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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March 31, 2011

What Will the PROs Think of the Cloud?
by David Harrell
Personally, I'm in complete agreement with Amazon's assertion that it doesn't need permission from the music labels to allow consumers to store (and stream) their personal music files online. The major label groups obviously think differently, so I hope any court decisions will give the legal blessing to what seems like commonsense.

One thing I haven't seen this week is any reaction from the performance rights organizations -- ASCAP, BMI (I'm a member as a songwriter), and SESAC. Given that ASCAP made the unsuccessful legal claim that purchasing and downloading a music file also constitutes a public performance, which should result in payment to the song's publisher and writer, I wouldn't be surprised to see a similar claim that streaming a purchased song from an online locker also counts as a performance.

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March 30, 2011

Like It's 1998: Some Quick Thoughts on the NY Times Paywall
by David Harrell
The NY Times has flipped the switch, activating its new paywall/digital subscription model and I can't help thinking of 1998, the year that Slate began what turned out to be a short-lived experiment with a subscription model.

At the time, I was part of the small editorial team for Morningstar.com, which had launched the previous year. While that site was (and still is) an investment research and portfolio tracking destination, as opposed to a news/opinion magazine, Slate often came up as an example when we first planned the format and design of our longer articles.

So when Slate first announced its plan to move to a subscription model, it set off hours of discussion with my co-workers about the ethics of sharing your Slate login (keep in mind, this was before the launch of Napster and the large-scale P2P exchange of digital music files). As best as I can recall, we hit upon many of the main arguments, pro and con, that would soon arise with the advent of P2P music sharing: Is it truly theft when it doesn't result in the loss of a sale?, the fact that consumers can easily share physical content such as magazines, books, and CDs (though obviously not concurrently and only with people who are nearby), the challenge of charging for online content when there are numerous free alternatives, and so on.

I held out for a month or so before I finally succumbed and paid -- there was obviously no Twitter workaround and, believe it or not, back then Slate articles frequently came up in conversations with friends. Besides, the annual subscription was only $19.95 and Slate threw in a free umbrella. Then, before my subscription ran out, Slate abandoned the pay model and refunded my balance for the year by sending me a few issues of a now-defunct Web 2.0 magazine.

Thirteen years later, the NY Times is obviously trying to thread several needles at once with its subscription plan by setting a price point that maximizes its subscription revenue while it maintains its search engine rankings by allowing a minimum number of free page views each month. And unlike Slate, the Times serves at least two distinct audiences -- those in the NYC region who would read the paper even if there were no online version, and those of us outside the region who probably wouldn't pay for a daily print subscription if that were our only option. Its digital pricing strategy has to account for the possibility of cannibalizing print subscriptions. (Assuming that those subscriptions are indeed more profitable.)

I truly have no problem with the NY Times charging for access to its website (it'd be hypocritical of me if I did, as my employer derives a fair amount of revenue from the folks who are paying $185 a year for subscriptions to the premium version of Morningstar.com). Yet the cheapest digital-only NY Times subscription, $195 a year, still strikes me as too high.

You can, of course, make a very valid argument that $195 is a relative bargain, especially when compared to a daily print subscription. And I remain somewhat amazed by how eager media consumers are to pay for their hardware (iPods, iPads, and smart phones) yet so reluctant to purchase the content they consume on those devices. But given the ready availability of other quality online news sources (The Washington Post, the BBC, etc.) and the fact that the NY Times paywall appears to be easy enough to get around, I wonder if a subscription price at the premium magazine level (the New Yorker's $40, for example) would generate more total revenue.

For now, I'm going to make do with my 20 free articles each month, plus those I can read via FB and Twitter links. But if the price drops below $50 a year and the Times tosses in a free umbrella, count me in.

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March 24, 2011

How NOT to Win a New Fan
by David Harrell
I clicked a link on Facebook today to visit the band website of a friend of a friend. And that's as far as I got, as I was sent to rather snotty redirect page, telling me to go download Firefox and then come back. (You can't even get past the redirect page using IE.)

If you want to optimize your website for certain browsers, that's fine. Yet to not let a potential fan in the door is just shooting yourself in the foot. I happened to have IE open and I could have easily fired up Firefox. But at that point I wasn't going to bother...

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March 22, 2011

The Downside of eMusic's Currency Pricing
by David Harrell
eMusic banner

Even after last year's subscription changes, average album prices at eMusic are no doubt less than the average prices at iTunes, Amazon MP3, and other digital music stores. Yet I believe that eMusic's switch from a credits system to currency pricing, in combination with Amazon MP3's $5 album deals and daily specials, presents a real challenge to eMusic's subscription-based business model.

Here's why: With eMusic's old credit-based system, direct comparisons to prices in other digital stores weren't straightforward. The math certainly wasn't difficult, but "12 credits" was an entirely different animal than "$5.99," which is now the default eMusic price for many new releases. Your credit card was charged every 30 days, credits showed up in your account, and you used them to download albums and tracks. Any price considerations you made were likely based on the number of credits required for an individual album -- that is, based on the number of tracks and credits required, was it relatively expensive or a relative bargain? You might have done the math to figure out the dollar amount for either extreme, but in general, you were probably more likely to think in credits than in dollars and cents.

Now, you see the price of each album spelled in dollars and cents, which has a two-fold effect: 1. It reminds you again of what you're actually paying for the album (something you were less likely to think about under the credit system), and 2. It invites direct price comparisons with other digital stores, namely the daily specials and $5 album deals at Amazon MP3. (It's slightly more complicated than that, because some existing subscribers received monthly bonuses when currency pricing was implemented. For example, I currently pay $11.99 every 30 days, but my account is credited with $13.99, making my true cost of a $5.99 album just $5.13.)

Chances are, the price of any individual album is still less at eMusic than at Amazon MP3. Yet when you think about how a subscription actually works, the eMusic advantage become less apparent. That's because no one is ever buying the entire eMusic catalog. With an $11.99 eMusic subscription, you can download approximately two albums every 30 days. You have tens of thousands of albums to choose from, but you have to decide on two to download. (We'll get to individual track downloads in a minute.)

At Amazon MP3, the total catalog is the same size, if not larger, but your bargain pool of $5 monthly specials (as well as whatever shows up as the daily deal, which is most frequently priced at $3.99) is a relatively small one. Yet as long as you can find just two albums you'd like to each month for $5 a piece, you can probably equal your total eMusic album downloads for a lower price. And you're not locked into an ongoing subscription where, if you lose track of the expiration date, you can lose most of the money you paid for the most-recent period.

I've heard from at least two friends that the $5 Amazon specials are making them re-think their eMusic subscriptions. Granted, that's a tiny sample size, and perhaps it's an anomaly, but I can't help wondering if a larger number of eMusic subscribers (and potential subscribers) are thinking the same way. Over at eMusic's message board, subscribers will often point out the availability of albums for less at Amazon MP3 or other stores.

The switch to currency pricing was made, of course, to accommodate variable track/album pricing within the eMusic catalog. Another option would have been to allow fractional pricing -- charging one credit for some tracks and one-and-a-half for others -- but that approach just seems messy. Another possibility would've have been to "deflate" the credits. That is, give more credits for each subscription price point, say 100 for $11.99 instead of 30, and then charge more credits for each track -- some songs would be two credits, some would be three, and so on. My guess is that eMusic considered these options and others, and decided that straight currency pricing, if not an ideal solution, was its best option.

For myself, the bargain appeal of eMusic is more now obvious for individual songs than with full albums, at least for new releases. Individual tracks are priced at 49 cents, 79 cents, or 89 cents. With my $2 bonus each 30 days, that makes my cost for individual track 42, 68, or 76 cents, prices you won't find at Amazon MP3 or iTunes, where prices for individual songs top out at $1.29.

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March 14, 2011

The Ethics of Downloading Music You've Already Paid For
by David Harrell
An eMusic subscriber loses $200 worth of his downloads and posts this question to eMusic's message board: Is it ethical to download those same tracks from illegal sources (such as P2P sites)?

I was somewhat surprised by the responses -- by more than a 3 to 1 ratio, his fellow subscribers voted "no," most of them rather emphatically. Then again, maybe that's not surprising, as eMusic subscribers are a self-selected group of music fans who are willingly paying for digital content that they could probably download elsewhere free.

Personally, as both a music fan and a self-released musician (albeit at the hobby level -- I'm not depending on my music sales to pay my mortgage every month!), the above scenario doesn't bother me at all. Perhaps I'm wrong to think there are varying degrees of wrongdoing when it comes to "illegal" music acquisition, but replacing lost tracks seems less of an ethical lapse than acquiring content that you've never paid for in any form.

What do you think? Is acquiring music without paying for it always wrong, no matter the circumstances? Or are situations like the one above, or, say, upgrading from a previous release of an album to a new remastered version, less of a moral offense? That's not to say it's "right," but simply less wrong, landing somewhere on the left-hand portion of the continuum from parking infraction to misdemeanor to felony. (While I've avoided P2P sites, there are plenty of tracks in my music collection that came to me in a way that didn't compensate artists and labels -- namely promo CDs, used CDs I've purchased, and the occasional CD-R from a friend.)

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March 10, 2011

Re-ReDigi: More Details Emerge About the Used Digital Music Marketplace
by David Harrell
ReDigi, the used digital music marketplace that is planning to launch this summer, has released more details about how the platform will work. I might be misreading it, but this part of the press release makes it sound as if only fingerprinted music files (Amazon MP3 and iTunes now individually watermark all of their downloads) will be eligible for sale:
The ReDigi Music Agent uses a sophisticated method of analyzing many aspects of the music file to determine its base eligibility, including identifying the song's digital thumbprint (a proprietary, patent pending, forensic analysis of key details associated with each specific file) and confirming whether the file has been properly acquired from an eligible commercial site. A music file determined to be "unverifiable" or "ineligible for resale" is not necessarily an illegally obtained file; it only means that the origin can't be identified or the source does not qualify.
And ReDigi will actually zap the song files from your hard drive and any synced devices:
...acceptable files are then added to the ReDigi music marketplace for re-sale and deleted from the original owner's computer. The files are also removed from any synced devices. ReDigi manages this process for users, so even devices synced over time will be updated with tracks that have posted for sale and sold tracks will be removed. Just like anything else you physically own, once you sell a music file, you no longer have the right to use it. By doing this, ReDigi provides even stronger copyright protection to labels and artists as it proactively removes these files to protect the owner and the appropriate parties.
The workarounds to this feature are obvious -- burning tracks to a CD-R before selling them, using a dedicated computer for selling tracks while maintaining the files on another machine, etc. -- though the same can be said for keeping copies of physical CDs that you sell, which also violates a strict "fair use" interpretation of copyright law.

The big question here is how music labels (and, perhaps, book publishers and software companies, as there are obvious implications for those industries as well) are going to react to ReDigi's effort to apply the first-sale doctrine to digital content:
"The technological development of the ReDigi Music Agent passes copyright and first-sale doctrine tests that have stopped other companies from legally being able to do this previously," says Larry Rudolph, CTO of ReDigi. "If you have bought it, you are allowed to sell it. Also, you are allowed to buy something that someone else legally can sell. ReDigi is the technology used for this transaction. It verifies the legal origin, a seller's right under the first sale doctrine and allows a user to resell a file that is verifiably his or hers to sell."
As Rudolph alludes to in the above quote, ReDigi isn't the first attempt at a used digital music marketplace. This 2008 Ars Technica article provides background on the first-sale doctrine and discusses Bopaboo, a previous attempt to give consumers a platform for selling their mp3s. While Bopaboo sought a licensing deal of some sort from music labels, it required the upload of a copy of each music file to its platform, something that legal interpretations of the first-sale doctrine don't provide for. And while the ReDigi approach seeks to ensure that only one version of a music file exists at a time, it can be argued that the version that ends up on ReDigi's servers is indeed a copy of the original purchased file.

Personally, I'm all for the application of the first-sale doctrine to digital media. But given that at least one major label group has been extremely litigious over digital music lockers (as in seeking the personal assets of a music locker company CEO), I'll be shocked if the major labels and industry groups don't mount a serious legal challenge. If so, I'd love to see the courts find for ReDigi and extend first-sale protection to digital goods.

One final thought: Assuming ReDegi overcomes any legal hurdles or harassment, the platform could actually give music fans an arbitrage opportunity of sorts -- the ability turn a profit on some digital files. That is, if you legally obtain "daily special" albums from Amazon MP3 (or the various freebie mp3s that Amazon offers), you might be able to sell them later for a higher price after the promotion is over and the tracks revert to their standard prices.

Related: A Marketplace for Used Digital Music?

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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