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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October 28, 2011

Friday Flashback Fun: Goodbye to R.E.M.
by David Harrell

I have to post something, even if it's a little late, about the demise of one of my favorite bands of my youth. Up first, via Slicing Up Eyeballs, is an incredible clip of a pre-R.E.M. Michael Stipe in a local St. Louis TV news story about "Rocky Horror Picture Show" fans. Look and listen for Stipe, dressed as Frank-N-Furter, at the 1:25 mark:

And a clip I posted a few years back, of the band performing my favorite R.E.M. song on David Letterman. Note the discussion with bassist Mike Mills @ 1:01 about the effect of the lower-than-average list price for the group's debut album ($6.98 vs. the then-standard $8.98) on record sales:

Labels: Friday Flashback Fun, R.E.M.

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October 27, 2011

The Convergence of Owning Music and Renting Music
by David Harrell

image by TheTruthAbout via Flickr

Earlier in the week, Hypebot pointed to this eMarketer summary of two recent studies about consumer attitudes about owning music vs. renting it:

The first of the two studies was a survey conduced by Insight Research Group on behalf of eMusic that revealed the widely noted insight that 91% of those polled preferred to own music rather than subscribing to it.

There are real differences, both logistical and psychological, between owning and renting music. But I'll bet that the preference for ownership will decrease as the listening experience for "owned" and "rented" music converges. If you're using a website or app to listen to music on your computer or portable device, where the files are coming -- your hard drive, your cloud drive, or the server of a music subscription service -- doesn't have much effect on your listening experience. And a year from now, even more people will be using Spotify, iTunes Match, Amazon's Cloud Player, Google Music, and other services to listen to music. The more they do, the more willing they'll be to forgo actual ownership.

Music ownership isn't going away, as there are plenty of circumstances where a streaming service can't replicate what can be done with purchased music -- burning it to a disc, easily copying it, playing it without an Internet connection -- and, for the present, the sound quality of a CD is much higher than what's available from any streaming service. Yet for me, there's already plenty of music for which the ability to stream it suffices.

Labels: music streaming, music subscriptions

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October 18, 2011

Two Quick Thoughts About ReDigi
by David Harrell

A couple things that surprised me about the launch of ReDigi, the platform for buying and selling "used" digital music tracks:

1. No Lawsuits
Don't get me wrong, I'm glad that someone is making a strong stand for establishing a "first sale" right for digital goods. (ReDigi's FAQ section makes it clear that the firm believes the first sale doctrine gives it legal cover.) And I've long believed that digital albums are overpriced relative to CDs, given the lack of resale value. But I'm amazed that ReDigi has made it this far without being sued by the major labels or music publishers. As I noted earlier in the year, the user agreements for Amazon MP3 and eMusic prohibit the transfer of purchased music files to other parties. (I couldn't find explicit language in the iTunes user agreement forbidding the transfer of files to another party, but I assume it's in there somewhere.) It seems extremely unlikely that the labels and publishers won't soon file lawsuits. Scott Kirsner of the Boston Globe contacted the RIAA, Sony Music, and Warner Music but couldn't get anyone to comment on ReDigi.

2. The Prices
If you're selling a used car with zero miles on the odometer, you'd probably ask for something close to the price of a new one, and there's obviously no wear and tear on a digital file. Yet while the "starting at 59 cents" prices at ReDigi are a healthy discount from a $1.29 or 99-cent download, in many cases you could buy the same tracks "new" for less at eMusic, which has tens of thousands of digital tracks available for 49 cents. I suppose, however, there's only so low ReDigi can go with prices, as it has to charge enough to make selling your digital tracks an attractive option.

Labels: digital music pricing, first sale doctrine, ReDigi, used digital content

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October 10, 2011

How Much Does Rhapsody Pay Artists?
by David Harrell

Last week, Paul Resnikoff of Digital Music News asked some basic questions about how much the music streaming services pay labels/artists. He had a hard time getting detailed responses from any of the firms he contacted, including Rhapsody.

Here's how I'm paid for my self-released albums in the Rhapsody catalog:

1. A penny per stream. For albums distributed by CD Baby and TuneCore, I receive one cent per listener stream. CD Baby, which uses a commission business model, takes a 9% cut, resulting in a .91 cent payout per stream. TuneCore, which charges an annual maintenance fee for each album, passes on the full one cent. This one-cent rate has remained steady and unchanged from September 2004 to the present.

It's certainly possible that the major labels were able to negotiate a higher per-stream payout rate. I doubt, however, that any artist signed to a major label is receiving more than a cent per stream, as the payout to the artist depends on the recording contract. My guess is that most major-label artists ultimately receive a small fraction of a cent for each Rhapsody stream.

2. As mentioned in Resnikoff's post, there are also payments to songwriters and music publishers, in addition to fees paid to labels, to consider. Starting in late 2010, payments for "Rhapsody Mechanical Royalties" began showing up in my CD Baby account. Here, however, the per-stream amount varies from month to month and I've seen payments ranging from .13 cents per stream to .28 cents. The payout rate appears to correlate roughly with the date, with higher rates for more-recent performances.

3. Finally, small payouts show up for "Rhapsody Inter" on my BMI statement, approximately .16 cents per performance. I assume these payments are for plays by non-U.S. Rhapsody subscribers. I'm a self-published songwriter, so I receive all royalties paid to BMI for performances of my songs. If I were signed to a publishing company, half of those royalties would be paid to the publisher.

Labels: artist payments, Rhapsody, streaming royalties

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October 06, 2011

Steve Jobs in 1981
by David Harrell

Via Google books: Except for the product names and dates, the quotes in this 1981 New Scientist piece on Steve Jobs sound remarkably recent:

Labels: 1980s, 1981, Apple, Steve Jobs

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October 04, 2011

The Flaw in the Standard Apple vs. Amazon Digital Pricing Story
by David Harrell

Amazon's price for the upcoming Kindle Fire ($199) conforms to the storyline that has emerged over the last year or so about the respective digital pricing strategies of Amazon and Apple. That is, Apple's happy to break even on digital content sales because its iPods, iPhones, and iPads are so profitable, while Amazon prices its hardware aggressively to encourage the sales of profitable digital content.

But there's a slight problem with this narrative: digital content is often cheaper at Amazon. For example, as of this afternoon, the top 10 tracks in the iTunes store are selling for $1.29 each, while eight of those songs are available for just 99 cents each at Amazon MP3. You'll find a similar trend for digital albums -- most of the top 10 sellers are less expensive at Amazon MP3. (Due to the switch to the "agency model," prices for the best-selling digital books are usually the same in both stores.)

Unless Amazon is losing money on all of this digital content in order to build its market share (that's clearly happening in certain cases), the digital content sold by Apple is probably more profitable than generally assumed. (Way back in 2008, Saul Hansell suggested that Apple was sandbagging when it discussed the profitability of iTunes sales.) If so, it means Apple has been able to exact a premium price for both its hardware devices and the digital content that fills them.

Update: After I posted a link to this story on Google+, my friend Aaron made a comment about the role of content providers in setting prices, something I probably should've addressed in the original post. As far as I know, Apple and Amazon pay the same wholesale prices to labels and digital distributors. Yet Amazon is consistently using a smaller markup for its retail prices. While the premium Apple commands for its hardware is easy to explain (design, usability, brand appeal, etc.), the willingness for consumers to pay higher prices to Apple for identical digital content is harder to understand. I suppose it comes down to the convenience of the single system, even though music purchased from Amazon will download directly to your iTunes library!

Labels: Amazon, Apple, digital music pricing

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THE LAYAWAYS

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

"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.

"...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.

"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.

"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:

the layaways website