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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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November 29, 2006

Increased Per-Song Payments from eMusic
by David Harrell
The per-download payout from eMusic to labels/artists has increased: Our CD Baby account is showing eMusic payments of 27.4 cents a download for our most recent sales. (CD Baby takes a 9% cut, leaving us 24.9 cents a download.) This is a huge percentage jump from the 19.4 cent gross per-song payment from our last batch of reported eMusic sales.

While eMusic's recent changes in its subscription plans should boost per-song payouts, the new plans just took effect last week, so that can't be the reason. One factor in eMusic's variable payout is the average number of songs downloaded by subscribers -- any increase in the per-song payout indicates that the average number of downloads per subscriber has declined. The increase above indicates a fairly sharp drop in the average number of downloads. (Though I've certainly been wrong before in my attempts to decipher eMusic's revenue-sharing economics.)

related: Welcome to the Club, A Price Increase for eMusic

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November 27, 2006

Monday Odds and Ends
by David Harrell
Monday Odds and Ends
There's an overview of digital music services in today's Wall Street Journal:
When it comes to legal digital music, iTunes is the undisputed king. But a host of rivals are trying to carve out empires of their own in the shadow of Apple Computer Inc.'s service.

For the most part, they're not trying to steal away big chunks of Apple's customers. Instead, they want to win over music lovers who haven't yet signed onto iTunes. People who are still wary of downloading music, for instance -- or those who are used to getting it free from illegal services.
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Coconuts, the music and movie retailer, is now f.y.e. Something that caught my eye in ad I saw this weekend: Buy any two of the "20the Century Masters" best-of collections (the Who, the Allman Brothers, Peter Frampton, etc.) for $15.88 and you'll receive a $15 dollar iTunes gift card.

Is Apple selling gift cards to other retailers at a substantial discount off face value? If not, I'm not sure how this works for f.y.e., unless it's getting credit for "digital breakage" of unredeemed gift cards.

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November 22, 2006

Thanks
by David Harrell
Thanks...
Posting will be light for the next few days, but I did want to say "thank you" to everyone who has visited this blog since it began back in January. It's a relatively small audience (or, as Ian Faith said in Spinal Tap, a "selective" one), but your insightful comments and e-mails are much appreciated!

-- David

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Is Lala.com A Digital Distributor
by David Harrell
Is Lala.com A Digital Distributor Retailer?
OK -- I'm not going to say "I told you so" based on the words of a single lala.com member. But as I wrote in this guest post for Moistworks a few months ago, I think lala.com is likely to become a something of digital distributor, with members trading CDs after ripping mp3s files or burning copies of the discs. While doing so is expressly forbidden by the lala.com user agreement ("fair use" copying only applies to discs you actually own), I wasn't surprised to see this comment from a lala.com member about an Online Fandom piece on the CD trading site:
I am a lala user and I very happy that I found the site. With the birth of mp3 players actually having the physical CDs are no longer necessary. I am able to upload my CDs to my computer and then post them to trade on lala.
Don't get me wrong -- I have nothing against the used CD market. My CD collection has plenty of discs I purchased used, well aware that used sales generate no income for the artist, publisher, or the label. And I fully support the right to sell or trade music you have purchased. One of my main beefs with digital downloads is that the current default iTunes album price fails to reflect that a portion of a CD's worth is derived from the fact that it has a resale value. Because you can't (legally) sell your digital downloads, this disadvantage should be factored into the price. (See this recent Medialoper post for more thoughts about digital download pricing.)

Plus, Lala.com promises that 20 cents from every dollar (its fee for a trade) will make it back to artists as either a direct payment or via a fund to provide health insurance for musicians. That's a much better deal than zilch, which is what artists/labels receive from used sales, copied CD-Rs, or peer-to-peer downloads. (Though I've never believed that most "pirated" music represents a loss in revenues to labels and artists. Just because someone gives you a burned copy of disc doesn't mean you ever going to BUY the album in question...)

So if this modest lala.com royalty creates income for musicians that wouldn't have been generated otherwise, it's a good thing for all involved parties. But if lala.com is indeed morphing into a digital distributor (where you rip discs to mp3 then pass them along) with a cumbersome distribution model, its 80/20 split comes close to inverting the current iTunes royalty, where the label/artist receive 70 cents from a 99-cent download. And by creating an increasingly liquid market for used CDs, it also seems likely to cannibalize new CD sales as well, more so than the previous options of selling your discs to the local record shop or online via Amazon.com or eBay.

That's the unanswered question: does heavy trading among members supplant music sales (digital downloads and CDs) that would have otherwise occurred?

I don't know. Lala.com members are -- as a group -- no doubt major music fans who probably already purchase more music than the average person. (The same has been said about peer-to-peer users.) So I'm reluctant to demonize them for ripping CDs before trading the discs. Especially when I've given serious consideration to backing up my entire CD collection on hard drives and then selling off the original discs.

But something here still (slightly) bothers me. All in all, lala.com seems like great business model for its founders (who'll be able to cash out by selling the company or going public in a few years) and an unmatched bargain for its members. (Even cheaper the eMusic!) Yet despite its warning that you're not "supposed" to retain copies of the discs you trade, lala.com has no way of enforcing that rule, nor much incentive to do so. It seems like the success of its business model (like YouTube's?) is based on the distribution of intellectual property, with a compensation formula that puts a relatively small portion of the revenue in the hands of the creators/owners of that property.

Update -- as Glenn noted in the comment, I really should be saying "retailer," not "distributor."

related: A Trade-In Value of Zilch, Karma Police (guest post at Moistworks)

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November 21, 2006

iPods by the Hour
by David Harrell
How complete is Apple's dominance of the portable music player market? Take a look at Amazon.com's list of its top-selling music players, updated hourly.

Except for a SanDisk player in the number five spot, the top 10 sellers are all iPods. The new Zune is currently #17.

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November 20, 2006

Long Tail Economics
by David Harrell
Long Tail Economics
There's an interesting comment about this hilarious Improv Everywhere mission -- writers protesting "book piracy" outside a NYC public library. From the comments page:
Believe it or not, since the early 1980s, by law UK public libraries really do have to pay writers for books issued, supposedly to support creative lit.

Unfortunately this means:
(a) less money to buy books
(b) bestselling authors get 99.9% of the money
(c) they pay nothing to authors with issues below a certain amount.
I can't verify that 99.9% claim, but I'd like to run the numbers with real data for music sales. My guess is that you'd see somewhat similar results for any of the alternative compensation proposals that would compensate musicians based on total downloads within a peer-to-peer system. Not 99.9%, but I think the "head" of the tail is still large enough that it's not going to translate into meaningful revenue for the folks at the other end.

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November 17, 2006

Even More Sound Alike Albums
by David Harrell
There are more of them than I ever imagined available at eMusic. This label has sound alike cover albums for REM, the Police, Fleetwood Mac, Billy Joel, the Eagles, and more.

The strange thing here is that -- unlike the Beatles example of last week's post -- ALL of the above artists are available in iTunes. Though they're all on major labels and unlikely to appear in eMusic any time soon.

So it's not a question of availability, it's strictly economics (and, perhaps, convenience). At least a few eMusic subscribers are buying/downloading these facsimiles, even though the digital downloads of the original recordings are readily available in iTunes, albeit at 99 cents a track as opposed to eMusic prices. And there's always the option of ripping mp3s directly from CDs or going the peer-to-peer route. Yet it seems like there's at least a small market within eMusic for these substitute recordings. I don't quite get it.

related: The Return of the Sound Alike Album, More Sound Alike

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November 16, 2006

Naming the Zune
by David Harrell
Naming the Zune
From today's Wall Street Journal, a piece on Lexicon, the firm that named the Zune:
Lexicon -- which has named high-profile products such as Research In Motion Ltd.'s BlackBerry, the Pentium chip from Intel Corp. and Subaru's Outback -- started with as many as 4,500 candidate names, whittling them down over the course of three months early this year. The company, based in Sausalito, Calif., has spent thousands of dollars in linguistic studies of languages around the world and usually charges about $150,000 to come up with a brand name.

Zune was selected because it has a familiar sound, says Mr. Placek. "From tune to zune" was the expression some inside Lexicon used. The letter "U" also has a full sound and makes one think there is a lot packed into a little word -- and product.

Lexicon hopes Zune will catch on as a verb, much as "googling" has for searching on Google Inc.'s Internet search site. Someone might "zune out" (listen to music) or "zune you" (send you a song wirelessly), says Mr. Placek.
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November 15, 2006

Steven Levy Discussion Transcript
by David Harrell
Steven Levy Discussion Transcript
The transcript of today's Washington Post discussion with Steven Levy (author of The Perfect Thing: How the iPod Shuffles Commerce, Culture, and Coolness) is here. Not terribly interesting (most questions were about iPod accessories and such), but this was the best bit:
Annapolis, Md.: Is Apple doing anything to make the iPod more sturdy? It seems like everyone complains about how easy it is to scratch them up. I must admit that I don't currently have an iPod, but would it get that scratched up just keeping it in my purse or do you have to purchase one of those covers?

Steven Levy: Once I used an iPod to record an interview with Steve Jobs and he saw that I had one of those plastic skins covering it. He was appalled, and insisted that iPods, like people, only gain more character with the occasional ding and scratch. I'm not sure about that (especially if the screen is affected) but for those who worry, there are plenty of cases. By the way, in the small print in packaging of the new iPods, there is a disclaimer explaining that like fine denim jeans, iPods can go through a weathering process. Classic Apple explanation--wear and tear makes iPods cooler!
Levy's iPod-related blog is here. Haven't read the book yet, but I just ordered it.

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November 14, 2006

More Sound Alike
by David Harrell
As Glenn mentioned in a comment about Friday's post, sometimes the "sound alike" artist is actually the original artist. Contractual disputes (or the desire to bypass the original label) can lead to artists re-recording their own material to release on a different label. There are few compilation albums on eMusic like this one (and this one), where most of the reviews note that the songs are NOT the original versions.

My favorite recent example, however, is Cracker. Back in February, the band released its own collection of re-recorded hits on the SAME DAY as the release of a compilation by its original label. But in this case, the Amazon customer reviews and ratings are supportive of the band's version, with fans dissing the label's release as "corporate greed." (With the exception of one track, the re-recorded version is also available at eMusic).

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November 10, 2006

The Return of the Sound Alike Album
by David Harrell
Back in the day, one option for cheap music was "sound alike" albums -- knockoff versions of hit albums recorded using studio musicians and vocalists. The issuing label had to pay mechanical royalties on the songs, but by avoiding artist royalties and advances (and keeping recording costs low), it was possible to significantly undercut the price of the original album. I'd see them in the local discount store as a kid -- "Sounds Like the Saturday Night Fever Soundtrack" and "Sounds Like the Bee Gees" are two that I can definitely remember.

Today, the lack of one certain artist in the download stores has opened the door for sound alike digital downloads: I just stumbled across this label in eMusic, which appears to have issued the bulk of the Beatles catalog (plus some Elton John and Conway Twitty?!) on various album releases.

These albums aren't -- in any way -- artistic reinterpretations of the Beatles catalog. (If you're looking for that, check out "McLemore Ave" by Booker T. and the MGs, a track-by-track recreation of Abbey Road.) Like the original sound alike records, they're meant to replace something else that was too expensive or otherwise unavailable. They attempt, with varying degrees of success, to ape the vocals, instrumentation, and production of the original records.

I'm not sure why anyone is downloading them -- they seem like very poor substitutes for the originals, and it's easy enough to rip mp3s from the CDs or to find (free) Beatles tracks online. Yet for all the hand wringing over music piracy, there are actually some folks who are willing to accept these proxy versions of the Beatles, presumably instead of illicit downloads. I can't tell how many times these albums have been downloaded by eMusic subscribers, but, based on the listed "Fans" for each release, there are at least a few.

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November 08, 2006

Wednesday Odds and Ends
by David Harrell
Wednesday Odds and Ends
Steven Levy, author of The Perfect Thing: How the iPod Shuffles Commerce, Culture, and Coolness, is scheduled for an online discussion for the Washington Post. It's a week from today at noon ET, but you can submit questions ahead of time here.

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Medialoper attempts to define piracy.

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And the WSJ on financial planners and musicians, complete with a few "musicians are knuckleheads" quotes:
"They're bad with money," said Barry Feldman, who became an adviser with New York Life Insurance Co. this year after three decades as a record executive. "By the nature of what they do, they don't want to talk to finance and insurance people. They're running from it."

David Steinfeld, an adviser with Raymond James Financial Inc. in Nashville, tells of one client who sold a farm, then bought it back at a higher price six months later because he changed his mind.

"People in the music industry are not always logical people. They run off of feelings," he said.
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November 07, 2006

Hang the DJ
by David Harrell
Hang the DJ
Another WSJ piece on iPods taking business from wedding DJs. Lee Gomes interviews the editor of Bridal Guide magazine:
What about digital music?

A trend now is for couples to create their own playlists on their iPod, and use it for the music and dancing at the reception. I think this would work if it's a smaller, intimate wedding. But I think if you have a large crowd and you really want to have some fun, there is nothing better than having a live band or a DJ. It's much more interactive than you could get from an iPod.

But don't wedding bands and DJs play the same things at every wedding anyway?

There's probably a standard list of songs that are crowd pleasers. But you can work with your band leader or DJ and say, "Look, I really don't want you to play "The Macarena.'"

The wedding industry is often accused of trying to keep people spending lots of money on weddings. Some of the examples you have cited, such as using an iPod, are ways that people can keep costs down.

I think they are OK if you have a very limited budget and you want to have music at your wedding but it's not that important to you to have a DJ or a band. If it's going to be cost effective, then by all means do it. But think of what's important to you, and the kind of atmosphere you want. I certainly don't think couples should go into debt, or take out loans, to pay for a wedding.
related: Killer iPod Monday

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November 06, 2006

Welcome to the Club
by David Harrell
Welcome to the Club
Evidently, eMusic's revenue-sharing agreement is more complex than I thought. In an early post for this blog, I wrote that music subscriptions are like health clubs, where infrequent-users essentially subsidize those members who take full advantage of their subscriptions. However, I later exempted eMusic from this characterization, believing that its revenue-sharing model made it indifferent to the number of downloads each subscriber used each month. I believed it was simply passing on a straight percentage of the subscription fees to record labels, divvied up according to the total number of downloads each month.

But I was wrong. According to this Register story, eMusic's David Pakman acknowledges that "health club" economics do play a role in the company's business model.

So eMusic will see a direct financial benefit from decreasing the number of downloads for each subscription plan. And there are two other ways that the new rate plan might benefit the bottom line. First, it might encourage some current subscribers to upgrade their plan before the changes take effect, to lock into the current rates.

The second benefit is less direct, but in theory, the per-download payments to artists and labels should increase. Which could, as one subscriber speculated on the eMusic message boards, encourage additional labels to make their catalogs available to eMusic subscribers.

However, any changes in per-song payments from eMusic will probably phase in very slowly. Even after the new rates take effect, the vast majority of eMusic subscribers (the current base) will be paying the old rates. I have no knowledge of the specifics of the revenue sharing agreement, but based simply on the changes in the number of downloads, the plan frees up 33% more for labels for the $9.99 plan, 30% for the $14.99 plan, and 20% for the $19.99 plan. Yet to pass on even half of those percentages to labels, eMusic will have to sign up the same number of subscribers under the new plans as it currently has under the old rates, essentially doubling its subscription base.

We don't receive monthly payments from CD Baby from our eMusic sales (they seem to get lumped together for several months) but I'll post any new numbers as soon as I see them.

related: A Price Increase for eMusic, Why Music Subscriptions Are Like Health Clubs, Increased Downloads at eMusic, Per-Song Label/Artist Payout Decreases

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November 02, 2006

More Fish, Smaller Ponds
by David Harrell
More Fish, Smaller Ponds
This NY Times piece on the CMJ Music Marathon frames what I believe to be the central conundrum for today's musicians: The profound shifts in recording and distribution technology mean that an ever-expanding number of musicians (ranging from major-label artists to self-released indie rockers) are all competing for the time, money, and attention of a listening audience that is NOT expanding at the same rate. Growth of available content is outpacing the growth of listening hours.

One consequence is the end of what Robert Christgau calls the "monoculture," especially for music. But that's not resulting in a complete free-for-all in listening and buying habits:
It wasn't supposed to turn out like this. Only a few years ago, the Internet threatened to blur boundaries of genre and culture making it easy for listeners to fill their iPods with whatever caught their fancy.

But listeners of all sorts like having what Mr. Christgau called a shared experience. That's why the old monoculture flourished in the first place. And today's indie-rock fans have something that's smaller yet similar: a mini-monoculture. That is, a robust infrastructure of Web sites and blogs, along with a (necessarily vague) consensus about what indie-rock sounds like.
Twenty years ago, many bands aspired to be the next R.E.M. Today, the goals are more modest, as captured by this bit in the Times piece:
Even more than usual downtown Manhattan is full of bands most people have never heard of, hoping to emulate the success of other bands most people have never heard of.
Which isn't necessarily a bad thing -- getting the attention of a few bloggers and generating some download traffic is certainly a more reasonable goal than getting signed to a major label and selling a million records. And there's room for more bands to do so. But it's still a competition, and -- Long Tail or not -- only a small percentage of artists will "succeed" at any given level. (Thanks, Porter, for the link.)

related: The Long Tail, the Fat Middle, and Tiny Slices, A Little Is Enough (my guest post for Shake Your Fist), An Interview with Robert Christgau (PopMatters)

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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