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.

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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April 30, 2008

Cheaper Songs, More Expensive Albums
by David Harrell
Around this time last year, I noted that one result of pegging the single-song price at 99 cents is that individual songs within the iTunes store keep getting cheaper, at least on an inflation-adjusted basis.

As of Monday, the iTunes store is five years old. The CPI numbers aren't out yet for April, but for the five-year period ending in February 2008, the annualized inflation rate was 2.91%, with total cummulative inflation of 15.44%.

That translates into a current single-song iTunes price of 86 cents in April 2003 dollars. And, if inflation rates over the next five years are similar, iTunes customers in 2013 will be paying an inflation-adjusted equivalent of just 74 cents a track, assuming the 99-cent price remains:

inflation adjusted iTunes price

While you could calculate a similar inflation-adjusted "price drop" for $9.99 album downloads, album prices have been quietly creeping up within the iTunes store. "Deluxe" and bonus track versions of albums can hit $13.99, but it seems like $10.99 and $11.99 prices are becoming more common for the standard versions of new releases.

If iTunes prices were completely correlated with the CPI inflation rate, single songs would now be selling for $1.14. And the $9.99 album price would $11.53, so averaging the prices of those $10.99 and $11.99 albums gives you a cost that is essentially "keeping up with inflation."

related: Digital Downloads: Cheaper Every Day?


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April 23, 2008

Not So Fast
by David Harrell mp3 banner

Today's WSJ article on's digital business, Slow Slog for Amazon's Digital Media, seems a bit pessimistic, at least in regard to Amazon's mp3 store. I have no reason to disagree with the numbers cited in the piece -- according to one analyst, Amazon has invested some $300 million in its digital media efforts, resulting in annual sales of less than $100 million.

But damning the mp3 store for producing sales that are approximately 10% of those of the iTunes store -- the figure from the recent NPD report -- seems premature. As far as I know, neither store releases monthly digital music sales data, so it's hard to arrive at any exact figures. (Which begs the question, where is NPD getting that 10% number from -- its consumer surveys?) Peter Kafka at Silicon Alley Insider tried to come up with an estimate for mp3 sales and arrived at an initial figure of 100 million tracks, but he was stymied by the fact that the 10% refers only to U.S. sales, and Apple doesn't provide a breakdown of US. vs. non-U.S. iTunes sales.

However, according to Apple's most recent 10Q report, approximately 44.4% of its total sales for the quarter ending 12-29-07 came from the U.S. Assuming a similar percentage breakdown for the portion of sales coming from iTunes, it translates into 44 million tracks for mp3. I have no idea if that number is even in the ballpark, but consider this: After launching in April 2003, it took more than seven months for the iTunes store to sell 25 million tracks. (Update: Oops -- just realized the 44.4% figure from the 10Q refers to the Americas, not just the U.S. So that 44 million track estimate is on the high side. Though it's probably safe to assume that the majority of Apple's sales in "the Americas" are coming from the U.S.)

The mp3 store launched in September 2007 and is technically still in beta. And I'd argue that a fair amount of digital music consumers aren't even aware of the store yet. Here's one anecdotal example: This morning, a music-loving co-worker said his usual m.o. for purchasing digital music is to check first in iTunes. If the album in question isn't available (he likes some relatively obscure music), he'll head to eBay and try to buy a used CD on the cheap and rip it to mp3. He's a savvy online guy and a huge music fan, but he was quite surprised when I told him that was now selling mp3s...


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April 18, 2008

More Amazon mp3 and iTunes
by David Harrell mp3 banner

Wish I had seen this week's NPD report on iTunes and mp3 customers before I posted my mp3/iTunes comparison earlier this month. When comparing the top-selling albums within each digital store, I noted "the major differences -- at least at the top of the digital album charts --- are more likely the result of customer habits, demographics, and prices, as opposed to product availability."

According to the NPD report, there is indeed a large demographic difference between the audiences for the two stores -- iTunes customers are younger and more evenly split between male and female, while mp3 purchasers are less likely to be teenagers and they're 64% male.

The finding that's getting the most attention, however, is the fact that there's minimal overlap between the two audiences. Just 10% of purchasers of mp3s have purchased digital music from the iTunes store, suggesting that the newer service is tapping into new digital customers.

Which is, I suppose, really not surprising. In a comment about my first comparison of the two stores, Frank Hecker observed that anyone visiting the iTunes store is there to purchase digital downloads. Over at, the option of purchasing an mp3 album is presented to shoppers for music in the CD format (for most releases, at least). Given that the mp3 albums are almost always less expensive -- and offer immediate delivery -- it seems obvious that some of those customers will opt for the mp3 version, even those who have never purchased downloads before.

The full NPD report isn't online, but this Ars Technica story (via Coolfer) is one of the better takes that I've seen.


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April 09, 2008

Wednesday Odds and Ends
by David Harrell sent out a press release today, noting increased music sales since the introduction of free streams: announced today that its free-on-demand music service has had a direct and positive impact on the music purchases of its users. Since the service launched in January, overall CD and download sales through's partnership with have experienced a 119% increase.
Chuck Klosterman on the demise of the record industry. (Via Coolfer)

And ARS Technica on the TEMPO Digital Music Brandscape Study:
Ipsos collected web-based surveys from a representative sample of 1,826 US downloaders over the age of 12 and found that 82 percent of those surveyed were aware of iTunes, with Napster taking second place at 76 percent. Although downloaders were also generally aware of MySpace, Yahoo Music, Rhapsody, and Wal-Mart, none of those brands had particularly high numbers of unaided awareness—that is, people thinking of those brands immediately without outside help.
As noted in the ARS Technica post, eMusic and mp3 appear to have been left out of the survey.


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Like the Beatles in '64
by David Harrell
In the first week of April 1964, the Beatles held the top five spots on Billboard's singles chart, with an additional seven songs in the top 100.

A week after the introduction of the Rolling Stones' ABKCO catalog to eMusic, its weekly download chart is similarly Stones-heavy. As of this morning, 17 Stones albums are in the top 40, including six in the top 10.


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April 04, 2008 mp3 vs. iTunes
by David Harrell
When it first launched, direct comparisons of the mp3 store with Apple's iTunes store were difficult, largely because of major differences in their respective catalogs. (Amazon launched without any titles from Warner Music Group or Sony BMG.) Several months later, there's much more overlap between the two stores.

Here's what the top-20 digital albums looked like for both stores on Wednesday morning, April 2nd: mp3/iTunes sales comparison

It's a 50% overlap, with 10 titles appearing on both lists. Of the non-overlapping iTunes titles, all except the pre-order of Madonna's "Hard Candy" are available from mp3, while the NIN Ghosts release (#6 at isn't sold in iTunes. Hence, it seems likely that the major differences -- at least at the top of the digital album charts --- are more likely the result of customer habits, demographics, and prices, as opposed to product availability.

As for prices, across the board, all 10 overlapping best sellers were cheaper at Nine of the albums are selling for $8.99 and one title is $9.99, for an average price of $9.09. Over at iTunes, the album prices range from $9.99 to $14.99, with an average iTunes price of $11.59 for these 10 albums.

However, to be fair, it's not exactly an, uh, apples-to-Apple comparison: Only four of the 10 titles contained the exact same track lineup. (And two of those iTunes albums feature a digital booklet in addition to the music.) The iTunes versions of the remaining six of the albums each feature at least one bonus track, while two also included a video and three featured digital booklets.

So iTunes purchasers are in most cases getting something extra for their additional dollars, though the relative value of that bonus content varies. The most egregious pricing differential is probably the two versions of R.E.M.'s Accelerate, where iTunes purchasers are essentially paying an extra $5 to receive a digital booklet. On the other hand, for an extra three bucks, buyers of the iTunes version of the new Counting Crows album receive two bonus tracks, a 20-minute video interview, and a digital booklet.

Keep in mind this was a pretty simple comparison, based on a single point in time for two charts that update throughout the day. But I'll check back every month or so, if only to keep an eye on the general pricing trends.


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April 03, 2008

The Stones and eMusic
by David Harrell
Holy cr@p -- eMusic now has the ABKCO portion of the Rolling Stones' catalog -- 25 albums! Quite a coup for eMusic...


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April 01, 2008

The Four Dollar Insert
by David Harrell
Is an iTunes "Digital Booklet" worth four bucks? That's the only difference between the $13.99 iTunes version of the new R.E.M. album and the $9.99 bonus track version from (Interestingly, Amazon's also selling a non-bonus-track version for $9.99.)

Update: It's now a $5 digital booklet -- Amazon lowered its album price to $8.99 at some point during the day.

No time for it today, but I'm working on another iTunes/ pricing comparison -- look for something later in the week.


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