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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June 06, 2006

TV and Online Sales
by David Harrell
TV and Online Sales, Sony vs. Apple
From Saturday's Wall Street Journal, a short piece on TV exposure and subsequent record sales:
Snow Patrol, 'Grey's Anatomy'
More than 22 million viewers heard this band's single, "Chasing Cars," in the final moments of this medical drama's season ender on ABC. The result: The song sold 21,000 downloads in the week after the finale, according to Nielsen SoundScan, compared to 1,600 downloads the week before...

Imogen Heap, 'The O.C.'
On May 18, British singer Imogen Heap's latest single, "Speeding Cars," was featured on the season finale of Fox's popular teen drama, "The O.C." In the week that followed, the song sold 7,000 downloads, up from 1,500 the week before, according to Nielsen.
Memo to self: start writing songs with "cars" in the title!

I have to think that the ability to purchase the songs as downloads leads to impulse sales that otherwise wouldn't have occurred. The option to download online minimizes any hassle factors associated with driving to the store or waiting for a CD to be delivered. And the 99 cent price at iTunes pretty much eliminates any hesitation based on cost. What I'd love to see is a day-by-day or even hour-by-hour breakdown of iTunes sales of the Snow Patrol song, starting the minute the episode ended.

---------

Based on this interview with Sony CEO Howard Stringer in today's WSJ, it doesn't sound like Sony will be challenging the iPod anytime soon, if ever:
Mr. Mossberg: Let's talk about the [Apple] iPod for a second. Is it too late to significantly dent their share? Can you bring out a digital Walkman with the kind of end-to-end experience with the software and the service that can really go after them?

Mr. Stringer: It's a mountain to climb. We're coming out with a device that uses OpenMG [a Sony copyright management technology], which is not everybody's favorite over here, [but] will do well in Japan. It will dent Apple in Japan mostly for nationalistic reasons I suspect ... If you're talking about delivering music, [there's] the Sony walkman phone. We sold three million before Christmas in Europe, but thanks to the confusing cellular system in America, we're only just bringing the Sony walkman phone into the United States. We're bringing out another Sony Ericsson phone that pushes email and that will give BlackBerry a bit of a headache. That's coming out this summer. I'm not suggesting this is going to have Steve Jobs sleepless, but you just have to keep coming at him, and I'm fairly convinced that the next generation of devices will master software.
tags:

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June 02, 2006

Digital Sales More Profitable than Amazon.com CD Sales
by David Harrell
While my mother-in-law was REALLY impressed when she found my band's albums on Amazon.com, it's not hard to sell your own CD there. You just need a bar code, shrinkwrapping, and a manufactured CD (no CD-Rs).

The main downside is that Amazon.com seems to have switched to a minimalist inventory policy, at least for relatively slow selling self-released CDs. When our first disc was released in 2003, Amazon placed an initial order of 15 copies. All of those copies eventually sold, and Amazon continues to send re-stocking orders, albeit much smaller ones, generally for just one or two discs. And it seems to take a while (nearly a week) after selling a disc before the re-stocking order is placed.

The problem is -- by stocking only one disc at a time -- the cost of shipping discs to Amazon now represents a significant portion of our per-disc revenue. First class postage for a single disc is $1.35, which is actually the cheapest option, as media mail for a single CD is more expensive.

We sell our CDs at a "list price" of $9.99 and Amazon takes a 55% percent cut, paying us $4.50 for each disc sold. While I suppose there's a certain prestige to having your music available via Amazon.com, it's shaping up to be the LEAST profitable way for us to sell it. After factoring in manufacturing costs of around $1.25 a disc and the $1.35 it costs to mail each one to Amazon.com warehouse, that leaves about $1.90 per disc in gross profit.

In comparison, here's how the numbers shake out for discs sold through stores via our distributors, online via CD Baby, and digital downloads through iTunes and eMusic:

Sales in Stores, via Distributors
We sell discs to our distributors for $5.50 each, hoping they'll end up in stores for somewhere around $9.99. The orders are usually large enough that the per-disc shipping cost is pretty low, usually less than 20 cents a disc. So after accounting for shipping and manufacturing, we're netting a little more than $4 a disc.

CD Baby
For online CD sales, CD Baby takes a $4 cut of the $9.99 price. After manufacturing and shipping costs, we clear around $4.50 a disc.

Digital Downloads - iTunes and Other Stores
For a $9.99 album price, Apple pays our distributor $7. The distributor takes a 9% cut, leaving $6.37 a disc for us. (No shipping or manufacturing costs here!) The numbers are similar for the other download stores that charge around $10 for a full-album download.

Digital Downloads - eMusic
This last example is the truly amazing one. An eMusic subscription is by far the cheapest way for someone to buy a copy of one of our albums. With a 40-downloads-a-month subscription, which costs $9.99 a month, our first album (12 tracks) "costs" the buyer $3 while our 11-track second album costs $2.75 for an eMusic download.

The per-track payout rate varies each month (more details here) but the most recent payout we've received is 19 cents a track, minus the distributors 9% cut. Which works out to $2.07 take for the 12-track disc and $1.90 for the 11-track disc. The option that costs a purchaser the LEAST money still nets the same amount (or more) for us as an Amazon.com purchase.

In fairness to Amazon, dealing with slow-selling CDs is no doubt something of a pain. But the given that the CDs are steady sellers, it seems like maintaining a stock of only one disc maximizes Amazon.com's labor cost, as it has to restock the disc every time one sells. It's making me think that for self-released musicians on the right-hand portion of the long tail, digital downloads may be the best bet. (Though it pretty much cuts the indie stores and distributors out of the picture...)

tags:

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May 31, 2006

Politics and Playlists
by David Harrell
Politics and Playlists
Last week, Slate's Jacob Weisberg analyzed the reported iPod contents and favorite songs of Hillary Clinton, Condoleezza Rice, and George Bush. He also ran them through Pandora for additional analysis and music recommendations for each of them:
Hillary, it seems, likes "basic rock song structures," "repetitive melodic phrasing," and "extensive vamping." Pandora predicts she would enjoy various '60s girl groups and '70s soul singers: Gladys Knight and the Pips, Carla Thomas, and the Velvelettes. The service can be a bit uncanny. One of its first recommendations on the Hillary station I created was "Girls Can't Do What the Guys Do," by Betty Wright, a feminist-minded '70s soul artist. This was followed by Barbra Streisand's rendition of David Bowie's "Life on Mars," a deeply unfortunate recording, but one somehow indicative of the present predicament of the Democratic Party.

In point of fact, I doubt that the relentlessly driven Hillary Clinton spends much time listening to music of any kind. Condoleezza Rice, by contrast, who recently revealed her musical Top 10 to Bono when he guest-edited The Independent newspaper in Britain for a day, clearly loves many kinds of music. For Condi, who was trained as a classical pianist, the playlist is an opportunity to show that she is not as uptight as she sometimes seems. In addition to Brahms, Mozart, and Mussorgsky, she reveals that she likes to work out to Cream's "Sunshine of Your Love" and loves "anything by U2." Aretha Franklin's "Respect" gets another vote, along with Kool and the Gang's "Celebration," and Elton John's "Rocket Man," which the secretary of state says reminds her of her first boyfriend. Hmmm. Pandora doesn't do classical, but based on her pop choices, Secretary Rice responds to "disco influences," "a busy horn section," and "groove-based composition." Radio Condi is a lot more fun than Radio Hillary.

Last year, the president also revealed part of the playlist of his iPod, which he listens to while mountain biking. It includes "My Sharona" by the Knack, "Centerfield" by John Fogerty, "Brown-Eyed Girl" by Van Morrison, and music by the honky-tonk singer George Jones. Unlike Hillary and Condi, this all sounds pretty uncalculated. Bush doesn't worry about being politically correct or care what other people think of him. He likes to listen to white guys singing country and rock and doesn't care if Jerry Falwell objects to some of the lyrics. According to Pandora, Bush likes "mixed acoustic and electric instrumentation," "meandering melodic phrasing," "major key tonality" and "a smooth male lead vocalist." It is recommended that he try Van Halen and Jimi Hendrix as well as Billy Ray Cyrus and Conway Twitty. You could wait a long time for Morrissey or Neil Young to surface on his radio station, and Pandora was wise enough not to suggest the Dixie Chicks.
Thanks to Porter for the link.

tags:

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May 25, 2006

The Rise of eMusic
by David Harrell
The Rise of eMusic
ARS Technica has an in-depth story on eMusic, with quotes from president David Pakman and some details on the subscription base:
As a private firm, eMusic doesn't break out its financial information, but it's clear that its subscription model is working. In the 18 months since the relaunch, the company has clawed its way to the #2 position among digital download services (this does not include streaming music). Pakman claims that eMusic has 12 percent of the market compared to Apple's 61 percent, and that his company has now sold more than 60 million songs. Since eMusic does not sell individual downloads but only monthly subscriptions, its members download a lot of music when compared to iTunes, for instance. As Pakman puts it, "An iTunes customer downloads one song a month, on average; an eMusic customer downloads 20 songs a month, on average."

The subscriber base has also grown from "the low five figures" to 175,000, and has an average age of 39. That's unusual in a music business that generally caters to a young audience, and eMusic sees its willingness to appeal to the 25+ demographic as one key to its success.
Thanks to Joseph B. for the link.

tags:

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May 18, 2006

Hi-Fi iPod?
by David Harrell
Hi-Fi iPod?
This Wired story gives the lowdown on how to boost the audio quality from an iPod, with a link to this 2003 Stereophile piece that compares audio quality for various bit rates:
The iPod offers such an embarrassment of choices regarding file storage and playback that I had to begin by discarding quite a few of them as irrelevant to a discussion of its fidelity. That's not to say that 96kbps MP3 and AAC, for example, aren't useful space-saving options; simply that they represent sonic compromises most readers of this magazine wouldn't tolerate even while jogging...

Things are somewhat better at 128kbps in both MP3 and AAC, but neither cuts the mustard for critical listening at home. MP3 robbed Steve Swallow's pulsing bass lines of dynamics and punch on the Carla Bley album, while blunting the shimmer of the brass overtones. AAC fared slightly better, offering better bass response (although it was still pretty lightweight compared to the original CD) and slightly more extended HF (again, shelved down in comparison to the CD).

Surprisingly, upping the bit rate to 160kbps did not result in major improvements for either format. Bass impact remained MIA in MP3, and the upper frequencies sounded strident, with that unmistakable "too much compression" punchiness. AAC again sounded marginally better, although Bley's big band still seemed flattened and lacking in dynamic variation.

The audiophile in me began to pay attention at 192kbps. Both MP3 and AAC began to exhibit a small degree of soundstaging, albeit not with great amounts of front-to-back dimensionality or layering. MP3's highs began to lose their stridence, and AAC sounded fairly detailed and revealing.

The compressed formats began to show some real promise at 320kbps. Definition, detail, and soundstaging were all impressive, and high-frequency response was almost liquid in its lack of edge effects. At this rate, differences between the two formats jumped into sharper focus: MP3 made transients "splashy," while AAC just sounded anemic compared to the original. With both formats, dynamic variation was considerably reduced compared to the CD.

Best of all -- and, to my ears, completely indistinguishable from the original CD -- was AIFF. Dynamics were impressive, imaging was nuanced and detailed, and the frequency extremes sounded extended and natural. On my reference rig, I could listen with immense pleasure for hours on end to files ripped in AIFF. In fact, I did.

Ah, some of you are saying, but what about VBR? Variable bit-rate formats seem to offer extremely satisfying sound and show a great deal of potential, but those options deserve greater exploration in a dedicated comparison.
My prediction: As storage capicity on the iPod and other players increases, don't be surprised if the record companies try to get consumers to once again upgrade their music collections, this time with a second generation of digital downloads.

tags:

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May 16, 2006

Chris Isaak Bonus Tracks
by David Harrell
Chris Isaak Bonus Tracks
Last month, I noticed that quite a few iTunes customers weren't happy about the $12.99 version of the new Flaming Lips disc. It has three bonus tracks not available on the $9.99 version, though -- as shown by the customer reviews -- many folks didn't see the cheaper version.

There's also an iTunes "bonus version" of the new Chris Isaak "Best of" collection, with a 20-track version going for $13.99 and an 18-track version selling for $11.99. As with the Flaming Lips album, the bonus tracks are "album only" purchases and NOT available on the CD release, so the only way to legally obtain them is to buy the pricier iTunes version of the album.

As one customer points out, this tactic seems to punish the artist's most-loyal fans:
...for we fans who already own all the songs that were on previous albums, it's kind of mean to make two of the special acoustic tracks available as Album Only, meaning we have to buy the whole $13.99 album (not the old $9.99 standard, nor the cheaper $11.99 version of this record just to get them. The other new songs we can buy for 99 cents so no biggie there. Hey, at least the old songs are remastered (like it makes a difference on the lower-fi 128kb-encoded AAC tracks that iTMS sells anyway). The CD is cheaper at $12.99, but doesn't have the last two acoustic tracks. It might be appropriate to say Arrrgh!
-- iTunes review of Best of Chris Isaak by "luc..."
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May 15, 2006

Download Arbitrage with eMusic
by David Harrell
Download Arbitrage with eMusic
There's an arbitrage opportunity available to eMusic subscribers, albeit one that violates the subscription agreement (and is probably illegal to boot). After a lunchtime conversation with co-workers that concluded with memories of a bad cover band with a repertoire of exactly three songs, my friend Randy remarked that he would like to download one third of the band's set -- "The Girl From Ipanema" as sung by Astrud Gilberto on the Getz/Gilberto album.

I told him the track was probably available from eMusic. Randy, who just canceled his eMusic subscription, then speculated that I probably had a few unused downloads for the month that I might be willing to, uh, share. No problem, I said, provided he was willing to pay a slight markup over my cost...

In theory, a 40-downloads-a-month eMusic subscriber is paying just under 25 cents a track, so selling one of those downloads to a non-subscriber for 75 cents yields a healthy return. For the buyer, it's cheaper than a single download from iTunes, plus the eMusic download is an mp3 that can be played on virtually any portable player, with no DRM to hamper the file. And you can get your eMusic cost-per-track down to around 22 cents by opting for a 90-a-month plan or pre-paying for a year with eMusic.

I'd bet there are at least a few folks out there who are informally "sharing" an eMusic subscription with a friend, though I doubt anyone's gone so far as to follow the plan outlined above. If you want really cheap downloads you've always got the option of the different file sharing systems and it seems like a lot of hassle to make a half a buck a song by setting up your own download service to sell tracks to your friends.

Still, this scheme would give artists and record companies the same revenue they're currently receiving via eMusic sales and it would provide customers who might want the occasional eMusic track access to service without having to pay for an ongoing subscription. And unlike an all-you-can-eat restaurant, where the restaurant's bottom line would be destroyed by diners "sharing" a meal, from an accounting standpoint eMusic is indifferent to whether or not a subscriber maxes out each month. That's because eMusic pays a set percentage of its subscription revenue each month, so the amount paid to record companies artists is the same no matter now many tracks each subscriber downloads in a given month. (More details here.) Though it would hurt the bottom line of everyone involved if it ultimately resulted in fewer eMusic subscriptions.

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May 12, 2006

The Good Old Days of CDs?
by David Harrell
The Good Old Days of CDs?
Kelefa Sanneh's NY Times piece on the new Tool album has lots of comments on the listening experience for CDs vs. mp3s and single-song downloads:
CD's and films both rely on captive audiences; you've paid your money, so you'll sit still until the end. By contrast MP3's are more like television shows than films: they have to keep you entertained, or you'll click over to something else. If the last track on "10,000 Days" -- it's called "Viginti Tres," and it's essentially five minutes of digital groans and sighs -- were available as a free download on the Tool site, even hard-core fans probably wouldn't bother with it. Sometimes it's easier to pay attention once you've paid money.

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Flat-fee downloading works best when an album's tracks are roughly equal in length and importance. The Red Hot Chili Peppers, who only recently signed a deal with iTunes, have a new double-CD, "Stadium Arcadium" (Warner Brothers), consisting of discs named "Mars" and "Jupiter." (Sounds as if someone narrowly avoided a lawsuit from John Gray.) Maybe it's a coincidence, but the album is surprisingly iTunes friendly: the structure is loose and the songs are pretty evenly weighted; few grand epics or wispy interludes. Fans can pick and choose, downloading the album piecemeal or compiling favorites to turn the album into a playlist.
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...that's one of the pleasures of CD's: imperfect control. Sure, you could program your CD player to skip your least favorite tracks, or rip the whole thing to MP3's. But sometimes it's easier just to put it in and press play, even if that means you end up hearing some tracks more than you might want to. In one online review of "10,000 Days," a blogger dismissed the final track: "Listened to it once, and that'll probably be the last time." Wanna bet?
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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