Digital Audio Insider -- the economics of music and other digital content


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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from the perspective of a musican who has self-released four albums with the indie rock band the Layaways.

My personal website has links to my LinkedIn and Google+ pages and you can send e-mail to david [at] thelayaways [dot] com.

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If you enjoy this site, please consider downloading a Layaways track or album from iTunes, Amazon MP3, Bandcamp, or eMusic. CDs are available from CD Baby and Amazon.

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April 25, 2006

Tuesday Odds and Ends
by David Harrell
Tuesday Odds and Ends
Joshua Porter of User Interface Engineering applies the Long Tail concept to prioritizing design time.

----------

Yale Law School professor Yochai Benkler's new book, The Wealth of Networks, How Social Production Transforms Markets and Freedom, isn't available yet in actual book format, but it's published under a Creative Commons license and you can download a PDF of it here. It's 500+ pages and I haven't had time to explore much of it yet, but it looks like a good bet for anyone interested in distribution issues (online and peer-to-peer) and intellectual property.

---------

Finally, I just stumbled across the letter guitarist Steve Vai wrote back in 2004 in support of California Senate Bill 1034. I've heard for years that major label recording artists who signed contracts before the rise of the CD format were often paid a lower royalty rate on CD sales, due to the "new technology clause" in the standard contract. At the time of Vai's letter (February 20, 2004) it looks like the same thing was happening for download sales. What's even worse is that -- according to Vai -- labels were deducting the standard charges for packaging and "free goods" (promo discs, etc.) even though neither exist for downloads. Seems insane, but certainly not implausible.

If this is still the case, it adds another wrinkle to Chris Anderson's analysis of the latest RIAA sales numbers at the Long Tail. He points out the margins are higher on digital sales because there are no physical good to manufacture and ship, and speculates that 2005 might have been a more profitable year than 2004. Paying a lower rate on digital sales would definitely increase that probability. (In January, Bill Wilson of No Revolution posted this breakdown showing that download sales are more profitable for labels, at least for full-album downloads.)

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April 24, 2006

Breakdown of Download Sales 2
by David Harrell
Breakdown of Download Sales, Part II
Last week, this post listed the percentage breakdown of digital sales for independent artists and labels distributed by CD Baby. A similar chart below gives the sales breakdown for my own band on a percentage basis.

One caveat, though: Unlike a release on a major label or a well-known indie label (Merge, etc.), which will appear on its official Tuesday release date (if not sooner), music distributed via CD Baby trickles slowly into the different download stores. That's because CD Baby sends the sound files on hard drives after they've been received and processed by CD Baby, and in some cases it takes a while before a hard drive with new material is delivered to a particular store. And once an album gets to a particular store, it can take weeks -- if not months -- for it to show up for sale.

It's a minor frustration when you're waiting for your album to appear in iTunes or eMusic, but I'm still pleased with the CD Baby experience. And much (most?) of the delay is due to the fact that -- as a group -- these relatively unknown releases no doubt fall far down on the priority list for the download stores.

So this chart is based on varying sales periods for the different stores. (That's the case for the aggregate CD Baby chart as well, but I'm assuming the effects of time-period differences average out somewhat for the overall chart.)

Total Download Sales for the Layaways
Apple iTunes58.74%
eMusic21.85%
Rhapsody10.18%
MusicNet2.16%
Napster2.13%
iTunes Europe1.31%
MusicMatch1.31%
iTunes Canada1.11%
iTunes UK0.68%
LoudEye 0.52%
MusicNow0.02%
-----
100.00%

As in the overall chart, iTunes represents the majority of our digital sales so far, with nearly 62% of our sales coming from the various iTunes stores. But our music is doing much better in eMusic than the overall average for CD Baby-distributed sales. And that 21.58% figure for eMusic is based solely on the sales of our first disc. Our second release wasn't available on eMusic until early this year. Based on subsequent chart activity, I'm guessing the eMusic percentage will rise a bit when these sales show up.

I'll save the "song downloads vs. streams" breakdown for a separate post, but it's safe to say that the bulk of the dollars are coming from downloads, not streams. We've had a fair amount of streaming activity, but the per-song payout we've received (.2 to 2 cents per song stream) is tiny compared to the single-song-download payouts (around 20 cents for eMusic up to 70 cents for iTunes). At the lowest stream payout, it'd take 350 plays to equal to the pay for a single iTunes download. (It looks like that .2 cents rate is no more, however. I believe the lowest rate is now one cent per stream.)

Finally, there are few stores where we've definitely had sales (based on chart placements and song rankings) but have yet to receive payment. Wal-Mart (supplied by Liquid Digital Media ) is one. But I noticed that the overall CD Baby chart also showed no Wal-Mart/Liquid Digital Media income as of February 2006, so I'm assuming that Wal-Mart pays infrequently or perhaps has a fairly large minimum sales requirement before it cuts a check.

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April 17, 2006

Indie Download Sales Breakdown
by David Harrell
Breakdown of Indie Download Sales by Online Stores
CD Baby handles the digital distribution for my band's self-released music. One thing I really like about the company is how extraordinarily open it is with the numbers.

Back in February, CD Baby head honcho Derek Sivers posted a complete breakdown of how much CD Baby has received in total (as of February 8, 2006) from the various download stores and streaming services for the indie artists it distributes. CD Baby takes a 9% cut of these revenues and then pays the remaining 91% to the artists and labels. I added a percentage column to create the following table:

Total Download Sales via CD Baby
Download Store Total Sales Percent
Apple iTunes $2,892,913 66.48%
iTunes-Europe $298,978 6.87%
Rhapsody $261,785 6.02%
iTunes-UK $230,481 5.30%
MusicNet $111,700 2.57%
MSN Music $97,337 2.24%
iTunes-Canada $93,780 2.16%
MusicMatch $85,399 1.96%
Napster $67,243 1.55%
iTunes-Japan $50,538 1.16%
Emusic $35,876 0.82%
Sony Connect $30,347 0.70%
MP3tunes $21,017 0.48%
AudioLunchbox $16,421 0.38%
iTunes-Australia $15,048 0.35%
BuyMusic $11,386 0.26%
Puretracks $9,144 0.21%
Napster-UK $5,472 0.13%
Audiolunchbox Subscription $2,929 0.07%
LoudEye $2,095 0.05%
MusicNow $1,957 0.04%
Napster-Canada $1,951 0.04%
Mperia $1,805 0.04%
NetMusic - DEAD $1,775 0.04%
Weed $1,348 0.03%
PassAlong $1,144 0.03%
Viztas - DEAD $538 0.01%
DigitalKiosk $484 0.01%
CatchMusic - DEAD $462 0.01%
DiscLogic - DEAD $229 0.01%
RuleRadio $37 0.00%
----------
$4,351,619 100.00%

Unsurprisingly, iTunes topped the list. I was, however, somewhat amazed at just how thoroughly iTunes dominated -- if you add up the numbers for all of the iTunes regions, they represent more than 82% of the download/stream sales for CD Baby's distribution catalog. No other store even hits double digits.

The biggest surprise for me was the relatively paltry sales via eMusic. In previous posts, I've speculated about why indie musicians should do well at eMusic. My two-fold argument is that eMusic subscribers are (by default) supporters of non-major label acts and that the "use it or lose it" subscription model encourages subscribers to use their expiring downloads each month to take chances on unknown acts.

I think that logic still holds (and I expect to see the eMusic market share increase) but clearly the iTunes audience still dwarfs the audiences/subscribers to the other download stores. I'll post a follow-up later in the week with a store-by-store breakdown of our own sales. (Off the top of my head, I think eMusic fares a little better, at least for our stuff.)

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April 12, 2006

Flaming Lips
by David Harrell
Flaming Reviews of the Flaming Lips
The new disc by the Flaming Lips, "At War With the Mystics," is a 12-track album available in two versions at iTunes. You can buy the standard album for $9.99 or a $12.99 version that includes three bonus tracks that aren't on the CD version of the record. But the distinction isn't clearly marked and many customers are overlooking it and then venting their frustrations about the "premium" pricing. Here are a few of the choicer comments:
steve jobs and co. have fought to keep the prices low. warner bros are to blame for this crazy price. ANYWAY, why would you pay FULL PRICE for a 128 kbps ACC that has limited copy restraints? buy the CD, get the art, get the full quality music, get no copy restraints...it's a no brainer. sorry iTunes Music Store, this doesn't appeal anymore...

$13 is nuts. You can buy the disc for $13, rip it to your iPod, and still have the CD.

...I thought that was the whole selling point of iTunes - to charge less for the actual songs but not get the CD casing & art work...

...it is stupid to raise the standard 9.99 price to $13...oh well I'll just go download it off limewire now.

I hope the large record companies are happy now that they are beginning to kill the golden goose (iTunes) by insisting that Apple charge more than $9.99 per album. No one in their right mind should download this intangible album for $12.99 (with restrictions on how they can use it) when they can purchase the tangible album for the same price or less...

Sorry but for $13 I want to own my music. Last I checked I wasn't getting album art, an actual CD or music that I can play anywhere. I'm getting digital tracks in a proprietary format. Screw you iTunes, I'm not buying this.

I've been a big fan of the 99 cent song and the 9.99 album but I'll be damned if I pay any more than that. Good things never last, greed conquers all...again. There is a reason peer to peer sharing became so popular...
Reading these comments about a perceived iTunes price increase, my first thought was that any actual across-the-board price increases for full-album downloads will result in a large-scale consumer revolt. Then again, maybe not. Convenience is no doubt a major factor in many digital download purchases. And you don't have to go above $9.99 to be paying a "premium" price for the download version of an album. Many albums in iTunes can be purchased new on CD for less than $9.99 and -- if you're willing to track down and buy a used copy -- almost all of them can be found for much less.

As a great post at Betty Rocker's Music Pantry titled "The Stuff We Can't Give Away" notes, many CDs are worse than cars at holding their value:
Mr. Rocker and I are doing a little CD Spring Cleaning in the Music Pantry and I thought we'd sell all the stuff we don't want (or have doubles on) at Half.com. The stuff we're selling still has the plastic wrap on it and I'm hoping to get some good dough from the sales.

I was kind of surprised to see that over 60% of what I have to sell is not worth much at all. If a (currently popular) CDs is not sold within a year of their release, three years later, they aren't even worth the cost to ship! Kind of makes me feel bad for bands that were the "IT" band three years ago to come across a site like Half.com to find that their music is practically worthless to the consumer.
Given the availability of cheap used CDs, most download consumers are already paying a premium price to avoid the hassles associated with buying the CD and ripping it to mp3. Are they willing to pay an even larger premium? Maybe some of them are, but I think the "price of the physical CD" barrier (that is, the price of a NEW CD) will be a tough one to break through.

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April 07, 2006

Interview with Shake Your Fist
by David Harrell
Interview with Amy from Shake Your Fist
I'll start with a quick disclosure: I've known Amy for nearly a decade now and she also included my own band in a blog post last year. That said, I think Shake Your Fist is definitely one of the best music blogs out there. The writing is consistently good, insightful, and relevant. And -- unlike many music/mp3 blogs -- SYF isn't about hopping on the latest bandwagon. So I thought Amy would be a great subject for the first Digital Audio Insider interview and she kindly agreed to a series of e-mail questions.

You've always been an evangelist for good music. (I still have a great mix tape you made for me years ago.) What prompted you to start the music blog?

Shake Your Fist didn't start as a music blog, actually. A small group of us intended to talk about books, film, music, television, technology, politics, etc. I was primarily interested in writing about music and had the time and obsessive tendencies to do most of the posting. So SYF pretty much evolved into an mp3 blog in its first few weeks. I suppose it's an extension of what I've always done -- recommending music I love to friends. Now I'm recommending music to strangers, too. Besides providing me with a soapbox, it gives me a chance to write on something I'm passionate about. I've done a lot of professional writing, but not really about subjects that interest me personally.

Has your music listening experience changed over the past decade (due to the iPod, mp3s, and individual song downloads)? That is, single songs vs. full albums, headphones vs. stereo speakers, etc?

I've always been more of a song than album person -- there are very few albums I can listen to all the way through without reaching for the skip button. So, from my perspective, mp3s and mp3 players are a very happy development. You mentioned a mix tape I once made you. I think anyone who has ever known me reasonably well has one or two or ten of these things lying around. I've long been interested in sequencing, or controlling my listening experience. ITunes and similar software make it easy. Too easy, probably.

What digital music has altered more than anything is my consumption patterns. I download music off blogs, record label sites and iTunes almost every day and often feel like I'm drowning in new sounds. Used to be I'd buy a CD (and going back, a tape or record) and listen to just that album for weeks on end. I still buy a lot of CDs, though. I'm very attached to the object-ness of music, like to have something in my hand while I listen.

continue reading "Interview with Shake Your Fist..."

So it's safe to assume that CDs still represent the majority of your music purchases, from a total $ standpoint?

Oh yeah, definitely. I spend a lot of money on CDs. As an mp3 blogger, I get some sent to me, obviously. But I'm sometimes a little queasy about writing on them. I'm afraid I'm being unduly influenced or something. So I prefer to pursue my own "leads" and buy my own music.

And your iTunes purchases -- single tracks or full albums?

I mostly use iTunes to download single tracks and EPs. If I know I want a full album, I'll buy the CD, because I want the art and liner notes. That's worth the extra couple of bucks.

How are you discovering new artists and how does that contrast to the days before music/mp3 blogs?

I used to learn about new music from friends, music magazines and going to shows and falling in love with opening bands. Not surprisingly, I now find most new music online. I read the major Web music publications -- Pitchfork, Stylus, Pop Matters --pretty much every day and check in with a bunch of smaller zines on a weekly basis. I visit dozens of other mp3 blogs, cruise record label and artist sites and (reluctantly) MySpace. That said, I love magazines and still read print pubs like Magnet and The Big Takeover. And I still get really good tips from friends and, increasingly, SYF readers.

So what's your total music consumption -- that is, listening hours per day or week?

Writing a music blog means spending enormous amounts of time listening to music -- 6 to 8 hours of day (and that's a minimum). Fortunately, my iPod makes that pretty easy. I create new playlists a couple nights a week, then listen to them on my commute or at work when I'm not doing something that requires a lot of concentration. A year ago, pre-blog, I was listening to new music, but without the same kind of urgency or pressure, and certainly fewer hours each day.

Wow -- I'm amazed at your listening habits. Are most of those listening hours spent exploring new (or new to you) bands or is a sizable portion still devoted to long-time favorites?

Does that sound like a lot? Keep in mind I do a good portion of that at work and during my commute... I wish I had more time to spend with old favorites, but these days it's a lot of new stuff. SYF is my second job, and a big part of that job is looking for interesting new music. Not that I don't write about music I have a history with -- I do a lot. But I also don't think music stopped being interesting in 1990 or 2000 or at some other arbitrary point.

Here's a three-part question: On your site, you have a disclaimer that says you'll remove links upon request -- has a band or label ever actually asked you to do that? On the flip side, do you get many requests from labels or publicists asking you to feature acts? And, do you have any advice or thoughts for bands seeking coverage in a blog?

No one's ever asked us to remove anything. If requested, we would take a file down in a heartbeat -- we definitely don't want legal trouble! We try to be responsible about what we post, which means we don't post leaked tracks, full albums or more than two tracks from any album that's readily available for purchase. Our goal is to turn people on to the music we're featuring and that means giving them incentives (sample tracks) to buy the records or tickets to the shows.

We get a steady stream of requests to cover music. I administer the blog's mailbox and receive the mailed CDs but don't write about much of the music sent our way. This is for a couple reasons: 1) A lot of it's not very good and/or not the kind of thing I (or my blogmates) like, 2) I'm not interested in talking about something 50 other bloggers are also hyping because they received the same e-mail/CD and 3) It eliminates the "thrill of the hunt" -- one of the things that keeps me interested in writing this blog.

I'm sure I'm not the only blogger who dislikes getting mass e-mails from bands that obviously pulled your name off a list. If you want to get a blog's attention, send a personalized e-mail to the blogs you actually read and whose taste you know. Provide links to at least two mp3s (not streams!) and to a Web site or MySpace page that contains biographical and other pertinent info such as discography and record label name, if any. Those are the e-mails that are most likely to work with me, anyway.

Last question -- any thoughts on music blogs vs. college radio these days? I'll say this carefully, as I don't want to offend any college music directors who might potentially play our band, but it seems like an mp3 post on a well-read blog probably gets a band more exposure these days than a few spins on any single college radio station. (Aside from the really big ones like KEXP, etc.) Agree, disagree...?

I don't know a whole lot about college radio...I pick up WNUR sometimes when I'm in my car and used to listen to WHPK regularly when I lived in Hyde Park. I'm not sure they're competing mediums -- probably complementary more than anything. Listening to the radio is easier and more passive than reading and downloading and hearing some great song on the radio that you might never have bothered to download can be a powerful and persuasive experience. This may seem like an odd and unpopular stance for an mp3 blogger to take, but I think the influence of mp3 blogs -- even the really popular ones -- is probably overstated.

Thanks Amy!

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April 03, 2006

Pitchfork Interview
by David Harrell
Pitchfork Interview with Steve Gordon
There's a great interview at Pitchfork with Steve Gordon of Digital Music News about the RIAA lawsuits, digital distribution issues, "free" music, and label economics:
Pitchfork: Are the artists making money from iTunes and other sources of digital revenue?

Gordon: The artists with the big labels are not seeing much revenue. Although sales of digital music have multiplied in the last year, they still only represent a fraction of the income from CD sales. And the artists are paid on digital sales basically the same way as they are paid for ordinary record sales. Artists usually only receive any recording royalties after "recoupment" of their "unearned balances," that is, production and marketing costs. But only the most successful artists recoup production and marketing costs. Under the standard recording agreements artists only "recoup" at their royalty rate. After deductions, the artists' royalty usually is well less than a dollar per album. So if production and marketing costs (including music videos) are $250,000 (modest in terms of big labels) then they most sell more than 250,000 records to earn any recording royalties. In addition many agreements reduce the artists normal royalty rate for digital sales.

Now compare this to an artist who records and sells an album without a record company. Say an artist records an album for $10,000 and sells the CD for $14 on CD Baby. CD Baby takes only $4. If the artist sold 10,000 units, he or she would make 10,000 x $10 = $100,000 minus $10,000 and gets to keep $90,000. If the artist recorded the same album for a record company and sold the same number of units they would probably receive no recording royalties at all. If the record company produced the album for $10,000 and spent $10,000 on recoupable marketing costs, and the artist's royalty was a dollar, the artist would in fact still owe the record company $10,000.
The full interview is here.

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    THE LAYAWAYS

    Out Now -- "Maybe Next Year" -- The New Holiday Album:

    <a href="http://thelayaways.bandcamp.com/album/maybe-next-year">Joy To The World by The Layaways</a>

    "This is a sweet treat, deliciously musical without being overbaked for mass media consumption." -- Hyperbolium

    "Perfect listening to accompany whatever holiday preparations you may be making today." -- Bag of Songs


    O Christmas Tree - free mp3 lyrics and song details
    Away In A Manger - free mp3

    Download from eMusic, iTunes, Amazon MP3, or Bandcamp. Listen to free streams at Last.fm.



    album cover art from The Space Between

    <a href="http://thelayaways.bandcamp.com/album/the-space-between">Keep It To Yourself by The Layaways</a>

    "...about as melodic and hooky as indie pop can get." -- Absolute Powerpop

    "Their laid-back, '60s era sounds are absolutely delightening." -- 3hive

    "...melodic, garage-influenced shoegaze." -- RCRD LBL

    Where The Conversation Ends - free mp3
    January - free mp3
    Keep It To Yourself - free mp3

    Download from eMusic, iTunes, Amazon MP3, or CD Baby, stream it at Last.fm or Napster.



    album cover art from We've Been Lost

    <a href="http://thelayaways.bandcamp.com/album/weve-been-lost">Silence by The Layaways</a>

    "The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music

    "Catchy Guided by Voices-like rockers who lay it on sweetly and sincerely, just like Lionel Richie." -- WRUV Radio

    Silence - free mp3 lyrics and song details
    The Long Night - free mp3

    Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.



    album cover art from More Than Happy

    "These are songs that you want to take home with you, curl up with, hold them close -- and pray that they are still with you when you wake up." -- The Big Takeover

    Let Me In - free mp3
    Ocean Blue - free mp3

    Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

    More Layaways downloads:

    download the Layaways at eMusic download the Layaways at iTunes

    the layaways website