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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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January 31, 2007

The Convergence of Download and CD Prices
by David Harrell
Over at the Big Picture, Barry Ritholtz asks if the $9.99 iTunes album price is driving down the prices of CDs. He quotes from an e-mail from an anonymous music industry friend:
The biggest thing driving prices to $9.99 is iTunes. Physical retailers are pressuring the labels downward on price (of course, Wal-Mart is the biggest culprit) because they don't want to be undercut by iTunes 9.99 on all single albums. We're rapidly moving to a 9.99 world on the big sellers (the ones stocked in Target and Wal-Mart and Best Buy).

To accomplish this, I am told, particularly on new releases, the labels are doing what they historically did in the physical world and buying into "retail" programs -- in essence, paying for price and positioning or other marketing tools on Amazon by giving them functional breaks.
I've been tracking the prices for the top 25 albums at iTunes (and comparing them to Amazon.com prices) for the past few weeks for research piece I'm working on. (Look for a lengthy post on it in a couple weeks!)

Until then, here are a few quick stats:

On Friday, 1/19, 10 out of the top 25 albums at iTunes were available for the same price at Amazon.com ($9.99). And another three albums were actually cheaper at Amazon, though the iTunes versions for two of them included bonus tracks or videos. I saw the same thing on Friday, 1/26 -- 10 albums for $9.99 at both iTunes and Amazon and four releases from the top 25 at iTunes were actually cheaper at Amazon, albeit in slightly different form.

Of course, that's ignoring shipping charges for the Amazon.com purchases. But a large number of Amazon customers either qualify for free shipping via a $25+ purchase or they've signed up for Amazon Prime. While Amazon Prime costs $79 a year, once you've paid for it, there's no incremental shipping costs for any purchase.

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January 30, 2007

The Growing Conflict: iTunes vs. Retailers
by David Harrell
What do indie record stores think of iTunes exclusives like this live Decemberists EP?

Not much. From a recent Coalition of Independent Music Stores e-mail by Don VanCleave:
I checked my Blackberry to find that iTunes has an exclusive with the Decemberists. It is an in store recorded at the swank (with all due respect) Soho location a few months ago. Now, this is a band that has LIVED at indie retail forever. Even at Capitol, we have made a very important contribution to the sales of The Crane's Wife. Our Capitol folks have been very supportive. We have been pounding the Decemberist's management and label for the same type of cool product for the past two years. I even cornered the lead singer, at LaGuardia for a few hours to explain our game. Guess what? Seems EMI UK has this policy that exclusive content only can be granted as DIGITAL content. Oh, I see. It is easier to deal with the retailers who are paying a small increment of your income instead of the retailers who are paying the bulk. It is also amazing that you would grant exclusive content to the very channel that is NOT replacing your lost income dollar for dollar. Keystone Cops indeed.
It's just going to get worse. Any medium-sized indie band will be hard-pressed to say "no thanks" to an offer from Apple/iTunes, but it means pissing off the retailers who have been the most supportive of their releases. I love indie record stores, but I'm not optimistic about the next five years.

Also from the same CIMS e-mail (sorry, no link, not available online):
On the digital side, we fully intend to sell music. However, we have watched one idea after another throw tons of money at the concept with only one winner -- Apple. We are only interested in launching a digital service that is DRM free. Hopefully we will get on the map in the coming year with our ideas. One thing is for sure; we have amazing brands in many parts of the country. Trusted brands that will continue to be a filter for fans of music. Even though the Internet is world wide, we find that many people are using it locally. I hear constantly from owners who report amazing response to their email blasts about what is happening in the stores and from customers who actually check stock levels online before driving to their favorite music emporium.
related: The Death of the Record Store

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January 29, 2007

The Distribution Curve of iTunes Purchases?
by David Harrell
Definitely not a random survey, but there are some folks on the iLounge message boards who have purchased an insane amount of music from iTunes:
I have purchased about 600 songs off of the iTunes Store, 2 movies, 56 music videos, two TV series (season 10 of South Park and season 2 of Ghost Hunters), and one game. I think I have spent around $800 on purchased items. Then again, I started purchasing songs back in 2003 so some of them are pretty old.
Guess I'm helping to drag the curve down to the 20-track average from last year's Forrester report that caused all of the commotion -- over the past three years, I've purchased exactly seven tracks from iTunes.

Which makes me wonder if that 20-track average really comes from a handful of big buyers and a "silent majority" of iPod owners who purchase close to zilch from iTunes. If anyone out there has actually read the Forrester report, I'd love to know if it provides any data beyond the average -- the median, a distribution curve, etc.

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January 26, 2007

Friday Fun: The Beatles Love the Rolling Stones
by David Harrell
Why I love YouTube -- reason # 437: As a mildly obsessive Beatles fan, I knew that Paul McCartney and John Lennon had sang backing vocals on "We Love You," the 1967 psychedelic single by the Rolling Stones. But I had never heard the song in its entirety until I came across the video for it on YouTube:



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January 25, 2007

Genre Trends at eMusic: It's Hip-Hop Country
by David Harrell
Most of my eMusic downloads are indie rock offerings, so I guess that's why I've chauvinistically assumed everyone else is downloading the same. And the daily top downloads chart is often dominated by indie rock albums.

Yet if you look at the top downloads for the month, you'll see mostly hip-hop and country. For the past month, the top ten includes four rap or hip-hop offerings and four country or bluegrass albums. Which is probably a better reflection of overall music-purchasing trends in this country, though I had suspected that eMusic's subscriber base skewed somewhat toward rock and alternative.

I was going to write that the trend's the same for the most downloaded chart as well, but the results are identical for both charts, which leads me to believe that the "most downloaded" chart is based only on the past month, as opposed to an actual cumulative chart.

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January 24, 2007

An iTunes Workaround
by David Harrell
In this Slate piece on Japan-only iTunes offerings Paul Collins reveals a workaround for buying iTunes songs in countries where they're not legally available:
Meanwhile, a back door has appeared in the Music Store itself: While iTunes Japan pegs foreign undesirables from their credit card numbers, it can't screen fake Japanese addresses provided by prepaid iTunes Card users. There's a small but ardent underground economy among Americans in dummy addresses and e-mailed scans of Japanese iTunes Cards, picked up by friends in Tokyo convenience stores or openly sold online.
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January 23, 2007

Radio Radio
by David Harrell

Slightly off-topic, but Marc Fisher had a great article in Sunday's Washington Post about audience research for radio stations:
The bigger picture, however, only grows fuzzier. As young people choose to discover, share and collect music via iTunes, blogs and MySpace, decades of music research suddenly seem irrelevant. If listeners can create their own music stations, what will radio's role be?

Wrong question, many radio executives contend: Choice is overrated; most people don't want to spend their leisure time sifting through hours of mediocre tunes in search of their new favorite. They just want someone to deliver the music they love. The trick for radio is to find a way to capture the spirit of the Web -- the interactivity, the flattened hierarchy, the sense of empowerment -- while maintaining radio's traditional authority ("The hits from coast to coast," "The hits just keep on coming").
And there's some good bits from yesterday's online chat about the article:
Bowie, Md: Imagine if the restaurant industry operated like the radio industry. All we would have to eat is hamburgers, hot dogs, and pizza.

Marc Fisher: All too true.
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January 22, 2007

Songs, Albums, Books, Chapters
by David Harrell
Songs, Albums, Books, Chapters
The WSJ's Jason Fry on digital downloads, the album experience, and changing music-listening habits -- and if the same thing might happen to books:
Personally, I like it better this way: Many musicians have a sublime song or two in them; not nearly as many can pull off a great album. And in the CD era, albums have become too long -- when I was a kid, an LP that lasted more than 45 minutes was rare and, truth be told, somewhat annoying. (It took up more than one side of a 90-minute cassette tape, meaning you had to cut a song.) CDs are great for reissuing old albums with additional tracks, but with new albums they seem to encourage bloat: Songs that once would have been left in the studio now clutter up the works. (Your mileage may vary, of course -- like I said, I'm a song guy.)
For me, it's not the availability of individual songs that has changed my listening habits -- it's the iPod itself that's destroying my patience for the album. It's just too easy to jump to the next track.

Thanks, Porter, for the link.

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January 19, 2007

Bargain Downloads from Wal-Mart
by David Harrell
Bargain Downloads from Wal-Mart
For a few select titles, Wal-Mart now sells 48 cent downloads:

48 cent downloads from Wal-Mart


Except for subscription-based services (eMusic) this is by far the cheapest per-song price available for digital downloads. There is -- of course -- one HUGE drawback:
The Apple iPod and Microsoft Zune digital media players do not currently support protected WMA-format files, and will not play Wal-Mart Music Downloads.

Walmart.com has a large selection of WMA-/DRM-compatible digital music players available at great prices.
I love the implied optimism by the use of the word currently in this explanation. Yet given Wal-Mart's marketing muscle (and ability to squeeze vendors and keep prices down), I can't help thinking a Wal-Mart branded player, combined with cut-rate prices for the entire download catalog and/or a bargain subscription service, could be a formidable competitor. Not a serious threat to iPod/iTunes (no kid's going to want a Wal-Mart player) but I don't see why Wal-Mart couldn't grab a big chunk of the remaining market share. Apple will get the consumers who aren't price sensitive, everyone else is the target audience for Wal-Mart.

Then again, cut-rate prices for the entire catalog would require big concessions from the major labels, which doesn't seem likely. And while it makes a lot of sense to sell retail CDs as loss leaders to get people inside a store, there's little logic for selling downloads at a loss.

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Friday Fun: The Beatles Come to Town
by David Harrell
Friday Fun: The Beatles Come to Town
Rumour has it that the Beatles are finally coming to iTunes. Dial up the wayback machine to 1963 for this newsreel feature, The Beatles Come to Town:



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January 18, 2007

Thursday Odds and Ends
by David Harrell
Thursday Odds and Ends
Over on the eMusic message boards, subscribers speculate about if/when major label material (and some big indie holdouts like Barsuk and Sub Pop) will show up in the eMusic catalog.

---------

A great post from last month: Swindleeeee examines the strengths of an Amazon.com music service vs. eMusic:
As a "long tail" Internet retailer Amazon already sells a lot of music from independent labels, certainly significantly more than the three retailers ahead of it in terms of overall market share (Wal-Mart, Best Buy, and Target). Amazon thus already has a built-in audience for selling digital downloads from independent labels, and thus the lack of major label content would not hurt it as much as it would others.
And Paul Lamere has some good thoughts about Amazon as well. According to this Hypebot story from December, Amazon just recently started contracting with the major labels. The CD Baby catalog of small labels and self-released musicians was actually delivered to Amazon.com back in September.

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January 17, 2007

Today's WSJ
by David Harrell
Today's WSJ
Holman Jenkins on the Cisco/Apple spat over the iPhone name:
In his blog, Cisco General Counsel Mark Chandler plays to the gallery with talk about mom-and-Apple-pie values such as "interoperability" and "open" standards. He says Cisco's goal is not to shake loose some money, but to start a "collaboration." Of course, if such a partnership were appealing to anybody but Cisco, Cisco would hardly need to extort Apple's agreement by putting a gun to the head of its six little hostages. Because that's all Cisco has to offer -- those six little letters. In return, it wants a piece of the wholly owned money machine that Apple has created by convincing so many consumers to lock themselves into Apple's world and pay a hefty markup for the privilege. Collaboration is not Apple's game -- the company has been determinedly building its present prosperity on the closed standards of the iPod and iTunes. Cisco's proffer, in other words, is the equivalent of slipping and falling on Mick Jagger's sidewalk, then trying to parlay it into a place in the band (with royalties, of course).
And Lee Gomes writes about new milestones for disk drives and flash drives. My not-so-bold prediction: You'll be able to buy "lossless" downloads from iTunes and other download stores by 2010. Just like remastered CDs -- another chance for consumers to buy enhanced versions of content they already own...

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January 11, 2007

Gift Card Economics
by David Harrell
Over the holidays, I noticed that Target was selling $30 iTunes gift cards for $25, which would bring your single-song download price to less than 84 cents. But the discounted cards probably aren't a loss leader for Target -- Apple will discount song codes if you purchase at least 100,000 songs and I'm assuming it offers a similar price break gift cards for retailers.

I can't seem to find any public information on the actual discount amount, though Apple can only go so low before it loses money on the transaction, as it pays approximately 70 cents to labels/artists for each single song download. But that's assuming the gift cards are actually used in full, which often isn't the case. According to this NY Times piece by Stephen Dubner and Steven Levitt, there's a breakage rate -- on average -- of at least 10%:
As for gift cards -- well, let's just say there is good reason that they are known within the retail industry as a stored-value product: they store their value very well, and often permanently. The financial-services research firm TowerGroup estimates that of the $80 billion spent on gift cards in 2006, roughly $8 billion will never be redeemed -- "a bigger impact on consumers," Tower notes, "than the combined total of both debit- and credit-card fraud." A survey by Marketing Workshop Inc. found that only 30 percent of recipients use a gift card within a month of receiving it, while Consumer Reports estimates that 19 percent of the people who received a gift card in 2005 never used it.
So even if Apple offers a large discount to retailers on gift cards, it might come out ahead on the average download "price." As noted in this post from last year, Napster has begun to realize the revenue from such digital breakage.

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January 04, 2007

The Nice Price Comes to iTunes
by David Harrell
The Nice Price Comes to iTunes
As this blog and others have noted, the $9.99 iTunes album price is often more than the cost of the physical CD, especially for older catalog albums. At Amazon.com, for instance, you can find hundreds of discs selling for less than $7.99. Given the trade-offs associated with digital downloads (lower sound quality, no artwork, etc.), paying a premium rate for the iTunes version seems a steep price for the convenience (and instant gratification) of the downloadable version.

But iTunes is now selling a slew of greatest hits collections for $7.99 -- Queen, Journey, R.E.M., Simon and Garfunkel, etc. -- in some cases significantly undercutting the Amazon.com price: Queen's Greatest Hits, Volumes 1 & 2 is selling for $19.99 at Amazon, but you can pick up all 34 tracks in iTunes for less than half that price. (Not sure when this happened, but I think it's a recent change -- just noticed it today.)

I think this new pricing strategy makes a lot of sense and it might even minimize the "cherry picking" effect, as $7.99 isn't too much more than the cost of three or four individual song downloads. It'd be interesting to see what would happen with a $4.99 price point...

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The Future of Movies
by David Harrell
The Future of Movies
This is video, not audio, but David Denby has a great piece in this week's New Yorker about differences in the viewing experiences for the iPod, traditional film, and digital movies, as well the economics of filmmaking and promotion in the day of digital production and distribution:
The device was as elegant as an old cigarette case and not much larger than a child's palm. I was holding a video iPod, poised at the frontier of a new digital age, a new platform for movies, a new convenience that will annihilate old paradigms. Last spring and summer, when I visited a number of executives and tech guys in big-studio Hollywood, I kept hearing disdain for the mall cinemas and the multiplexes -- the theatres in which most Americans see movies. And I heard a new mantra: "Content on demand -- when you want it, where you want it, and how you want it." By the end of the summer, movies were beginning to flow into homes and portable devices through the Internet. In September, Apple began offering previously released Disney movies through its iTunes Store. I downloaded the first "Pirates of the Caribbean" onto my hard drive, then put it onto a video iPod. The screen was only two inches across.

If you are sitting down, the natural place for an iPod is in your lap; that way, your arms don't get tired. At that distance, however, I couldn't focus on the image. So I rested the iPod on my stomach. And there it sat, riding up and down every time I took a breath. I was on the Black Pearl, all right, standing on her foredeck like a drunken sailor as she plowed through heavy seas. The horizon line kept pitching and heaving, and I had trouble seeing much of anything. "Pirates" has lots of wide vistas and noisy tumult -- a vast ocean under the dazzling sun and nighttime roughhousing in colonial towns, with deep-cleavaged prostitutes and toothless drunks. What I saw, mainly, was a looming ship the size of a twig, patches of sparkling blue, and a face or a skull flashing by. The interiors were as dark as caves. My ears, fed by headphones, were filled with such details as the chafing of hawsers and feet stomping on straw, but there below me Johnny Depp and Orlando Bloom were duelling like two angry mosquitoes in a jar.
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January 03, 2007

Coming Zune
by David Harrell
Coming Zune
CD Baby, the online retailer that also provides digital distribution for self-released musicians, has begun delivering its catalog to the new Zune music store. (One of our albums was sent on 12/27.) I'll TRY to report back when the album becomes available there, but my initial attempt to install the Zoom softward was a disaster and I haven't had time to do the various updates that it will require...

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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