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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May 29, 2008

The New Dime Store, Part 2
by David Harrell
A few more thoughts on the new "rental" option from Lala.com:

The "pay once and stream forever" model does alleviate one supposed consumer concern that's mentioned in most analyses of why "rental music" (the subscription model) hasn't taken off: The fear that -- if you ever cancel your subscription -- you lose all of your music and have nothing to show for all the money you paid.

I've never really thought this to be a valid issue -- it's seems akin to complaining that you can't watch HBO and ESPN if you cancel your cable subscription. Besides, you can always re-subscribe and gain full access to the catalogs of the subscription services. But, if that concern really held some consumers back from streaming subscriptions, the new Lala.com plan should be appealing. Though, as Michael Robertson points out in his analysis, purchasers of the dime streams are reliant on the continued existence of both Lala.com and this particular business model. Coolfer's take, which I agree with, is that it's unlikely for anyone to be too worried about losing something they paid a dime for.

Also, I'm very curious about how record labels will be compensated for these "purchases." I haven't read anything yet about how that dime is split with the labels, but assuming that the percentage breakdown is similar to iTunes, labels would receive approximately seven cents for every dime purchase.

Based on the payouts I've seen for my own band via CD Baby's digital distribution, Rhapsody and Napster pay at least one cent every time a subscriber streams a song. (There appears to be different Napster payout rates for the ad-supported free streams and streams by paying subscribers). So whenever a Napster or Rhapsody subscriber streams a specific song seven times or more, the label receives more than it will likely receive from the one-time payment from Lala.com.

Yet that comparison assumes it's strictly an "either or" proposition, and that the two models are competing for the same exact same consumers, with Lala.com dime purchases coming at the expense of repeated downloads within the previous subscription services. Given the relatively limited market share of the standard subscription models, it still makes sense to reach as many music consumers as possible, even under compensation plans that might pay less. (Warner Music Group is a major investor in Lala.com, so it's clearly on board with the revenue split, whatever it is...)

And -- of course -- labels have long accepted different levels of compensation to reach different digital music consumers -- 70 cents for 99-cent downloads from iTunes and Amazon.com MP3, 20 to 33 cents for downloads from eMusic subscribers, and so on.

BTW -- I spend a bit of time with the site today. Availability is somewhat hit or miss, but I'm impressed. It's easy enough to add songs and listen to them. (Still working on my 50 free songs, so I have yet to fork over a dime...). There's also the option to "upgrade" many of the streamable songs to mp3 for an additional 79 cents, which the makes the purchase of dime stream an attractive alternative to purchasing a download from iTunes or Amazon.com MP3. If the streams are enough, you've saved (on a percentage basis) a lot of money, and you don't pay a penalty for opting to purchase the mp3 at a later date.

related: The Latest from Lala: The Return of the Dime Store

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May 23, 2008

The Latest from Lala: The Return of the Dime Store
by David Harrell
I received an e-mail today from Lala.com, touting the new features it will roll out next week as part of a site redesign. You can preview it here.

The big one is the new "a la carte" streaming option, where you pay 10 cents for the right to stream a single track as many times as you want:

new lala.com site

As far as I know, this sort of thing hasn't been done before, and it creates some interesting math in comparison to the other subscription services. Currently, you'd pay $12.95 for a Napster streaming subscription and $12.99 a month at Rhapsody, giving you the right to stream the entire catalogs of each service. (It's a couple bucks more if you want to transfer tracks to a portable device.)

The question is -- how do consumers use subscription services? Are they sampling thousands of different tracks or simply using the service to repeatedly stream a smaller number of their favorites?

If it's the latter, the new Lala model is preferable. For the cost of a traditional "all you can eat" subscription plan, you could "buy" 130 tracks a month or more than 1,500 a year. If you tend to listen to a relatively small number of songs, paying a dime a piece for them makes a lot of sense. And you also have the option of stopping -- you can build up a library and add to it only when something new appeals to you.

Yet everything I've read suggests that the current audiences for subscription services fall into the former category -- music fanatics who might well listen to thousands of tracks in a given year. Which makes the "all you can eat" plans a better option.

But maybe it's not a matter of competing for those listeners. The new Lala model might appeal to music fans who have little interest in the standard subscription options, but who might find the dime-a-song approach for streaming very appealing. Even if 13 bucks a month isn't that much money, signing up for any ongoing monthly charge is always somewhat daunting. If part of the success of the iTunes store is the impulse purchase-friendly price of 99 cents, I can't help thinking that a digital dime store will find an audience as well...

tags:

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May 21, 2008

Amazon's Blue Light MP3 Special
by David Harrell
That $1.99 Van Morrison album I bought on Friday is back to its regular price, but it looks like Amazon.com MP3 -- in addition to its weekly $5 deals -- now has a regular daily special:

Amazon MP3 special

Yesterday it was a Green Day collection for $2.99, today it's a live album from BB King for $3.99.

A few quick thoughts:

Selling $1.99 or $2.99 albums probably isn't a money maker for Amazon. But these specials will no doubt encourage some impulse purchases, possibly by first-time buyers of digital music. Plus, the daily special aspect creates a strong incentive for music fans to visit the Amazon MP3 page every day.

Also, while this is pure conjecture on my part, I'm thinking that Amazon might be planning to use the sales numbers from these weekly and daily specials to convince the music labels that there actually is a price elasticity of demand for music.

That is, if Amazon can demonstrate that the deep discounts result in enough additional sales to actually increase the total dollars spent, it could persuade labels to embrace a standard digital album price in the $5 range, as mentioned in that recent Fortune article.

Though any additional sales would be partly driven by the perception of the bargain, and the need to purchase immediately to receive it. If the sale prices become the default, there's less incentive to buy today.

related: Is Amazon MP3 Thinking Elastic?

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May 19, 2008

Feeling Kinky
by David Harrell

The Kinks banner

I've been on a Kinks kick as of late, and it's not a habit that can be fully satisfied with digital downloads. Via eMusic, you can download pretty much everything starting with the late 1971 release "Muswell Hillbillies". Which gives you the scattered classics from the Kinks' early- and mid-70s catalog and some brilliant tracks from the late 70s and early 80s. ("Better Things" and "Heart of Gold" are a couple of my faves.)

But you're out of luck when it comes to the band's early classics and late 60s masterpieces such as "Village Green Preservation Society." You can't find them in the iTunes store, aside from a few scattered "album-only" tracks on soundtrack releases, and Amazon.com MP3 has far less Kinks than eMusic. Rhapsody actually has some pre-1971 tracks available for streaming as part of some compilation albums, but again, the original albums aren't available for download.

I'm assuming the licensing issues here are a real mess. In his entertaining memoir, Dave Davies says that the band's business contracts in the 60s were typically chaotic. Perhaps Pye Records and/or producer Shel Talmy are simply sitting on the download rights to the band's early material.

So I ended up buying this CD compilation and will probably pick up "Village Green Preservation Society" and "Something Else" on CD as well. Obviously, I'm ignoring the P2P option...

How about you -- anything you've tried to download recently that isn't available from any of the online stores or services?

Please leave a comment or send me a note and I'll compile a list of "still not available digitally" artists for a post later in the week.

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link 2 comments e-mail listen to the Layaways on Spotify




May 16, 2008

Bargains and Widgets from Amazon MP3
by David Harrell

Amazon.com mp3 banner

Excuse me if I sound like a total Amazon MP3 fanboy, but -- for a small number of albums -- Amazon is getting very aggressive with its pricing. In addition to its weekly $5 specials (this week's bargains include Zeppelin's Houses of the Holy and the Postal Service's Give Up), Amazon is actually selling a few select mp3 ALBUMS for $1.99! (That's what I just paid for Van Morrison's Astral Weeks.)

My guess is that these ultra-bargain albums are essentially functioning as loss leaders to prime the pump for the MP3 store -- I can't see how Amazon's making money on a $1.99 album download, unless the involved labels are forgoing the usual payout rates. (While the nominal per-track prices at eMusic are similar to Amazon's bargain prices, those figures are somewhat deceiving because eMusic subscribers -- on average -- only use around 50% of their allotted downloads each month. Hence, this "digital breakage" allows eMusic to pay labels, via its revenue sharing agreement, a per-track amount for each download that approaches -- or even exceeds -- the average per-track price that the subscription plans suggest, while keeping a similar amount for itself...)

Amazon also rolled out some mp3 widgets this week that allow web publishers and bloggers to embed any track from Amazon's mp3 catalog on any web page and receive a 10% commission on click-through mp3 purchases:



This could be huge, as it seems like many websites and most blogs already have associate links to Amazon products. If the mp3 widgets are similarly embraced, it means that millions of web pages could soon feature music samples that readers can easily purchase as mp3 files.

After the NPD report came out last month, much was made over the fact that Amazon's initial share of the digital music market hadn't come at the expense of Apple's iTunes store. Some commentators seemed to think that this failure to capture iTunes customers was somehow a major negative for Amazon. But market share is market share, and the existing digital music market is still relatively small. So it doesn't matter if Amazon never poaches a single iTunes customer -- the biggest growth potential for digital downloads comes from consumers who aren't yet purchasing downloads. And it seems like Amazon.com is better positioning itself to capture those consumers by converting its current CD buyers into purchasers of downloads and giving bloggers an incentive (and easy way) to link to Amazon's mp3 catalog.

Apple, of course, has an affiliate program for iTunes and provides a few iTunes widgets. But as far as I can see, the widgets aren't designed for affiliates and are limited to displaying music and video content you've already purchased or reviewed. They're billed as ways to share information with friends and appear to be separate from the affiliates program.

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May 15, 2008

Thursday Odds and Ends
by David Harrell
This year's Bandwidth Music + Technology conference will be held on August 14 & 15 in San Francisco. More details and scheduled speakers are here.

It's a year old, but this Swindleeeeee post on how labels could optimize eMusic and non-eMusic sales is still relevant.

And a reader proposal for an improvement for mp3 ID tags sparks a whole list of ideas for tags and iTunes upgrades.

tags:

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May 13, 2008

In Rainbows, Now at eMusic
by David Harrell

eMusic banner

Back during Radiohead's "name your own price" experiment for the download of "In Rainbows," I opted for a cheapskate price. I paid $2.50 for the album (plus the service fee), the equivalent of the "eMusic price," based on my 40 downloads for $9.99 subscription. Guess what showed up today in eMusic?

While my initial instinct was to write that anyone who paid more than the eMusic price overpaid, that logic ignores the six-month wait for the budget price.

Perhaps eMusic will become -- in part -- an online music version of the second-run movie theatre. It seems to be a form of price discrimination that could help labels and artists maximize "full price" sales while also picking up business from the casual fan who is unlikely to pay as much.

related: Second-Run Movies, In Rainbows, Now at Amazon.com, Economists, Radiohead, and Bob Mould, Pre-Ordering Radiohead

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May 08, 2008

More Stones and eMusic
by David Harrell

eMusic banner

An eMusic subscriber has a funny -- but somewhat plausible -- theory:
Regarding the Stones, I have a conspiracy theory. Yancey mentioned that they consulted ABKCO and UMG, but didn't say anything about getting a sign-off from the Stones themselves.

I have this scene in my head of Mick and the boys hanging out in some 25-star hotel suite somewhere. Mick is reading blogs (as I'm sure he always does) and comes across a mention of the Stones catalog on sale at eMu for $0.33 per track. Outraged, he yells over to Keith, "Richards! Stop snorting your father's ashes and get on the phone to our manager. We're the Rolling freakin' Stones. We don't discount our music. EVER."

And that's how the Stones catalog got pulled from eMu.
related: No More Stones, Like the Beatles in '64

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May 07, 2008

Is Amazon MP3 Thinking Elastic?
by David Harrell

Amazon.com mp3 banner

Some interesting bits from Josh Quittner's recent Fortune story on Jeff Bezos and Amazon.com:
Bill Carr, Amazon's VP of digital media, would only say that the MP3 downloads business is "going very, very well." But the music industry folks I talked to say they like what they see, both in terms of sales volume and, even more important, the way Amazon sells digital music. One exec I know at a big label, who asked to remain anonymous, says he's excited by one trend in particular: At Apple's iTunes store, two thirds of the music sold is single tracks and one third is albums. But at Amazon, two thirds of the music sold is albums and one third is tracks. "It's fantastic," he says. "We make a bunch more money from albums than if you buy one track at a time."

My friend said his label's experience with Amazon could well point to some relief for the music industry down the road: "As soon as we wise up and realize that online albums are worth about $5, the music industry will be fixed."
That two-thirds albums/one-third tracks stat is remarkable, though I'm not too surprised by it. Many of those purchasers probably went to Amazon.com with the intention of purchasing a CD and then opted for the less-expensive mp3 version of the album. And the iTunes/Amazon.com MP3 comparison of albums vs. single tracks seems to mirror the demographic breakdowns from the days of vinyl, when younger music fans (the iTunes audience) purchased 45s and their older siblings and parents (Amazon.com MP3) bought LPs.

Also, while that unnamed big label music exec doesn't say so explicitly, his statement that $5 album downloads will fix the ailing music industry seems to indicate a belief that a price elasticity of demand exists for recorded music.

Maybe Amazon.com is coming to that same conclusion, or is at least willing to test the idea. Earlier in the week, I received an e-mail from Amazon.com announcing a weekly special for the month of May -- $5 mp3 album downloads. Last week's specials included this Tom Petty Greatest Hits set. The 18-song album is back to its regular $7.99 price now (same price as the CD), but when selling for $5.00, the per-track cost worked out to just 28 cents -- a price that's in eMusic territory...

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May 05, 2008

No More Stones
by David Harrell

eMusic banner

It was fun while it lasted, but eMusic yanked the Rolling Stones (and other ABKCO releases) from its catalog. (Thanks to ConceptJunkie for info!).

From the message board post by an eMusic employee:
Before posting the ABKCO catalogue on eMusic at the beginning of April, we pursued every level of due diligence possible. We triple- and quadruple-checked with every possible party at both ABKCO and Universal Music Group, which distributes the label, and the word was unanimous: let's do this. Green-lit, we proceeded to do what we do best: we got the best writers in the world to put it in context, and we presented the catalogue to you with an impressive amount of musical and historical background. ABKCO and UMG were both incredibly impressed by both the treatment and the sales: the catalogue (even stuff beyond the Stones) generated a huge number of downloads.

But this was not enough. Due to events outside of our control, we are being forced to remove the entire ABKCO catalogue from eMusic effective tomorrow morning. We hope to get them back at some point, but for now, we have no choice.
As I've written before, the effective per-song payout rate from eMusic varies, based on the total number of downloads by subscribers each quarter. But the most recent payouts I've seen for my own band are approximately 33 cents per track, a little less than half of the standard iTunes payout of 70 cents per track.

Yet given the popularity of the Stones catalog with eMusic subscribers, it seems likely that eMusic downloads were generating a significant revenue stream, one that didn't exist before the addition of the tracks to eMusic.

Perhaps the unknown party who nixed the deal feared that the eMusic downloads were cannibalizing higher-margin downloads from iTunes and Amazon MP3. But even if they were, the revenue loss would probably be more than offset by downloads by eMusic subscribers who previously had no interest in paying for Stones downloads. (Count me among them -- I nabbed "Child of the Moon," "I'm Free," "We Love You" and some other obscure singles and B-sides that I didn't own on CD, and never felt inclined to purchase at 99 cents a track...)

related: Like the Beatles in '64, Increased Per-Song Payouts from eMusic, More On eMusic Payouts

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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