics have been challenging for streaming services. For paid subscription services, which can offer reasonable compensation (around one cent) to labels for each stream, the difficulty has been growing their subscriber bases. While millions of U.S. households are willing to pay for $30 or more each month for cable/satellite service, only a tiny percentage of the country appears to be willing to spend a smaller amount for music access. And the problem with free, ad-supported streams is that ad rates simply aren't high enough to allow the streaming services to offer reasonable payments to labels for each stream, let alone generate enough profit to support and grow the company. (See this recent post on Spotify payouts.)

Apple, however, should it choose to offer some sort of free streams via iTunes, has one major advantage over any other streaming music provider: It doesn't have to make money from it. Apple has famously claimed that it essentially breaks even on music sales from the iTunes store. Yet given how many high-margin iPods and iPhones Apples sells, it could even stand to lose money on iTunes music sales, provided that they encourage the purchase of Apple hardware. Ditto for free streams.

The numbers here are a little different, of course, as a one cent or 1/2 cent payout per stream means each song played is a net negative for Apple. But if a Lala-style "stream any song once" option encouraged additional iTunes music sales or iPod purchases, it could make sense for Apple.

Thank you to my friend Jeff Kelley for the title post!

tags: digital music Apple AAPL streaming music iTunes Lala Spotify

eMusic's Per-Song Payout for Q1 2010 3 Jun 2010, 7:58 pm

After major changes to its subscription plans in the summer of 2009, the per-download payout from eMusic to the labels in its catalog continues to grow. For the first quarter of 2010, the payout rate for U.S. downloads was 40 cents, a slight increase over the Q4 2009 payout of 39 cents. That amount, however, is more than a 30% increase over the payout rate for the same quarter in 2009.

For comparison, here are the payout rates for the past five quarters:

Q1 2009 30.5 cents
Q2 2009 33.4 cents
Q3 2009 34.2 cents
Q4 2009 39 cents
Q1 2010 40 cents

A quick primer for those unfamiliar with the eMusic model: Rather than paying a fixed per-song amount like iTunes and Amazon MP3, eMusic shares 60% of its subscriber revenue, minus certain deductions, with the labels in its catalog. That shared revenue translates into a per-track amount, based on total subscriber download activity for the quarter.

related: eMusic's Per-Song Payout for Q4 2009, eMusic's Per-Song Payout for Q3 2009, eMusic's Per-Song Payout for Q2 2009, Sony and eMusic: Why the Per-Track Label Payout Might Not Change

tags: digital music eMusic eMusic royalty iTunes

Jane Siberry Ditches "Pay What You Want" for "Pay It Forward" 20 May 2010, 8:59 pm

A few years ago, Jane Siberry was averaging $1.14 a track for direct downloads to fans using a "pay what you want" model. But citing frustrations with PayPal, she has switched to a "pay it forward" approach (with an option to mail in a check, if you really want to):

i have let paypal go. old-fashioned wheezy paranoid beast. and i can't find a simple enough new solution. so, all music is pay-it-forward. see 'music' link at top right of this page.

Her entire catalog is now available as free mp3 or AIFF downloads. (Via Unclutterer.)

tags: digital music Jane Siberry free music

Google Music Search Not Waiting for 5/31 10 May 2010, 5:09 pm

Apple will shutter the Lala streaming service on 5/31, but Google's music search feature has already replaced Lala with iLike/MySpace Music for streaming an act's top songs:


One major difference -- the Lala embeds usually featured the full track (for the first listen, at least), while the iLike application doesn't always stream the complete song. In some cases, you'll only hear the first 30 seconds or 1:30 of the song. A link to Lala remains, along with links to Rhapsody and Pandora.

tags: digital music Google music search GOOG Lala Apple AAPL Rhapsody Pandora

Bye Bye Lala 30 Apr 2010, 1:55 pm

Apple will pull the plug on the Lala music streaming service on May 31st. From an e-mail sent this morning to Lala members:

The Lala service will be shut down on May 31st.

In appreciation of your support over the last five years, you will receive a credit in the amount of your Lala web song purchases for use on Apple's iTunes Store. If you purchased and downloaded mp3 songs from Lala, those songs will continue to play as part of your local music library.

Remaining wallet balances and unredeemed gift cards will be converted to iTunes Store credit (or can be refunded upon request). Gift cards can be redeemed on Lala until May 31st.

tags: digital music Apple AAPL Lala

Some Quick Thoughts on the Quirk Presentation 28 Apr 2010, 10:47 pm

Tim Quirk's presentation on the Walkman to the iPod and how portability and infinite storage changed the way we listen to music is a great read. And I completely agree that it's a shame that traditional radio formats are so narrow. It's hard to discover great new music if everything you listen to comes from the same genre or subgenre.

That said, I can't help thinking that his interpretation of the musical open-mindedness of Guns N' Roses fans is a little too generous. Quirk notes that Big Champagne data on P2P traffic reveals some surprising diversity in the music libraries of GNR fans -- more than a third of those listeners also have tracks from Tim McGraw, Kenny Chesney, and Garth Brooks. Quirk asks the rhetorical question, how many radio stations play all four of these artists?

After reading Quirk's post, Glenn Peoples at Billboard conducted a quick experiment and reported that the first three subsequent artists played on a Pandora Guns N' Roses station were Bon Jovi, AC/DC, and Metallica, even though, based on the Big Champagne data, Eminem and Black Eyed Peas had much higher GNR correlations those rock artists (and the three country acts above). Earlier today, I did the same thing on Last.fm and the first five subsequent artists were Aerosmith, Izzy Stradlin, Skid Row, Sebastian Bach, and Gilby Clarke.

So are GNR fans ill served by Pandora and Last.fm? The underlying methodologies for these two services are a very different, but it's probably safe to say that neither is likely to serve up tracks by Tim McGraw or Black Eyed Peas on a Guns N' Roses station. Yet even though it'd be wonderful if streaming services pushed the boundaries more on musical genres, I'd argue that the majority of those GNR listeners might not want to hear those artists.

Please don't get me wrong -- I'm not arguing for musical conservatism, I think almost every music fan could stand to expand his or her listening range. But a listener who likes Guns N' Roses enough to launch a GNR station on Pandora or Last.fm is no doubt a completely different listener than someone who just happens to have a GNR track in his or her library. (Especially when you consider that the tracks arrived there via a P2P service.) The former listener is a somewhat dedicated fan, the latter might just be someone who has fond memories of "Sweet Child O' Mine" and other 80s music and nabbed the track from a P2P service, but doesn't have much interest in the rest of the band's catalog.

Despite the correlations reported by Big Champagne, none of Last.fm's top 250 similar artists to Guns N' Roses (as determined by actual tracks played by listeners) are outside of the hard rock, metal, or rock genres. While I truly believe that fans of one genre like and appreciate great songs from completely different genres, unless the Big Champagne data shows a similar overlap in the number of listens, as opposed to a mere shared presence on a hard drive, it doesn't indicate that any given Guns N' Roses fan is open to hearing Black Eyed Peas, Eminem, or Kenny Chesney.

tags: digital music Big Champagne Pandora Last.fm Tim Quirk

Monday Odds and Ends 26 Apr 2010, 4:31 pm

CD Baby will now distribute a digital single for $9, with no ongoing annual fee. No specific mention was made of an ongoing commission, but I'm assuming it's the same 9% charged for digital sales of digital albums and individual songs from those albums.

Last week's New Yorker had a great piece on the iPad and the Kindle, and the economics of digital books. Also from that issue, Least Common Complaints About the New iPad.

From Sunday's NY Times Magazine piece on the National:

"The corporate model has collapsed, but small-label bands playing to 200 people a night can pay the bills and raise a family on it. That's why we’ll have better and more interesting innovations."

You can stream the band's new album from the NY Times article and a free download of "Bloodbuzz Ohio" is available here.

Senzoo is a new widget for soliciting online donations.

The transcript of Apple's earnings call from last week.

And BusinessWeek (or "Bloomberg Businessweek" as it's now billed) has a piece on Apple's app strategy:

For Apple, it's a Wintel-like cycle in which new Apple hardware drives the creation and purchase of new apps. Except it's better than Wintel; the combination of Intel processor running Microsoft's Windows operating system never really managed to leap from PCs to other devices. Apple has constructed its empire so that almost anything you buy on iTunes -- and Apple has your credit-card information with your first purchase -- can run on any future iProduct. "The laws of nature say that [Apple is] making too much damn money, that this has to be unsustainable," says David J. Eiswert, who runs T. Rowe Price's (TROW) $312 million Global Technology Fund (PRGTX). "But who is going to stop them?"

tags: digital music CD Baby Apple AAPL

Our First Spotify Payouts 21 Apr 2010, 7:27 pm

As the old saying goes, if you lose money on each sale, you can make up for it with volume. I thought of it when the first payouts for Spotify streams showed up in our CD Baby account last week. (CD Baby began delivering content to Spotify in early 2009.)

The payments, of course, aren't negative amounts. Yet the amounts for individual streams are small enough that it will take an extremely large volume to add up to any significant amount.

For August and September of 2009, we received per-stream payouts of .02 cents, .03 cents, .06 cents, and -- my favorite -- an amount so small that it apparently rounds to .000000 cents! These numbers are all after CD Baby's 9% commission, so the actual payouts from Spotify were approximately .022 cents, .033 cents, and .066 cents per stream. I'm assuming that the different amounts represent streams by different Spotify user types (free, day pass, and premium) and/or regions.

A couple years ago, Glenn Peoples discussed the disparity between per-stream payouts and those for actual digital downloads, noting that it takes 70 plays at a one-cent payout to equal the revenue generated by a single paid download. At the .022 cent rate, the disparity is much greater -- it would require 3,500 Spotify plays to generate the same payout as that from a 99-cent iTunes download.

So when Spotify listeners (both free and subscription) use the service as a direct substitute for the purchase of music, then it likely has negative consequences for music labels. On the other hand, when services like Spotify steer some listeners away from P2P downloads, it's a positive for labels, even if the amounts are small.

Finally, you can make an argument in favor of the streaming services when they're used to stream music that the listener already owns. That is, once you buy a song (on CD or as a digital download) that's the end of the revenue stream for the label and artist, no matter how many times you listen to it. But if you listen to a track or album you already own via a streaming service, you make an additional micro-payment to the artist and label with each play.

tags: digital music Spotify streaming royalties

A Long Tail Experiment 19 Apr 2010, 9:59 pm

Last spring, some research by Will Page (PDF), the in-house economist for PRS (the U.K. equivalent of BMI and ASCAP), received a ton of coverage. Page believed his numbers refuted the "Long Tail" theory, at least for music consumption. The sales figures for the U.K. iTunes store revealed that -- unlike the trends observed by Chris Anderson of the listening habits of Rhapsody subscribers -- the majority of tracks in the iTunes catalog had never been purchased. At the time, arguments were made about the shape of the sales curve and whether or not Page was using the same definitions as Anderson. (Page seemed to imply that the theory predicted that 80% of sales would come from the tail, while Anderson gave a much smaller percentage.) These details aside, the fact remains that Page's research revealed that most digital tracks weren't purchased, a seeming contradiction of the main music example in Anderson's original 2004 Wired article and his subsequent book.

Yet it's not difficult to reconcile these results -- Page and Anderson might both be right. Keep in mind that the music example Anderson gave in the original 2004 Wired article was based on data from a Rhapsody catalog that included less than 1 million tracks. Page examined sales from a catalog of more than 10 million tracks, so it's really no surprise that he saw a much larger number of "dormant" tracks.

The other thing to consider is that there's probably a huge difference in usage within a subscription service vs. sales within a download store. If you're a subscriber to Rhapsody, Napster, or Netflix, there's no additional cost associated with any individual song or film you choose to consume. Indeed, Anderson suggests so in a response to the initial reports of the Page research:

It could be that the pay-per-track model discourages risk-taking and exploration of new music, which is not an issue with Rhapsody, which uses an all-you-can-eat subscription model.

While eMusic phased out the "all you can eat" component of its subscription service years ago, the behavior its subscribers seems closer to that described by Anderson than that observed by Page. An early 2009 press release, which referred to the PRS study, touted the fact that approximately 75% of the eMusic catalog was downloaded at least once in the prior year.

Although tangential to the dormant track conundrum, another issue with the "Long Tail" theory for music sales is that it has too frequently been misinterpreted to imply that artists could somehow expect to earn money from "Long Tail" sales. Anderson, of course, never made that claim -- he suggested that aggregators of content (retailers and service providers such as Amazon.com, iTunes, eMusic, Netflix, etc.) were the ones who would profit from the Long Tail phenomenon, not the individual creators of that content. As I've noted here before, a single play by a Rhapsody subscriber might be enough to include the track in the Long Tail of music consumption, but that single play results in a payment of approximately one cent, hardly enough to think of as actual income.

Back in August, I started a Long Tail experiment of sorts. My current band, the Layaways, is something of a Long Tail act, in that while relatively unknown, we've consistently sold something, if only a few downloads, every month for the past five years. But I was curious to see what might happen with a music act without any Internet footprint, a defunct band with no website and no material currently for sale in any form -- CD, mp3, etc.

So I uploaded a single song from one of my very first bands to Last.fm, making it available for streaming and free download. This group existed in the dark ages before mp3s and music blogs, and we released three "cassette only" albums (we were too broke to release anything on CD or vinyl!). While we sold a few hundred cassettes at gigs and local record stores, as far I could tell, nothing from them had ever made it online in any form. I tagged the track a few times with appropriate descriptions and waited to see what happened.

Nearly eight months later, 30 listeners have heard the song 50 times. The most-frequent listener of the song has played it 10 times and it has been added to one playlist. (I'm not disclosing any details about the song or linking to here because I'd like to keep the experiment running.) Last.fm doesn't supply stats on how many times a free track has been downloaded, so I don't know how many of those listeners liked the song enough to acquire a free mp3 version of it.

I'm not sure if this result proves anything about the Long Tail -- the only thing I can safely say is that if something is uploaded to Last.fm and tagged, someone will hear it. Perhaps this is simply a testament to the popularity of Last.fm and how its tag-based streaming radio service works. The song I uploaded isn't available for sale anywhere, so I don't know if anyone would have actually paid for it. Besides, given how subjective musical tastes are, it's difficult to read that much into what happened with a single song. If an equally unknown song were deemed an undiscovered classic by the first few people to hear it, perhaps it might have taken off somehow, if those listeners were inspired to share or promote it.

But despite the relative "success" of my mystery song, one thing seems certain: The amount of available digital music has increased enormously since the original Long Tail article, and it will continue to expand each year. Unless the number of music listeners and their aggregate listening hours increase at a similar rate (I doubt they will), it seems likely that the both the number and percentage of dormant/unpurchased tracks will continue to increase as digital music catalogs grow.

tags: digital music the Long Tail Chris Anderson Will Page Rhapsody Last.fm iTunes eMusic

Feeling Cheap 16 Apr 2010, 11:40 pm

As a fan of the Cars, I was happy to see the addition of the group's entire catalog to eMusic this week. (The Led Zeppelin catalog was another major addition.) I own the band's first two albums but there are several tracks from their later releases that I wanted to pick up.

But my enthusiasm cooled somewhat when I saw that the Cars' catalog is only available as "album only." Given that my iTunes library is now more than 10,000 tracks (and I've barely ripped half of my CD collection to mp3), I've started to cherry pick, especially for older material. And even though it'd only cost me $4 to download the entire "Panorama" album from eMusic, I can nab the one song I really wanted, "Touch and Go," for 99 cents from Amazon MP3.

Don't get me wrong -- as an eMusic subscriber, I'm glad for the additions to the catalog. And if major labels opt to make some of their releases "album only," that's OK with me. I'd rather have them there with restrictions than not at all. Yet I'm now more likely to download new releases as full albums. For older material that I'm already familiar with, I'd rather just get my favorite tracks.

UPDATE: In this particular case, there's a workaround -- while the album it's from is "album only," the track is available from eMusic a la carte on this greatest hits collection.

tags: digital music the Cars eMusic

Monday Odds and Ends: Peter Gabriel's Filter and Apple's Moat 12 Apr 2010, 6:29 pm

BusinessWeek has a piece on the Filter, the recommendation technology company fronted by musician Peter Gabriel. Unfortunately, it provides very few details on how the recommendation engine actually works.

Has the introduction of the iPad made Apple a "wide moat" company? Morningstar analyst Toan Tran:

What Apple is doing, is that they are building a dominant mobile platform. Basically, they're recreating Windows in the mobile space with the iPhone.

Video and a full transcript are here.

And an interview with "In Pursuit of Silence: Listening for Meaning in a World of Noise" author George Prochnik:

There's a reason people are turning their iPod volume too high. People are responding to several generations of mounting infrastructure noise. We are so loud in part because we have to create our own personal noise so that we don't feel like we're being held hostage to the grind and clash of the environment. I went to Florida, where these people were using their cars to blast super-loud music. But the places where these people live is horrifically noisy. When you're dealing with that kind of environment, I can really see the temptation to blast something that at least you like.

tags: digital music The Filter Peter Gabriel Apple AAPL

Friday Odds and Ends: Minimum Wage Downloads, Free Music, and Live Nation 9 Apr 2010, 7:15 pm

This is fun: I've long joked with friends that -- if you add up all the hours spent practicing, performing, writing songs, recording, mixing, etc. -- many professional musicians are actually earning less then minimum wage for their efforts. Fazo, at the Cynical Musician blog, calculates how many downloads/streams you'd need from various digital stores/music services to earn the equivalent of a minimum-wage salary:

- In the case of Amazon and iTunes single-track downloads, 1,813 units must be sold monthly; 21,750 units a year.

- For CD Baby full album downloads (under the new commission rates), the numbers are: 155 units a month; 1,859 units a year.

- For eMusic single-track downloads, at the rates reported for Q3 2009: 3,392 downloads a month; 40,941 a year.

- With Rhapsody streams, you’ll need 127,473 streams a month; 1,529,670 a year (yep, that’s over one-and-a-half million).

- Finally, Last.fm rates mean you’ll need 7,733,333 plays monthly; 92,800,000 plays a year.

Chris Randall at Analog Industries wonders if he should give away the next Micronaut release.

And Morningstar equities strategist Paul Larson on why he recently dumped the stock of Live Nation Entertainment from one of the portfolios he manages for Morningstar's StockInvestor newsletter. (I work for Morningstar as well, though in a marketing capacity.) It's not available online, so I'm posting the best bits here:

I've always liked Ticketmaster's ticketing business; I figured that any business that could frustrate its customers but still keep them coming back is a business with a competitive advantage. Unfortunately, the merger with Live Nation greatly diluted the attractiveness of the overall company.

First, to get the merger past the antitrust hurdles, the company had to agree to license its ticketing software, providing a potential bridge across the moat of the ticketing business. Yet even if the ticketing business retains its moat (something with decent odds of happening, in my view), Live Nation's other operations are quite unattractive. It owns several concert venues, a business with a high degree of rivalry and modest barriers to entry. (This is almost the polar opposite of International Speedway ISCA, which essentially has mini-monopolies in any given city.) Live Nation is also involved in promoting concerts and managing artists, businesses for which I fail to see a moat. The old Live Nation generated an operating loss in four of the past six years, and the combined entity will also have to deal with roughly $1.5 billion in debt.

In sum, Live Nation is a financially levered firm with a declining moat and a management team that have done a good job destroying value. No thank you!

(Morningstar uses the term "economic moat" to describe how well a company can hold off its competitors.)

tags: digital music free music Live Nation

Variable Digital Pricing at Rhino Records 8 Apr 2010, 11:59 pm

This is somewhat old news, but I just noticed that Rhino Records, a division of Warner Music Group, is now selling digital downloads directly from its site:



Pricing is variable, with 99-cent and $1.29 320k mp3 tracks, and $1.49 and $1.94 "Hi-Def" (Apple Lossless, WMA, or FLAC) tracks. There's a range of album prices, though the standard price appears to be $9.99 for mp3 albums and 50% more for the Hi-Def versions.

Will higher-quality files lure music fans away from iTunes and other digital retailers? And will they pay up to $14.99 for a lossless digital album?

While the appeal to labels is obvious -- no 30% cut to Apple -- I've never thought that "direct from the label" downloads were that compelling for buyers, unless coupled with lower prices and/or higher audio quality. With its 320k mp3s, Rhino is offering higher-resolution downloads than those available from eMusic, Amazon MP3, and iTunes. (I've heard the argument that the 256k AAC files Apple sells in the iTunes store offer higher sound quality than a 256k mp3, though I've never done a serious A/B comparison.) As far as I know, Amie Street is the only well-known digital store currently selling 320k mp3s.

My guess is that within five years, as the capacity of portable devices increases, lossless files will become the new standard for digital downloads. (Higher quality files for streaming music will no doubt come much later.)

tags: digital music Rhino Records digital downloads iTunes

Of Course the Demand for Music is Elastic: The P2P Numbers Prove It 1 Apr 2010, 11:26 pm

In a recent blog post, former eMusic CEO David Pakman notes that the new CD pricing strategy from Universal Music means that the music industry (or at least one major label group), is finally acknowledging that the demand for music is elastic. That is, lower prices will increase unit sales enough to boost the total amount spent on music.

Pakman has long believed that music is elastic, and I tend to agree. In previous blog posts he has cited eMusic sales figures as evidence of the price elasticity of demand for music, but I believe there's another set of data that also makes a strong, albeit incomplete, case for elasticity: peer-to-peer file sharing.

According to the International Federation of the Phonographic Industry, for every track that is purchased from a legal download service, 19 are acquired via file sharing networks. No doubt a percentage of illegal download activity comes at the expense of legal sales, and P2P sharing and other forms of piracy are generally blamed for the decline of music sales over the past decade. (Check out the most recent IFPI Digital Music Report.) But a larger portion of this activity simply represents the increased demand for music when the price is zero. We know this because the sheer volume of music acquired outweighs the amount that was purchased before the advent of P2P sharing.

Think of it this way -- if all of the tracks now acquired via P2P sharing were instead purchased legally via iTunes or other download stores, it'd represent an annual digital music market of approximately $84 billion, 20X the total digital sales of $4.2 billion in 2009. Yet the total market for recorded music peaked in 1999 with worldwide sales of $38.6 billion and U.S. sales of $14.6 billion. And when you consider that the P2P crowd only represents a subset of music listeners -- those with both the basic technical skills to acquire music this way and no qualms about the legality/ethics of doing so -- the total demand for recorded music is obviously much greater than that reflected by total music purchases under traditional pricing models.

So it's undeniable that the demand for music is extremely elastic, at least as the price approaches zero. But you can't make money from $0 per unit, no matter how many are moved. What we don't know for certain is the shape and slope of the demand curve. Does demand only skyrocket as the price approaches zero, or is there some point between zero and current music prices where demand will increase to a level that produces total revenues that exceed the current dwindling numbers?

Keep in mind that -- because of fixed costs such as mechanical royalties -- the increase in demand must be significantly greater than the decrease in prices. Double the sales at half the price is a net loss for music labels. That is, due to mechanical royalties totaling 91 cents, if you drop the retail price of a 10-track album from $10 to $5, you need to sell 2.22 units at $5 to equal the revenue from 1 unit sold at $10, ignoring all other costs. (Physical CDs, of course, have manufacturing costs and shipping costs as well, but even digital albums have additional costs such as credit card transaction fees, though those tend to be percentage amounts.) The demand for music has to be elastic enough to offset the fixed costs that increase as a percentage amount as the selling price decreases.

I've long been convinced that Amazon.com, with its daily and monthly mp3 album deals, has been conducting an ongoing experiment in music pricing and demand, and that it will eventually use (or is already using) its sales data to try to convince labels to agree to a permanent restructuring of the pricing of digital albums. I'd love to see those sales figures, as well as those for Universal CDs under its new pricing model.

Can the music industry somehow adjust its prices to increase the sales of recorded music? Given the trend over the last decade, it seems like it'd be silly not to try. If nothing else, just halting or slowing the ongoing decline would be something of a victory.

tags: digital music price elasticity

Your Choice 26 Mar 2010, 5:10 pm

I can't fault record labels and musicians for asking for an e-mail address in exchange for a free download, though I sometimes get annoyed by the registration process and having to wait for an e-mail confirmation to actually download/hear the track.

So kudos to the National and 4AD for using an either/or approach for the free download from the band's upcoming release: You can download a 192k mp3 of "Bloodbuzz Ohio" without giving up any information or enter an e-mail address for a 320k mp3 version and artwork.

tags: digital music the National Bloodbuzz Ohio

Thursday Odds and Ends 25 Mar 2010, 7:32 pm

The Future of Music Coalition contemplates the payouts from YouTube's new "Musicians Wanted" program for indie musicians:

One thing seems true for the moment: if you’re gonna rely on video (or other streaming plays) as a means to lining your coffers, you be counting pennies for some time. Consider this: according to a November 2009 report, one of the most popular tracks on Europe's Spotify -- Lady Gaga's "Poker Face" -- was played more than a million times, and the artist supposedly netted a whopping $167 (or just under two ten-thousandths of a dollar per play). The veracity of these numbers has been challenged, but they do highlight the difficulties of monetizing on-demand streams at a significant level.

An essay on playlists from Fingertips:

The reason more people don't share music more often? It's all but heresy to suggest it, but what the heck, I promised a stunning conclusion: people don't share music more often because for most people, the connection to music is not primarily social at all but, rather, internal and personal.

This contradicts what the music futurists and social media mavens are telling us (24 hours a day), but I contend that most engaged music fans do not relentlessly look to their friends either for new music suggestions or to make suggestions to them. Some do, quite joyfully, but they are the vocal minority. And many who do enjoy sharing their musical discoveries with friends tend to have very specific friends with whom they do this. They are not parading with their music down the hallways of their lives on the off chance someone might connect.

And an eMusic subscriber sings the praises of "re-recorded" music downloaded via the subscription service:

I know that most times re-recorded music is not as good as the originals. But you have to give them a chance because once in a while they are very good, maybe even better than the originals. Sometimes re-recording breathes fresh life into tired old songs that have been overplayed till I never want to hear them again.

tags: digital music playlists re-recorded music Youtube

Thirteen 24 Mar 2010, 9:04 pm

My bandmate Mike Porter was testing out some new recording equipment and laid down a quick cover of one of my all-time favorite songs, Big Star's beautiful "Thirteen." Take a listen:

Thirteen, as covered by Mike Porter of the Layaways -- mp3

tags: Big Star Thirteen Big Star cover The Layaways

Alex Chilton 19 Mar 2010, 6:35 pm

"Each and every cut on this album has the inherent potential to become a blockbuster single. The ramifications are positively awesome."

-- Billboard magazine review of Big Star's "#1 Record," September 9, 1972.

There are, of course, hundreds -- if not thousands -- of songs and albums that "should have" been hits but never found a wide audience. Yet it's hard to imagine any another example of a greater disparity between the potential of a record and its subsequent success.

I started to write something yesterday about Alex Chilton, who found fame in the music industry, if not fortune, at the insanely young age of 16, when the Box Tops' "The Letter" hit #1 in 1967. But any attempt at an analysis of his commercial success (or lack thereof) with Big Star and his solo albums seems so inappropriate right now.

His talent as a singer, songwriter, and arranger (along with that of Big Star founder Chris Bell, who died in 1978), was staggering. The combination CD of the first two Big Star albums has been one of my favorites for the past 15 years and it easily ranks with the best output of the Beatles, the Kinks, or any other rock act. The songs, performances, and production are simply perfect.

I'm sad that this music didn't find a larger audience at the time (if there's such a thing as parallel universes, there must be one out there where Big Star actually had a #1 record), but I'm so incredibly grateful that it exists:

#1 Record/Radio City - Big Sta...

tags: Alex Chilton Chris Bell Big Star

Pandora's Seventy Percent 15 Mar 2010, 6:38 pm

The fact that Pandora (along with other Internet radio stations) pays out a large percentage of its revenues for royalties to BMI, ASCAP, and Soundexchange isn't news. But something really struck me about this bit in the Wall Street Journal's weekend magazine piece on Pandora founder Tim Westergren:

Almost 70 percent of our revenue is paid to royalties. In most businesses, as you get bigger, you get advantages of scale. Things get cheaper by the pound, cheaper by the minute. But that's not true in our case. It's the same price.

"Almost 70 percent" is nearly the same amount as the 70 cents that Apple pays labels for 99-cent downloads from the iTunes store. Which, as Apple has long claimed, is pretty much run on a breakeven basis. While some have questioned that assertion, because Apple makes such a healthy margin on iPods and iPhones, it could certainly afford to run the iTunes store for minimal profit. Or even, perhaps, at a small loss. Ditto for Amazon and its mp3 store, which pays a similar percentage to labels for the digital downloads it sells. Amazon has long been willing to sell content at a loss to establish itself as a market leader, as shown by the $9.99 pricing of digital books for its Kindle reader.

Despite not having a high-margin physical product, Pandora has been in the news because of its first-ever profitable quarter -- and rumors that it will purse an IPO. It's certainly possible, of course, that with new products, services, or tweaks to its business model, that Pandora will grow its profit margin. But without changes to how content providers (labels, artists, and publishing firms) are compensated, there are definite limits to the ultimate profitability of any music streaming business.

tags: digital music Pandora Soundexchange Apple AAPL iTunes Amazon AMZN streaming royalties

EMI vs. Pink Floyd 12 Mar 2010, 11:36 pm

Everything I've seen about the EMI/Pink Floyd dispute over the "unbundling" of the band's tracks for digital download indicates that the band's goal is keeping its albums intact, not maximizing their total sales revenue. Indeed, if an "album only" download policy were expected to be more lucrative, it seems likely that EMI would be embracing it as well. While the "cherry picking" effect seen with digital music downloads is often blamed for decreasing total music sales revenue, in the case of an older band, one without a current hit single, perhaps the ability to cherry pick increases total sales, as listeners unwilling to purchase the full album are willing to buy an individual song or two.

As of this afternoon, despite the recent court ruling, Pink Floyd songs are still available for individual download from iTunes and Amazon MP3 in the U.K. and the United States. But if EMI stops selling individual tracks, it will be interesting to see the effect on total album sales over the next year. According to today's Wall Street Journal report on the court ruling, here are Pink Floyd's SoundScan sales for the past two calendar years, with album sales representing both CDs and digital albums:

2009: 654,000 albums, 1.71 million digital tracks
2008: 760,000 albums, 1.35 million digital tracks

Was the decrease in album sales from 2008 to 2009 a direct result of increased digital track sales, or simply due to the overall decline in sales of recorded music? If "cherry picking" was indeed the cause, removing the option to buy individual songs should increase album sales, or at least reduce the rate of the year-to-year decline.

One other thing to note -- the digital download versions of Pink Floyd albums are often relatively inexpensive, especially on Amazon MP3. There you'll find Dark Side of the Moon for $7.99, Wish You Were Here for $7.95, and Animals for just $4.95. The exception is the double-album "The Wall," which currently sells for $22.25 on Amazon MP3 and a whopping $24.99 in the iTunes store.

tags: digital music EMI Pink Floyd iTunes Amazon MP3 cherry picking

Soundexchange Makes Some Calls 10 Mar 2010, 7:23 pm

After Paul Maloney of RAIN wrote about the Reuters coverage of Billboard's top-40 money makers piece (Reuters reported that only 10 artists have received more than $1,000 in streaming performance royalties from Soundexchange) he received a call from a spokesperson for the non-profit royalty collection/distribution organization:

Contrary to the statement that only 10 artists earned more than $2,000 for their play on Internet radio, Williams revealed, "In fact, more than a thousand artists received more than $2,000 from SoundExchange for non-interactive webcasting only..."

Williams further revealed to RAIN that more than 500 artists earned "well above $9,000 in 2009" webcasting royalties. Beyonce, who allegedly topped the list of non-interactive streaming royalty earners, "made exponentially more than the $5,000 reported by Billboard, and actually isn't even close to #1 among earners." Although SoundExchange won't disclose exact earnings of specific artists, they revealed 2009's top-earner made "well into 'six-figures'" from Internet radio.

And Jonathan Segel of Camper Van Beethoven, who said in an interview with this blog that his band had yet to receive a payment from Soundexchange, despite hundreds of thousands of plays on Pandora, e-mailed yesterday to say that he had received a call from the organization. A Soundexchange representative offered to help expedite the paperwork for unpaid royalties for Camper Van Beethoven. While it won't be a six-figure check, the preliminary total, which Segel revealed in a comment to the interview, actually exceeds the amount of money the band raised with its recent SXSW song sponsorship campaign!

tags: digital music Soundexchange streaming royalties Pandora