Tuesday, February 09, 2010

Entry 217: In Which Elliot Gives His $27.34 (that's $.02 adjusted for inflation) on Digital Music and the EBook Phenomenon. Part One - Digital Music

This started out, originally, as a post about why I think the iPad is the most ridiculously disappointing and useless gadget ever to be released, but I revised it (twice) and instead came up with part one of a two part blog on the digital revolution in both the music and publishing industry. I will still lay in to the iPad with unfettered avarice. This is a long post and is only part one. Ye be warned.

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Well, readers, I've had a lot of time to think of the ebook revolution, and with several recent developments in both the pricing and platform wars (and yes, those events are intertwined), I figured now is as good a time as any for me to give you my views on the ebook. But before I delve into the digital book, I want to look at the first industry to really go through what the publishing industry is currently going through; the music industry. And I know that the news publishing industry really took the first hit from the internet's game-changing motif but I'm not one to beat a dead horse, or at least not that particular dead horse, and I know that the film and television industry are just as embroiled in the "new media argh! the old ways don't make sense anymore what do we do what do we do whatdowedo!?" fiasco but the music industry seems to have almost got it figured out and the publishing industry is on the brink of doing so. So. Let us begin with ebooks, work our way through music and not mention ebooks again until another post.

For those at unawares, an ebook is simply an electronic copy of a book. It could be something as simple as a book's pages having been scanned as a .pdf file which you could carry around on your laptop or store on your desktop/portable hard drive/jump drive, etc., or it could be a platform-specific file purchased from an ebook store (such as Amazon for their Kindle reader or Barnes & Noble's Nook reader or Apple's iBook for the incomprehensibly named/engineered/featured/priced iPad). The point is that, like the .mp3 music files (and other similar extensions for audio files) and their effect on the music industry, the ebook is poised to change the publishing industry forever.

This comparison is important, because the publishing companies and distributors of ebooks are taking their cues from the music industry, which was really the first industry to go through this digital shift openly and publicly. So, I want to give a brief rundown of my feelings regarding digital music files. Remember, readers, that I have spent the better part of the last two months involved in a terrible ordeal in an attempt to procure a copy of Sunny Day Real Estate's Diary Remastered on vinyl from Amazon.com (side note update: finally gave up and walked into Euclid Records in Webster Groves, walked out three minutes later with a completely brand new and unblemished copy of said record on Sunday, thus ending the eternal struggle) so it should be clear where I stand on the issue at hand. Maybe.

Look, there are a great many advantages to both consumer and producer of music when it comes to the download. For starters, the cost to the record company of delivering, say, the copy of The Decemberists' 2009 release The Hazards of Love was less than one cent (probably). I purchased the album on iTunes, using a gift card I got for my birthday. As I understand it, record companies (or an independent artist, for that matter) pay a fee for each track available from their catalog on iTunes. However, they only pay the fee once per song. Let's say the cost per song is twenty cents (it's not, at least, I don't think it is, which shows you how well researched this particular post is). That would mean that the record company paid iTunes $3.40 to post The Hazards of Love. The album was then made available to download to iTunes users for $9.99. Once the album is downloaded once, it's already brought in more than the production cost (granted, the money goes first to Apple, who takes a cut and then to the record company, which takes a cut and then to the artist so it takes more than two downloads to pay the fee), and once it's downloaded a hundred times, the relative producer cost of each unit sold is so small, it's almost negligible. I am simplifying, of course, because the record company has to pay recording costs, marketing, touring, etc, not to mention they're still producing physical copies. The point is, it's very cheap to make one digital copy and sell it a hundred (thousand, ten thousand, hundred thousand, etc) times. In fact, the more you sell, the more profit you make on each sale. When you sell a physical product (vinyl record, CD), you get the same profit each time. Let's pretend it costs the record company five dollars to produce a CD and seven for a vinyl record. The CD then sells for twelve dollars at the store and the vinyl for twenty dollars. For each record, the company makes the same profit. Actually, look at my example in the light of my battle with Amazon; the record company only sold one copy of the vinyl album at $20 (after the store's recouped its expenses and a small profit, the record company probably recouped plus a dollar or two) but they produced three copies. With physical products come the possibility of physical defects in the products. It is beneficial to record companies to sell more digital copies than physical.

Really, in looking at this business model, there doesn't seem to be any drawback to the record company. But what about the consumer? Well, there are benefits to the consumer as well, namely portability. I own a few hundred CDs and am building a meager vinyl collection, but my digital music collection resides in the 10+ gigabyte neighborhood (at the height of peer-to-peer, before iTunes opened a store, I knew a guy who had 140 gigabytes of music on two 70 gig external hard drives, so my collection is relatively small). Much of the music that exists on my computer also exists on my shelves, though there are exceptions (music purchased as downloads, free downloads from artist websites, CDs ripped from friends or the library and, yes, Napster 1.0 era downloads which have been transferred through at least five computers now). My CDs and vinyl records take up a lot of space (in the last year, I had to buy a new CD tower and acquire a stand for the record player which had space to keep my records). But my digital music exists on my computer. Files do not have any physical mass, they only take up what we call "space" on a hard drive (or, again, a flash drive/external device such as an mp3 player). So why do I continue to clutter my already cluttered house with vinyl and CDs? I'll get to that. But the benefit is clear; space and portability. I once read an article online (tried finding it, but can't) about how hard it would be to carry all the music that a sixteen gig iPod holds if you carried it in different formats, and even carrying CDs (and, mind, just CDs, not the case and liner notes) would have required a large vehicle and a fully trained and accredited OTR trucker, not to even bring up vinyl. Also, even though Apple recently introduced tiered pricing, charging more for new releases and popular music while lowering the price on other tracks, the price is yet another benefit of the download. A CD generally costs more than a download of the same album (assuming you're downloading legally) and, another benefit, you can buy right from your home and not have to wait in line at the record store or wait days (or weeks) for the album to be shipped. Depending on your connection speed, you can start listening to the album in seconds.

But unlike the record companies, there are a few disadvantages to the download (some of which point to advantages of physical media) for the consumer. The most pressing problem is one of physicality. Sure, I bought a copy of The Hazards of Love, I mean, money was exchanged, but I can't run my hands over it. The benefit is also a disadvantage. In days past, being able to listen to my music was contingent on the proper function of a piece of electronics. I had a Magnavox boom box in my bedroom growing up, with a radio/cassette/CD. I'd pop Sunny Day Real Estate's LP2 in at night, hit play on the CD player, and fall asleep right before "Rodeo Jones" came on. One day, the CD player broke. That was okay, though, because I also had a Phillips portable disc player (not a Discman, that name belonged to Sony) with a set of headphones (the player had a belt clip, like I would go running with it or something...) and also, there was the CD changer hooked up to the component stereo in the living room (side note: my parents were never the kinds of parents who shouted "Don't touch my stereo!" which was stereotyped in sitcom after sitcom...no, my parents encouraged me to touch the stereo as long as I used it appropriately, i.e. listening to The Beatles or Queen or Paul Simon and not for listening to gangsta rap or conservative talk radio). If one of those broke down, I always had a back-up and a way to get my music from one to the other. Now, for listening to The Hazards of Love I am almost completely dependent on the proper functionality of my computer. I say almost completely, but even that isn't true. I make an audio copy of every album I download via iTunes in case I want to listen to just that album in my car or on the home stereo, not to mention that I periodically back up my music files onto DVD-R. But, even with that there is a problem. I do not do this immediately every time I download a new track. There may come a time (knock on wood) when I haven't done either since downloading a new track and bam, my computer crashes beyond all hope (this actually did happen, sort of, in 2007, and more on that in a moment). I'm sure The Geek Squad can recover files from my hard drive no problem,they've done it before, but the problem I ran into when my old computer crapped out was that I had never de-authorized that computer with iTunes. One account can only be authorized on three computers at one time. I have only one working computer authorized for my account, but iTunes thinks I have two. If it happens two more times, I'm screwed for the music I've already purchased. That is another problem; the music could disappear and the consumer has no recourse but to purchase it again. Thankfully, having backed up everything I download on both data and audio discs, I am fairly certain I can work around this should it happen, but still. A good reason to still buy physical CDs: when you get a new computer, your CDs will not have to be authorized to work on yet another computer.

Another disadvantage to the consumer is sound quality. This is the big one for me, and the big reason why I am falling in love with vinyl. Digital compression of the music flattens the range of tones. This may sound strange, but I've tested it. Using the same pair of really nice Sony headphones (the kind that cup your entire ear in a gasket), I listened to Sunny Day Real Estate's "8" off LP2 in the three formats I currently own it. I started with the CD copy (not through my computer but through a stereo system). Next I went to the digital copy (not imported from the CD but a HQ download direct from Sub Pop records, via a download coupon in the vinyl copy) and finally the vinyl copy. I found the digital copy to be better than the CD copy (though it is possible this has more to do with the digital copy being from the remastered re-release and the CD being the original release) but neither compared to the low-end range I got with the vinyl recording. The warmth is missing when the files are digitally compressed (either on CD or .mp3...before anyone points this out I know iTunes downloads are not .mp3 files but in this case the file came from the record company and it is definitely in .mp3 format). The only reason for having the digital file is, again, portability. I can fit eight gigabytes worth of music on the iPod my wife is so graciously letting me borrow for the time being which is equal to half of my music collection, roughly. I don't have the space for half of my CDs in the passenger compartment of my car and my car stereo does not play records. For listening at home, I prefer CDs or vinyl to digital every time. And, though I'm sure you could determine this on your own, I prefer vinyl to CD. But vinyl has its own special problems, which I won't go into now except for the one problem that pertains to the matter at hand, and that is portability. I do not have one of those fancy USB turntables which can import your vinyl tunes into your computer. I don't even have one of those less-fancy turntables which can take your vinyl records and burn them to CD. My turntable was manufactured before I was even born and sat in my parents' basement collecting dust for several years, abandoned in favor of a direct-drive BSR turntable with one of those record-dropping arm dealies and a needle that didn't need replacing. Despite the drop in sound quality, I do like having music with me in my car. Since I listen to more music in my car than at home (I drive for work...), it behooves me to buy either CDs which can be imported to my computer or to just buy digital files. The Sunny Day Real Estate records are awesome because they came with coupons for free digital copies. Note to record companies; please do that if you release your content on vinyl.

One more disadvantage exists; retailers. In the same way that national record chains and department store chains killed the local record store, so too is the digital download killing music departments at national record chains and department store chains. Remember that for every album sold on iTunes, that's one less physical copy sold (theoretically...there is a psychological thing happening there, though, in that many people don't think twice about buying an album download but the same people would probably decide against buying the physical product in the store, but let's pretend it's a one-to-one correlation). Many stores can help make up for this by selling iTunes gift cards, but the profit gained by the store on a ten dollar iTunes gift card is much smaller than the profit gained be a twelve dollar CD. Some stores have tried to get around this (Amazon is an online model, Wal-Mart a brick-and-mortar model) by setting up their own download store in opposition to iTunes. In my former capacity as Entertainment Specialist at Target, I was prepped for the launch of a Target-branded download store which was set to compete with Wal-Mart's eighty-eight cent download store but the Target store never got off the ground. When I asked about it, I was told that the reason it fell through was because of Target's existing relationship with iTunes. Apple threatened to pull exclusive deals from Target's stores, which was a very real threat. Since iTunes had opened its store, department stores saw a steady decrease in music sales volume. The only consistent performance in the music department at Target was seen in the iTunes cross-promotional merchandise. There were often deals in which if a customer bought three CDs off a specific rack, they received a free fifteen dollar iTunes gift card. Or there was the new-release deal, in which a new release would be available at Target with a Target exclusive code to download free extra content through the iTunes store. As these deals were a good profit stream for Target, the plan for the download store was abandoned. Even Wal-Mart's eighty-eight cent download store (the prices have since gone up, though are still pennies cheaper than iTunes) struggles against the giant that is the Apple iTunes store. Apple is a relative newcomer to the game of selling music, yet because they were the first major player in the legal-download field, they are able to muscle established companies which have been selling music since before Apple was even founded.

So, that's the music industry model and the problems I see with it. There are other problems, as well, and other benefits. Notable among the benefits, I just want to add (because this will be vital when I delve into ebooks), is that the .mp3 revolution has made it easier for an outsider, independent artist to place their music in the same store where people are buying all of their music. Before the advent of the download, the only way for an unsigned artist to get their music heard was to gain exposure through playing out as much as possible and releasing a demo tape to a local radio station and hope the song gets played or that they get noticed by someone with money (or at least a line to the money). It was expensive to sell your music to your fans at your shows because you had to front the money for the recording studio time, mixing, mastering, copying of media, printing of media, etc. You had to pay for each CD you sold at your show before you knew it would sell. But now, with sites like myspace music, iLike, and others, it is very easy to reach a fanbase. Myspace lets you post your music for streaming, free of charge for either you or your potential fan. And with iTunes, there are services such as TuneCore which distribute your music to iTunes for a fee. Before the internet, the .mp3 and iTunes, it was difficult enough for an independent artist to get on the shelves at a local record shop, never mind national distribution. But now there exists the digital equivalent to an unsigned band's latest album sitting on the shelf next to established artists. So again, the digital music revolution is a mixed bag.

Stay tuned, I promise by the end of the week to actually talk about ebooks! I have some strong things to say, though keep in mind that I could basically just repost exactly this and change some key words around. I promise I won't do that, though. It will be at least 89% new material.

9 comments:

Bridget said...

Be sure to address the fact that you can't dogear an electronic page...I hate that!

Molly said...

my head is spinning (like a vinyl record)! I wish they'd just decide on a format and leave it alone. You forgot to mention the brief heyday of 8 track tapes and the epoch of tapes. I still have some old music tapes around here and have nothing to play them on. I hate when the technology renders much loved music extinct, b/c it means you have to re-buy it. Do you know how many times I've bought Dark Side of the Moon? I think at this point, Pink Floyd owes ME.

I can't wait for the e-book post. I like the tactile experience of turning pages, but I'm also intrigued with the "Star Trek" cool-ness of the e-book.

Molly said...

Oh, and you forgot to mention some of the other great stuff playing on the home stereo of your youth: The Moody Blues, The Allman Brothers, Elton John, Queen, Sting, Blood Sweat & Tears, Jethro Tull (!), Crosby Stills Nash (& sometimes Young), Jefferson Airplane, Joe Cocker, the Rolling Stones, The Doors, the Beatles, The Eagles and all that lovely classical music.... We had a great soundtrack to our family life, didn't we?

Elliot said...

Umm...Molly, I mentioned Queen and The Beatles. I suggest a closer reading next time.

皮東 said...
This comment has been removed by a blog administrator.
Bridget said...

Wow...who's the blog administrator and why is he/she removing comments?

Elliot said...

I'm the blog administrator. And I delete comments that are all gibberish or spam, like the deleted comment was.

Bridget said...

Blog Administrator is such a wonderfully serious title...I think you should definitely add it to any future resume you may send out! Thanks for clearing that up for me...I didn't know if there was some person (aka blog administrator) who screens blogs for unblog-like comments/content...now I know!

Molly said...

Hey, I read ALL of it, it's not the reading that's at fault, it's the remembering. Jeez. Sorry

I'm ready for part 2. Get on it.