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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July 30, 2008

Buying Free Music
by David Harrell

NIN

Nine Inch Nails' "The Slip" has been available as free download from the band's website since early May. But enough eMusic subscribers have downloaded a paid version (released last week) to push it to the #15 spot on the daily download chart.

The eMusic subscriber reviews for the album reveal two sentiments -- "don't waste your downloads on a free album" vs. the "I want to support the band so I'm going download it again via eMusic" school of thought:
"i'm not saying you shouldn't get this album, just know that it's available for FREE on NIN's website."

"I downloaded this from nin.com, but will get it here..."

"it's a good album, and throwing the meagre cost of these downloads their way is the least you can do to thank Reznor for joining the eMusic fold."

"People, as much as I support Emu, The Slip is available for FREE from nin.com. You don't need to spend 10 dls on this."
I'm no expert in the psychology of purchasing decisions, but I've always thought the eMusic subscription model was ideal for encouraging music fans to "purchase" something they already own. Because your monthly allotment of downloads is already paid for, you're not pulling money out of your pocket for each specific download decision. Hence, it seems a little easier to be generous and "buy" the eMusic version, either for sake of convenience or to support an artist. While I haven't downloaded "The Slip" from eMusic, I'll often download songs that I first obtained as free mp3s from band websites, Insound, betterPropaganda, etc., basically treating my eMusic subscription as a mini-patronage system of sorts for indie bands. If an act is self-released, eMusic downloads are an incredibly efficient way to transfer money to them -- they can actually receive more for each download than the per-song rate the subscriber is paying. (Because most subscribers don't use their full allotment of downloads each month, the per-song payout rate from eMusic, as determined by its revenue-sharing agreement, is inflated beyond the nominal per-song price implied by the monthly subscription prices.)

The album is also available as an mp3 download from Amazon.com (and there's a CD version with a bonus DVD), but it ranks considerably lower on the daily album download chart -- it's currently #80.

UPDATE -- Coolfer notes that the album was near the top of the Amazon chart when it was priced at $5. The album is also available in the iTunes store for $9.90, though it's currently not among the top-100 albums. The customer reviews there offer a similar mix of "don't waste your money" and "download it to support Reznor" comments.

Perhaps the difference in chart positions provides some evidence of the difference between using pre-paid eMusic downloads and making a specific purchase decision within the Amazon mp3 store, though given that the album is considerably less expensive for eMusic subscribers, it's not surprising that they're more likely to download it. There's also the issue of the respective catalogs of eMusic and Amazon.com. When "big name" artists or albums show up in eMusic, they frequently shoot to the top of the download charts.

tags:

link 4 comments e-mail listen to the Layaways on Spotify




July 28, 2008

Odds and Ends
by David Harrell
Former Tower Records COO Stan Goman, on his new job -- running a small copy and printing shop:
"I'll tell you, it beats buying records for $12.03 and trying to sell them for $9.99."
How to save the music industry? Just put more people in jail:
"I have dodged every conventional bullet that has hit most music retailers," Paris says. "I don't have to worry about downloading, legal or illegally. The beauty of it is that prisoners don't have Internet access and never will."
Via Freakonomics.

And this would be a great development: According to this message board post, CD Baby will soon allow coordinated release dates for physical CDs and the iTunes version of the album. (Currently, CD Baby sends the files, but it's basically a waiting game at that point for an album to show up in iTunes and other digital retailers. I believe it's the same for TuneCore distributed works, at least for smaller acts.)

tags:

link 0 comments e-mail listen to the Layaways on Spotify




July 24, 2008

Giving It Away: A Call for Ideas
by David Harrell
After many delays and a couple mini-catastrophes -- we literally lost the ProTools files for the mixes of three songs (don't ask...) and a camping accident temporarily sidelined our drummer -- the third Layaways album is nearing completion. We've set a mastering date for early September and the album will be out sometime in October.

As discussed in this post from last year, while it will be available on CD and from all of the major digital retailers, we also want to give it away in some form. The question is -- how should we do it? Or, more specifically, is there something an unknown, self-released indie rock act can do beyond posting some free mp3 files and hoping for the best, in terms of attention and web traffic?

Alternative pricing strategies get the best results when they're used by acts that are already relatively well known: Radiohead's "pay want you want" experiment received the attention it did not because the idea was new (it wasn't), but because one of the biggest, best-known acts in the world embraced it. Pricing the new Paul Westerberg "album" for 49 cents was a brilliant idea (it's now sitting at the top of the Amazon.com mp3 album chart) because it's a Paul Westerberg album for 49 cents. And Harvey Danger received a fair amount of attention for its album giveaway in 2005, but they're a former major-label band that had a decent-sized radio hit in 1998.

Given the ubiquity of free music these days (full albums and individual tracks, both authorized and unauthorized), it seems that music acts at all levels are vying less for the dollars of listeners than for their time and attention. Every "free" or "pay want you want" music release simply adds to that competition and -- with the novelty factor declining -- free alone is less likely to attract attention, especially for unknown acts. Still, while it's doubtful that our decision to give away an mp3 album will generate much buzz, I can't think of any major downsides to doing so.

Here are a few of the approaches we're considering:
All 12 tracks are available for free download, from day one and forever.

A 12-week campaign where only one track at a time is available for download, similar to the promotion for the upcoming release by the Pretenders.

The "get it while you can" approach -- the entire album is available in week one, then one fewer song is available in each subsequent week until we're down to just one free song.
The other question is whether or not to require registration or an e-mail address before letting folks download tracks. My inclination is skip registration -- if the idea is to get as many listeners as possible, why put up any barriers?

If you have any additional suggestions, comments are open and all ideas are welcome. Not just for my band, but any thoughts relating to the merits of giving it away for artists at every level of the music industry food chain.

Is offering free music -- alone or with options to purchase -- a viable promotional strategy, the new norm for the industry, or just an economically-unsustainable gimmick with diminishing future returns? Please chime in...

tags:

link 6 comments e-mail listen to the Layaways on Spotify




July 22, 2008

Long Live the Jewel Case
by David Harrell
I realize, of course, that most music is still purchased on CD. Even so, one aspect of the recent Last.fm redesign surprised me -- on album pages, every release is now displayed as if it's in a jewel case, complete with a black plastic tray and the faux-sheen of the plastic over the CD insert:

jewel cases on Last.fm

Doesn't seem very music 2.0!

tags:

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July 21, 2008

Odds and Ends
by David Harrell
David Rose -- who has worked for start-up tech firms and record companies -- punctures the idea that record companies are like venture capitalists.

Andrew Dubber makes his case for limiting music copyright to five years (with the option to renew).

And Mark Hurst of Good Experience (and author of Bit Literacy) lists the secrets of book publishing he wishes he had known before writing a book. Substitute "record company" for "publisher" and "musician" for "author" and I wonder how many of these also hold true for the music industry...

tags:

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July 18, 2008

Friday Fun: In Defense of Stingy Record Contracts
by David Harrell
EMI's initial recording contract with the Beatles was rather parsimonious, with a royalty rate of one farthing (1/4 of a penny) per single. But according to this blog post, some of those Beatles profits funded the development of the CT scanner:
That was the bang -- over the next decade (and for years thereafter) the company earned millions of dollars from the fab four. So much money, the company almost didn't know what to do with it.

Meanwhile, Hounsfield's success with computers had earned him good standing in the science side of the company. Flush with money broken out of teenagers' piggy banks worldwide, EMI gave Hounsfield the freedom to pursue independent research. Hounsfield's breakthrough was combining his work with computers together with an interest in X-rays. Invented in 1895, X-rays were still pretty much used to image bodies in two dimensions from a fixed position. Hounsfield's idea was to measure in three dimensions, by scanning an object -- most dramatically, a human head -- from many directions. The result was a cross-sectional, interior image that he called computed tomography, or CT. As the Nobel Prize committee put it, in giving him the Nobel Prize in medicine in 1979, before the CT scanner, "ordinary X-ray examinations of the head had shown the skull bones, but the brain had remained a gray, undifferentiated fog. Now, suddenly, the fog had cleared."

First released as a prototype by EMI in 1971 -- the year after the Beatles broke up -- CT scanners started to appear at hospitals in the mid 1970s; today there are about 30,000 in use worldwide.
Via Kottke.org.

tags:

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




July 15, 2008

Amazon.com's Amazing MP3 Album Prices
by David Harrell

Amazon.com mp3 banner

Except for a couple songs, I don't even LIKE the Doors, but I almost bought this album this morning. At $3.99 for 20 songs, it was almost too good to pass up, even though I could simply buy the two songs I actually like for 99 cents each. (The album's now back to its regular price of $8.99.)

Amazon.com's daily and weekly mp3 album specials are clearly resulting in a lot of impulse purchases. The top album chart is usually dominated by the previous weekend's $5 specials and most all of the daily special albums make it to the top of the chart. Big-name artists (Madonna, the Police, etc.) almost always make it to the number one spot, and even relatively unknown artists like Liam Finn seem to hit the top five when given the bargain price. (Though the relative chart popularity of the specially-priced albums might just be evidence that total album download sales at Amazon are modest enough that it doesn't take too many purchases in a 24-hour period to make the top album chart...)

But the big question is -- what's the underlying math for Amazon for these sales, and what are its long-term plans for digital album pricing?

It's possible that the weekly $5.00 specials are label-sanctioned sale prices, but it seems almost certain that the daily specials, especially the $1.99 albums, are functioning as loss leaders, where Amazon builds a customer base for the download store by taking a loss on each transaction. Barring a change in the mechanical royalties law from a set per-song amount to a percentage amount, there's something of a built-in floor for album prices. Another possibility is that labels consider these sales as "promotional" sales -- like record club purchases -- and don't have to pay standard royalties for them.

While this is pure conjecture on my part, my guess is that Amazon is compiling some incredibly detailed data on how its customers respond to these specials. And, if Amazon can provide documented evidence for the existence of a price elasticity of demand for music, it will make the case for permanent album price cuts to the $5 range. That would require an increase in overall demand that more than offsets the lower profits on per-unit sales.

One thing to keep in mind, however, is that any pricing experiments by Amazon are taking place in the context of standard prices for the bulk of its digital catalog. The current impulse buys are driven somewhat because the prices are both ephemeral (24 hours or one weekend only) and relative bargains. If there's no pressure to buy today, and most albums are priced in the $5 range, there's little incentive to make an immediate purchase, and the perceived bargain disappears as well.

Anyway, if anyone has any behind-the-scene details about how Amazon is paying labels for these bargain album sales and/or its long-term digital pricing plans, I'd love to hear from you -- either for attribution or as an "off the record" source!

related: Amazon's Blue Light MP3 Special, Is Amazon MP3 Thinking Elastic?, Price Elasticity of Demand for McCartney

tags:


link 4 comments e-mail listen to the Layaways on Spotify




July 10, 2008

More Flat Tail Evidence
by David Harrell
Granted, these are anecdotal examples, but some self-released CD Baby artists discuss their monthly digital sales here. While the person who started the thread is doing relatively well, the other artists aren't:
We have made about 70.00 per month for the last 2 years

our total digital sales for our two releases is $16.92.

$144 over the past year so about $12 a month. :(

My sales are steadily increasing....but never over $30 a month, yet!

I averaged $30/mo. with highest month $90.
What surprised me wasn't the numbers, but the fact that two posters mentioned Verizon V-cast (pre-Rhapsody deal) as their best source of digital sales!

related: The Long Flat Tail

tags:


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July 02, 2008

Odds and Ends
by David Harrell
Coolfer on the Anita Elberse Long Tail paper:
Niches will continue to exist, and heavy users will continue to dabble in niches, but the level playing field of digital distribution isn't going to do away with mass culture.
And an "I told you so" from the WSJ's Lee Gomes:
Faithful readers of this column might recall its own skepticism about the idea when the book first hit the stores. In retrospect, "The Long Tail" seems to have followed the template of many Wired articles: take a partly true, modestly interesting, tech-friendly idea and puff it up to Second Coming proportions.
Also in today's WSJ, new corporate deals and marketing efforts for "indie" musicians. (I quoted "indie" because the deals mentioned in the article were for an artist already associated with a label and promo firm...)

Finally, I'm not sure if it will drive sales, but a strong plug from one of the country's best-known economics professors certainly can't hurt Vampire Weekend.

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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