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.

As an Amazon Associate I earn from qualifying purchases.

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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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archives
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November 29, 2006

Increased Per-Song Payments from eMusic
by David Harrell

The per-download payout from eMusic to labels/artists has increased: Our CD Baby account is showing eMusic payments of 27.4 cents a download for our most recent sales. (CD Baby takes a 9% cut, leaving us 24.9 cents a download.) This is a huge percentage jump from the 19.4 cent gross per-song payment from our last batch of reported eMusic sales.

While eMusic's recent changes in its subscription plans should boost per-song payouts, the new plans just took effect last week, so that can't be the reason. One factor in eMusic's variable payout is the average number of songs downloaded by subscribers -- any increase in the per-song payout indicates that the average number of downloads per subscriber has declined. The increase above indicates a fairly sharp drop in the average number of downloads. (Though I've certainly been wrong before in my attempts to decipher eMusic's revenue-sharing economics.)

related: Welcome to the Club, A Price Increase for eMusic

tags: eMusic music subscriptions digital downloads

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November 27, 2006

Monday Odds and Ends
by David Harrell

Monday Odds and Ends
There's an overview of digital music services in today's Wall Street Journal:

When it comes to legal digital music, iTunes is the undisputed king. But a host of rivals are trying to carve out empires of their own in the shadow of Apple Computer Inc.'s service.

For the most part, they're not trying to steal away big chunks of Apple's customers. Instead, they want to win over music lovers who haven't yet signed onto iTunes. People who are still wary of downloading music, for instance -- or those who are used to getting it free from illegal services.

---------
Coconuts, the music and movie retailer, is now f.y.e. Something that caught my eye in ad I saw this weekend: Buy any two of the "20the Century Masters" best-of collections (the Who, the Allman Brothers, Peter Frampton, etc.) for $15.88 and you'll receive a $15 dollar iTunes gift card.

Is Apple selling gift cards to other retailers at a substantial discount off face value? If not, I'm not sure how this works for f.y.e., unless it's getting credit for "digital breakage" of unredeemed gift cards.

tags: iTunes Apple digital breakage

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November 22, 2006

Thanks
by David Harrell

Thanks...
Posting will be light for the next few days, but I did want to say "thank you" to everyone who has visited this blog since it began back in January. It's a relatively small audience (or, as Ian Faith said in Spinal Tap, a "selective" one), but your insightful comments and e-mails are much appreciated!

-- David

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Is Lala.com A Digital Distributor
by David Harrell

Is Lala.com A Digital ~~Distributor~~ Retailer?
OK -- I'm not going to say "I told you so" based on the words of a single lala.com member. But as I wrote in this guest post for Moistworks a few months ago, I think lala.com is likely to become a something of digital distributor, with members trading CDs after ripping mp3s files or burning copies of the discs. While doing so is expressly forbidden by the lala.com user agreement ("fair use" copying only applies to discs you actually own), I wasn't surprised to see this comment from a lala.com member about an Online Fandom piece on the CD trading site:

I am a lala user and I very happy that I found the site. With the birth of mp3 players actually having the physical CDs are no longer necessary. I am able to upload my CDs to my computer and then post them to trade on lala.

Don't get me wrong -- I have nothing against the used CD market. My CD collection has plenty of discs I purchased used, well aware that used sales generate no income for the artist, publisher, or the label. And I fully support the right to sell or trade music you have purchased. One of my main beefs with digital downloads is that the current default iTunes album price fails to reflect that a portion of a CD's worth is derived from the fact that it has a resale value. Because you can't (legally) sell your digital downloads, this disadvantage should be factored into the price. (See this recent Medialoper post for more thoughts about digital download pricing.)

Plus, Lala.com promises that 20 cents from every dollar (its fee for a trade) will make it back to artists as either a direct payment or via a fund to provide health insurance for musicians. That's a much better deal than zilch, which is what artists/labels receive from used sales, copied CD-Rs, or peer-to-peer downloads. (Though I've never believed that most "pirated" music represents a loss in revenues to labels and artists. Just because someone gives you a burned copy of disc doesn't mean you ever going to BUY the album in question...)

So if this modest lala.com royalty creates income for musicians that wouldn't have been generated otherwise, it's a good thing for all involved parties. But if lala.com is indeed morphing into a digital distributor (where you rip discs to mp3 then pass them along) with a cumbersome distribution model, its 80/20 split comes close to inverting the current iTunes royalty, where the label/artist receive 70 cents from a 99-cent download. And by creating an increasingly liquid market for used CDs, it also seems likely to cannibalize new CD sales as well, more so than the previous options of selling your discs to the local record shop or online via Amazon.com or eBay.

That's the unanswered question: does heavy trading among members supplant music sales (digital downloads and CDs) that would have otherwise occurred?

I don't know. Lala.com members are -- as a group -- no doubt major music fans who probably already purchase more music than the average person. (The same has been said about peer-to-peer users.) So I'm reluctant to demonize them for ripping CDs before trading the discs. Especially when I've given serious consideration to backing up my entire CD collection on hard drives and then selling off the original discs.

But something here still (slightly) bothers me. All in all, lala.com seems like great business model for its founders (who'll be able to cash out by selling the company or going public in a few years) and an unmatched bargain for its members. (Even cheaper the eMusic!) Yet despite its warning that you're not "supposed" to retain copies of the discs you trade, lala.com has no way of enforcing that rule, nor much incentive to do so. It seems like the success of its business model (like YouTube's?) is based on the distribution of intellectual property, with a compensation formula that puts a relatively small portion of the revenue in the hands of the creators/owners of that property.

Update -- as Glenn noted in the comment, I really should be saying "retailer," not "distributor."

related: A Trade-In Value of Zilch, Karma Police (guest post at Moistworks)

tags: lala.com digital downloads used CDs iTunes

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November 21, 2006

iPods by the Hour
by David Harrell

How complete is Apple's dominance of the portable music player market? Take a look at Amazon.com's list of its top-selling music players, updated hourly.

Except for a SanDisk player in the number five spot, the top 10 sellers are all iPods. The new Zune is currently #17.

tags: iPod Zune SanDisk

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November 20, 2006

Long Tail Economics
by David Harrell

Long Tail Economics
There's an interesting comment about this hilarious Improv Everywhere mission -- writers protesting "book piracy" outside a NYC public library. From the comments page:

Believe it or not, since the early 1980s, by law UK public libraries really do have to pay writers for books issued, supposedly to support creative lit.

Unfortunately this means:
(a) less money to buy books
(b) bestselling authors get 99.9% of the money
(c) they pay nothing to authors with issues below a certain amount.

I can't verify that 99.9% claim, but I'd like to run the numbers with real data for music sales. My guess is that you'd see somewhat similar results for any of the alternative compensation proposals that would compensate musicians based on total downloads within a peer-to-peer system. Not 99.9%, but I think the "head" of the tail is still large enough that it's not going to translate into meaningful revenue for the folks at the other end.

tags: the Long Tail piracy P2P

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November 17, 2006

Even More Sound Alike Albums
by David Harrell

There are more of them than I ever imagined available at eMusic. This label has sound alike cover albums for REM, the Police, Fleetwood Mac, Billy Joel, the Eagles, and more.

The strange thing here is that -- unlike the Beatles example of last week's post -- ALL of the above artists are available in iTunes. Though they're all on major labels and unlikely to appear in eMusic any time soon.

So it's not a question of availability, it's strictly economics (and, perhaps, convenience). At least a few eMusic subscribers are buying/downloading these facsimiles, even though the digital downloads of the original recordings are readily available in iTunes, albeit at 99 cents a track as opposed to eMusic prices. And there's always the option of ripping mp3s directly from CDs or going the peer-to-peer route. Yet it seems like there's at least a small market within eMusic for these substitute recordings. I don't quite get it.

related: The Return of the Sound Alike Album, More Sound Alike

tags: sound alike album eMusic iTunes

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November 16, 2006

Naming the Zune
by David Harrell

Naming the Zune
From today's Wall Street Journal, a piece on Lexicon, the firm that named the Zune:

Lexicon -- which has named high-profile products such as Research In Motion Ltd.'s BlackBerry, the Pentium chip from Intel Corp. and Subaru's Outback -- started with as many as 4,500 candidate names, whittling them down over the course of three months early this year. The company, based in Sausalito, Calif., has spent thousands of dollars in linguistic studies of languages around the world and usually charges about $150,000 to come up with a brand name.

Zune was selected because it has a familiar sound, says Mr. Placek. "From tune to zune" was the expression some inside Lexicon used. The letter "U" also has a full sound and makes one think there is a lot packed into a little word -- and product.

Lexicon hopes Zune will catch on as a verb, much as "googling" has for searching on Google Inc.'s Internet search site. Someone might "zune out" (listen to music) or "zune you" (send you a song wirelessly), says Mr. Placek.

tags: Zune Microsoft

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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