Interesting Wall Street Journal article on downloads

[felser]

How the Music Industry Can Get Digital Satisfaction If you can't beat them, join them.By L. GORDON CROVITZ

The music industry played one sour note after another as digital technology undermined its traditional business models. But after suing some 35,000 music fans for illegally downloading songs, music honchos decided not to sue the more than seven million others. Instead, the industry has concluded that if it can't beat them, it might as well join them in enjoying the benefits of technology. This marks a milestone in what might be called the Great Unbundling.

Digital technology is a powerful disaggregator, giving consumers the power to pick and choose what we want, how we want it, and when and where we want it. Instead of buying a 14-song CD, people can download one favorite. Instead of owning physical CDs, we own access to digital copies. Instead of having to use a stationary stereo, we can play songs on our iPods, phones or laptops.

Other industries are still coming to terms with the unbundling power of digital technology -- think of video, books and news -- which makes the music industry's story timely. Recorded music for decades was sold as physical products, albums via phonographs, cassettes, then CDs. For young programmers, finding ways to download and share songs digitally (and usually illegally) became an early application of the Web. Napster and similar file-sharing services were shut down in the early 2000s as the music industry fought illegal downloads.

But shifts in how people access music can mean rethinking the entire value proposition. As music-industry critics David Kusek and Gerd Leonhard predicted several years ago, "Access to music will replace ownership of it. We have passed through the Industrial Age to the Information Age, and music will never be the same again." There are now about half as many CD sales in the U.S. as in 2000. A few years ago, record executives in London were shocked when young people refused even free CDs.

The industry should by now understand that the way to get "Back in Black" is not in album CDs, which remain the biggest source of revenue. Instead, the future is sales of digital songs and ring tones, licensing to video games, and trying to get rights to concerts and other revenues associated with the musicians.

Just in the past month, the Recording Industry Association of America abandoned its previous theme song of "Bring Lawyers, Guns and Money" by announcing it would no longer sue downloaders, except in exceptional circumstances. This means kids will no longer be sued for downloading songs for personal use.

Instead, the trade group will work with Internet service providers to identify the worst offenders. The association will track people who grossly infringe copyright and alert the ISPs, which will remind users that downloading music illegally is a violation of service agreements that could lead to the service being cut off. A study found that 70% of people in Britain would stop illegally sharing files if their ISP told them it had detected the violation. ISPs would benefit because a limited number of music downloaders hog bandwidth, and they may also hope this approach could work to limit abuse of online video.

The music industry also reversed its longtime strategy of limiting digital rights. The recording companies recently agreed that Apple's iTunes Store can sell songs without copy protection, which means that buyers can listen to them on devices other than their iPod or iPhone. They also agreed to price points above and below the flat 99 cents that Apple had used. The iTunes Store has redefined convenience for consumers, last year becoming the world's leading music retailer, dislodging Wal-Mart.

Unbundling has made singles -- disaggregated from albums -- the big winner. Last year was the biggest ever in Britain for the sale of singles, combining downloads and CDs. There can even be new bundles: Buyers of Nokia's "Comes with Music" mobile phone will get the right to download unlimited songs to the owner's phone and computers, with the participating music publisher paid a share of the price of the phone.

The music industry is the first disrupted industry to understand that people are willing to pay for what's otherwise free (albeit illegal) if it's convenient, well-packaged and reasonably priced. This is a lesson other parts of the media and entertainment business still fight by making their content available for free in the digital medium while charging for it in other channels.

The embrace of technology didn't happen until the traditional music companies had no option. Other industries should stop wailing that they "Can't Get No Satisfaction" and instead work on their own versions of "The Times, They Are A-Changin.'" Consumers will always want choice. When technology provides it, the best response is to find ways to give customers what they want.

Write to informationage@wsj.com

[A Lark Ascending]

Wise words.

[The Magnificent Goldberg]

I didn't know RIAA had changed its tune. A good move.

But where does all this leave people like Chuck? Is there an element of the new scheme of things that still allows small firms like his to make a profit?

MG

[Stefan Wood]

Chuck might want to think about downloads as well. The guy who owns Nimbus West offers his catalog as cds and downloads.

[mjzee]

Honestly. These days I really hesitate about buying more CDs, because I feel burdened by all of this **stuff** that I have to keep around somewhere, let alone file and keep track of. I have 2 external hard drives (one being a backup), I can find anything I want within a few seconds, and all the other advantages that digital files bring. It really is the way to go.

Also the instant gratification of buying and downloading. I find it frustrating that I can only download from eMusic once a month, when my downloads renew.

The only thing lacking is liner notes, discographical info, etc. I wonder whether it's a copyright issue: liner note writers would have to be paid again if published electronically. That's my only guess, unless it's the record companies figuring they're just not that important to most listeners. Certainly the runaway success of the iTunes store would back that point of view.

[save0904]

Honestly. These days I really hesitate about buying more CDs, because I feel burdened by all of this **stuff** that I have to keep around somewhere, let alone file and keep track of. I have 2 external hard drives (one being a backup), I can find anything I want within a few seconds, and all the other advantages that digital files bring. It really is the way to go.

Also the instant gratification of buying and downloading. I find it frustrating that I can only download from eMusic once a month, when my downloads renew.

The only thing lacking is liner notes, discographical info, etc. I wonder whether it's a copyright issue: liner note writers would have to be paid again if published electronically. That's my only guess, unless it's the record companies figuring they're just not that important to most listeners. Certainly the runaway success of the iTunes store would back that point of view.

Regarding liner notes I just found out that 7digital download shop provides digital booklet including the original liner notes. See Track 15 for details - Joshua Redmans Compass download with digital liner notes

[A Lark Ascending]

Booklets are provided as a matter of course by some of the smaller classical companies - Chandos, Gimmel etc. I recently bought the recent Patty Loveless album via iTunes and the full booklet was part of the download package.

We're thinking about reproducing the packaging of the past. It's not something that I care too much about (though I like a distinctive 'cover' that identifies the recording at a glance). But I wonder if this new way of distributing music might generate some highly novel ways to 'packaging' - doesn't have to come shaped like a CD booklet! I imagine a sort of 'goody bag' being attached to pop recordings (plus plenty of advertising!).

[mjzee]

We're thinking about reproducing the packaging of the past. It's not something that I care too much about (though I like a distinctive 'cover' that identifies the recording at a glance). But I wonder if this new way of distributing music might generate some highly novel ways to 'packaging' - doesn't have to come shaped like a CD booklet! I imagine a sort of 'goody bag' being attached to pop recordings (plus plenty of advertising!).

I think you're completely right - with 2 caveats.

Completely right: I remember the heyday of the creative LP packaging era (late '60's - early '70's). Besides fold-out covers, there were all sorts of things slid into the LP pocket (interesting graphics, stickers), embossed covers, die-cut stand-ups, customized inner sleeves, customized labels, colored vinyl, you name it...designers were really allowed to let their creativity run free. It enhanced the experience of owning and listening to the LP. Conceivably, you could have something similar in digital format - graphics on your monitor as the music plays, changing perhaps per play, etc. A new generation of designers would contribute their vision.

A caveat: This will only happen if record companies can make a profit on their sales. Illegal downloads are a cancer on this industry. I don't know that illegal downloads can be stopped, sorry to say.

Another caveat: Jazz covers were never big on graphics. Yes, I know about Reid Miles, Impulse fold-out covers, and the like. But Blue Note back covers were just text, the insides of Impulses were just text and black-and-white photos. Most jazz covers were more along the lines of Prestige, Muse, etc...kinda dreary. So I don't know that graphics are that important to the average jazz fan, though we would like discographical information.