A marriage of cd and analog technology?

[E-Stat]

The record companies make a small fraction on downloads than they make on physical disc...

Curious observation. Taking a quick look at a random mix of new and old releases over at Amazon, I find the MP3 "album" (as in downloadable version) is usually the same price or more expensive than the CD. Hmmm. No media cost. No media production cost. No packaging cost. No cost of carrying inventory. Instead, just cheap fixed cost storage on a server. Making less money? They whine about everything.

Just as some low volume books are only produced on demand to save the costs associated with mass production, some albums are only available as downloads. That reality, on the other hand, makes perfect sense.

rw

[RGA]

I thought I'd throw this out there - the president of Naxos was recently interviewed - talks about CD the new formats etc etc.

http://www.stereophile.com/news/klaus_heymann_of_naxos/

[Feanor]

I thought I'd throw this out there - the president of Naxos was recently interviewed - talks about CD the new formats etc etc.

http://www.stereophile.com/news/klaus_heymann_of_naxos/

Thanks, RGA. That was very interesting, and I learned a couple of things, e.g. Naxos to distribute Warner Classics, and Naxos radio which I'd somehow missed.

To quote Klaus Heymann, "The classical market has now probably shrunk to the core collector. There are very few titles that will sell huge quantities like in the past." Too bad but doesn't bother me much at this point; there is still more classical choice than ever -- and it's (virtually) all on CD (or SACD).

As for classical downloads increasing slowly, this isn't surprising to me. First, few classical listeners, (the "core" Heymann speaks of), are interested in complete albums, or at least complete, multi-track, composition, not single "songs". There is little saving buying a complete album for download and, secondly, not much reason to so so at all if the rez is only 320 kpbs.

Personally I would download vs. CD but I'm loath to pay almost full price for 320 kbps. ArkivMusic for example, now sells many albums, (notably Naxos), for download but only at 320 kbps, albeit at a small saving over the physical CD. Not good enough for me, but that will change when I can get FLAC downloads for the price of the lower rez.

[theaudiohobby]

While I agree with what you are saying, I admit vinyl does some good things with music, especially when the mastering and cutting is in the hands of folks like Doug Sax and Bernie Grundman. However, even they admit those very things that it does well, are also the very things that do not make the medium very accurate when compared to the master tapes. This is an area where CD does well, and Blu ray disc absolutely excels.

There, you said it , should we seek progress by emulating vinyl distortion Reminds me of the Orient Express so beautifully captured in certain period movies. Oh so romantic but absolutely and completely outclassed by modern bullet trains when the raison d'etre of trains is considered.

[theaudiohobby]

Hi Feanor,

I believe you meant to say that core classical music collectors are not interested in single song downloads but in complete albums/compositions , correct? I know I am not interested in single songs at least as far as classical music is concerned.

[theaudiohobby]

Wow, what an accurate description. Excellent post

Thanks

[E-Stat]

Personally I would download vs. CD but I'm loath to pay almost full price for 320 kbps. ArkivMusic for example, now sells many albums, (notably Naxos), for download but only at 320 kbps, albeit at a small saving over the physical CD.

Agree. I've never purchased a low resolution download of anything. Amazon has given me two free "songs" which were used for content for which I later purchased the CD. Heymann says "I don't think the future of the industry will be entirely downloads, as we had thought maybe three years ago," Hey Klaus - d'ya think its because we don't want to download lossy crap?

Perhaps the situation will change when buyers don't have to choose between convenience and quality. In fact, it may well be that for releases which are only available as a CD, a 24/96 download would provide better quality.

rw

[mlsstl]

Curious observation. Taking a quick look at a random mix of new and old releases over at Amazon, I find the MP3 "album" (as in downloadable version) is usually the same price or more expensive than the CD. Hmmm. No media cost. No media production cost. No packaging cost. No cost of carrying inventory. Instead, just cheap fixed cost storage on a server. Making less money? They whine about everything.

You're right, record companies whine about everything. But so do farmers, politicians, unions and pretty much everyone else in the universe. Look at the teachers in Milwaukee who are fighting tooth and nail to keep a Viagra benefit in their health plan while the school district is in a financial crisis. Now THAT is a first class mealy mouthed whine!

TTT is right in the sense that downloads are not as profitable because it has heavily swung the market from whole album purchases back to singles. In a fashion, that's pretty much the same spot the record business was in during the 1950s and prior. Not many people like going back in time to their old pay scale. Once the bar has been raised, no one I know likes seeing it lowered.

Since the record company revenue stream is dominated by popular music, it really doesn't matter too much that classical, jazz and some other genres are still album dominated. They don't produce the needed volume.

The point is that the way people buy music is changing (again) and that endangers the record companies' financial model.

Whines are a guaranteed byproduct.

[Mr Peabody]

It's interesting that if digital is so great no one wants to associate their gear with that term "digital", I've yet to see some one advertise, "our player sounds so digital", but you always see the ultimate compliment, "this player sounds analog, or, more like analog". No wonder I feel vinyl is sort of a benchmark. And, at this point vinyl is still 100% of the original signal where digital, well, is not.

[E-Stat]

TTT is right in the sense that downloads are not as profitable because it has heavily swung the market from whole album purchases back to singles.

Ok. It is not downloading per se, but the sale of singles. That is no way changes the favorable economics of downloadable albums vs. physical media.

rw

[Feanor]

Hi Feanor,

I believe you meant to say that core classical music collectors are not interested in single song downloads but in complete albums/compositions , correct? I know I am not interested in single songs at least as far as classical music is concerned.

Indeed!

[Feanor]

Ok. It is not downloading per se, but the sale of singles. That is no way changes the favorable economics of downloadable albums vs. physical media.

rw

Absolutely!!! A buck a song is gouge by any accounting when you consider the cost of physical production, distribution incl. middleman markups, and inventory. Vs. physical CD, price of a download ought to be 20% at worst, say $1 a song or $2 an ablum or similar math.

And the producers are perplexed about so much piracy? Not really: it's for public show and feeding to the polititians.

I would sure as heck buy many more albums at $2.50 or even $5.00 than CD price, and I'll bet I'm not along. It's call "demand flexability".

[E-Stat]

A buck a song is gouge by any accounting when you consider the cost of physical production, distribution incl. middleman markups, and inventory.

Or, conversely, the price of unbundled singles should be higher recognizing that the fixed costs of musical production are now shouldered by the reduced revenue of cherry picked content. Leverage the quantity discount model. Buy one for $2 or all ten for $8.

rw

[mlsstl]

Ok. It is not downloading per se, but the sale of singles. That is no way changes the favorable economics of downloadable albums vs. physical media.
rw

I think you're still being a bit hard on the boys.

I just checked Amazon for the new Tom Petty "Mojo" album. The CD is $13 (possibly plus shipping) versus $10 for the download version.

CD duplication prices for small quantities are in the $1 to $1.50 range (with packaging) so the price differential between CD and download doesn't seem unreasonable.

The problem from a business economics standpoint is you can't focus on just the unit production cost of the product. There are enormous fixed expenses Warner, for example, had $1,118,000,000 in administrative and marketing expenses in 2009 that were independent of artist and other unit production costs. All in all, there is some, but not a lot of difference in the cost of distributing music physically or digitally. You're looking at a differential of perhaps 10% or so.

However, if a company is used to getting $10 or $15 when a buyer wanted one or two songs and had to buy an album but is now getting $1 or $2 for the download of the specific songs, that ripples all the way through the company.

Hence, as noted before, that's a big change and is going to require some dramatic restructuring - layoffs, downsizing, loss of marginal acts, etc, etc.

There is no surprise whining is involved.

[E-Stat]

I just checked Amazon for the new Tom Petty "Mojo" album. The CD is $13 (possibly plus shipping) versus $10 for the download version.

And when you look at other examples, you find the opposite situation. Like for Brad Paisley here. For three of his albums, the MP3 download is more expensive.

CD duplication prices for small quantities are in the $1 to $1.50 range (with packaging) so the price differential between CD and download doesn't seem unreasonable.

Which makes zero sense that the downloads would ever be more expensive.

However, if a company is used to getting $10 or $15 when a buyer wanted one or two songs and had to buy an album but is now getting $1 or $2 for the download of the specific songs, that ripples all the way through the company.

Agreed. I'm comparing apples with apples with album examples.

rw

[Mr Peabody]

I wonder if it comes out close in the end, some consumers may not be willing to pay $13.00 to get one or two songs where they might go ahead and buy the two tracks at $1 a piece. Maybe the singles will add up. Also, a recent band, I'm thinking Siliva, did a heavy cover of Wham's Careless Whisper that was available on mp3 but I don't think has ever appeared on an album yet, it may in the future though, who knows. Many artists and the record companies do have to think about the garbage they release now, Pop and Country has been notorious about releasing albums with only a track or two worth listening to.

[mlsstl]

I wonder if it comes out close in the end, some consumers may not be willing to pay $13.00 to get one or two songs where they might go ahead and buy the two tracks at $1 a piece. Maybe the singles will add up.

That's not been the history so far. If you look at Warner's annual report, 2009 revenues (the last full year available) are down over $300 million from 2008. That's not chicken feed. The download market may be growing, but it certainly isn't replacing gross revenue.

This is one of those "sea changes" that an entire industry is going to have to come to grips with. That is certainly going to involve changes they don't like and will certainly include aspects that we, as customers, won't like either.

[mlsstl]

And when you look at other examples, you find the opposite situation. Like for Brad Paisley here. For three of his albums, the MP3 download is more expensive.

Which makes zero sense that the downloads would ever be more expensive.

rw

You keep focusing on the unit cost of a very inexpensive physical product, but that's only a minor part of the total expense picture.

Municipal water supply systems offer an interesting analogy. With increased societal emphasis on saving water, many communities have gone to great lengths to reduce their water consumption. Many consumers are only seeing their water bills increase.

Why? It's not the cost of the water. It is the cost of the physical facilities and pipes, electricity to run it, payroll for manpower and maintenance costs. None of these expenses reduce if water consumption goes down. As such rates go up as people use less.

In the music industry, you have falling revenues as consumer buying habits change. It is not surprising that the pricing model is in a state of flux as record companies try to keep up revenue to the extent they can. They are trying to balance that against consumer resistance over pricing.

It is not surprising that some artists (or their label) may be experimenting to see if they can extract a premium for the convenience of a fast download (immediate gratification.)

As noted in the post to Mr. Peabody, these changes affect everybody even when they may not appear to make sense on the surface.

[Feanor]

Or, conversely, the price of unbundled singles should be higher recognizing that the fixed costs of musical production are now shouldered by the reduced revenue of cherry picked content. Leverage the quantity discount model. Buy one for $2 or all ten for $8.

rw

Eight bucks is still too high. However thinking about, I suspect is that the record companies aren't prepared yet to write off their physical distribution channels. That is, the direct selling price must not undercut the retail selling price otherwise the retailers won't carry the merchandize.

[Sir Terrence the Terrible]

Curious observation. Taking a quick look at a random mix of new and old releases over at Amazon, I find the MP3 "album" (as in downloadable version) is usually the same price or more expensive than the CD. Hmmm. No media cost. No media production cost. No packaging cost. No cost of carrying inventory. Instead, just cheap fixed cost storage on a server. Making less money? They whine about everything.

Just as some low volume books are only produced on demand to save the costs associated with mass production, some albums are only available as downloads. That reality, on the other hand, makes perfect sense.

rw

It seems to me that both consumers and record company executives whine about everything, I don't think either is less guilty of that.

Remember, that is what Amazon charges, not what they give to the record company. The record company would rather you purchase the CD, that is where they get their money from. Amazon charges whatever they want for the MP3 album, but what rights they pay for that are fixed. Some folks think that just a little file on a server is cheap storage, but the reality is, it ain't so.

[Sir Terrence the Terrible]

That's not been the history so far. If you look at Warner's annual report, 2009 revenues (the last full year available) are down over $300 million from 2008. That's not chicken feed. The download market may be growing, but it certainly isn't replacing gross revenue.

This is one of those "sea changes" that an entire industry is going to have to come to grips with. That is certainly going to involve changes they don't like and will certainly include aspects that we, as customers, won't like either.

Bingo!!!

[Sir Terrence the Terrible]

You keep focusing on the unit cost of a very inexpensive physical product, but that's only a minor part of the total expense picture.

Municipal water supply systems offer an interesting analogy. With increased societal emphasis on saving water, many communities have gone to great lengths to reduce their water consumption. Many consumers are only seeing their water bills increase.

Why? It's not the cost of the water. It is the cost of the physical facilities and pipes, electricity to run it, payroll for manpower and maintenance costs. None of these expenses reduce if water consumption goes down. As such rates go up as people use less.

In the music industry, you have falling revenues as consumer buying habits change. It is not surprising that the pricing model is in a state of flux as record companies try to keep up revenue to the extent they can. They are trying to balance that against consumer resistance over pricing.

It is not surprising that some artists (or their label) may be experimenting to see if they can extract a premium for the convenience of a fast download (immediate gratification.)

As noted in the post to Mr. Peabody, these changes affect everybody even when they may not appear to make sense on the surface.

Bingo again!!!

[Sir Terrence the Terrible]

And, at this point vinyl is still 100% of the original signal where digital, well, is not.

This statement clearly shows that you have absolutely no understanding of digital audio whatsoever. What comment would you make if what was on the vinyl was digitally recorded?

[Sir Terrence the Terrible]

There, you said it , should we seek progress by emulating vinyl distortion Reminds me of the Orient Express so beautifully captured in certain period movies. Oh so romantic but absolutely and completely outclassed by modern bullet trains when the raison d'etre of trains is considered.

First, I just want to remind you that you are preaching to the choir.

I also want to add that a really good lathe cutter like Doug Sax, can create a master disc surprisingly low in distortion. Now what happens in the replication process is another story, and that goes double for reproduction in the home.

[RGA]

Feanor

Well I would think downloading would be greener, no? I mean CD's were never had much of a keep sake factor with the puny art work and take out a magnifying glass to read the tiny ass print. So if you're going to simply load the CD into a machine like the Soolos/hard drive system then you may as well bypass the CD all together if you can get a lossless perfect copy of the CD.

If you have not seen Soolos I highly recommend you fiddle around with it. You can certainly do something similar with a laptop and hard drive for far less money but the touch screen interface is very very nice. Though it is also very expensive - but the Chinese will make a knockoff that will be 1/10th the price and probably a lot better sooner or later.

I am the owner of a 300 disc mega changer and owned a 100 disc changer many years back and an 18 disc 3 magazine stack machine from Pioneer. There is sound quality and ease of use to weigh but I feel ease of use wins out. I mean if you connect a very good DA converter to a Sony 300 disc changer you will get better sound than a lot of or even most one box cd players. Or it will be "close enough" that the functionality and ease of use outweigh the sonics.

My 300 disc changer with the Grant Fidelity Dac 9 at $250 sounds a lot better than my $800 Cambridge Audio player for a combined $500. And that's a cheap do it all DAC/tube preamp so there is no reason it can't be even better with a much better DAC.

With Soolos you are taking the trashy transport of the 300 disc changer out of the picture not to mention you can probably put 25,000 CDs into the machine - it really boils down to your hard drive space.

Terry at Soundhounds has probably 20,000 LPs and maybe approaching that in CD. You simply insert the disc wait a couple minutes - not long and it's in the hard drive - it automatically saves it no button clicking - it knows what to do. you can have it set to genres, or alphabetical etc. You can't remember the name of the artists just type the first couple of letters and it will find it by artist or album title. push the screen where the cd is and it opens up and you can play all or the song.

If you have a large music collection and you want to let a friend listen to something he said it could take him half an hour to find the the album. With Soolos it becomes seconds. In the second room they have an apple iMac hard drive or whatever it's called and the only thing it is used for is music storage. It's very small - and you can do the same thing with a laptop and itunes or whatever other program you like. They had it connected to an Ayre DAC and this sounded easily better than the cd players in the general price range and some above it.

Hard drives are stupid cheap. Future Shop was selling a 640gb hard drive for $99 and this is the USB powered tiny Free Agent Go drives with the 5 year warranty. The argument over losing data is not relevant since you could buy 3 such hard drives using two as double back-ups for your music collection. They also sell 1TB drives that are the same size for $140.

The thing is while sound is important for many of us there is a factor to consider that even if I prefer one format over another if the other brings an improvement in user friendliness on the magnitude of 100 times then it's something to look at.

I think a big argument against it comes from owners who have a LOT of cash invested in a given technology. If you own 20,000 CDs (or LPS for that matter) that you paid full retail price for it's very hard to move on when it means you have to admit that the new technology is better.

I certainly don't want to be hanging onto things for sentiment or because I spent X dollars and refuse to admit that times they are a changing.

Certainly vinyl is worth it because there is just such a huge amount of music on no other format - especially in the electronica rare classical and pop singles catalog but if you are not invested in the music or have an established collection it may not be worth the investment/space/time involved. And if you don't live in an area where you can get good used and cheap vinyl then it's completely not worth it. I pick up stuff for a buck or two so the money that goes to the table is offset by the music prices. A lot of it you can get free if you ask friends if they want to dump their collections. But then storage becomes a huge issue. With the buying power of most people diminishing - the dad working and buying a big huge house and 2 cars and putting all his kids through college to today where far more highly educated people have huge debt at 25 and can barely afford a one bedroom apartment with no kids, one used clunker and with the wife/girlfirend also better educated and in huge debt where are they going to put 5000 records or be able to play them at any reasonable volume? Most of the young educated folk who can afford more came from wealthier parents who could afford to pay their university tuition and buy them their cars and cell phone plans. Money stays with money.

Then the music industry and movie industry wonder why these poor university trained people download and thus steal music on Bittorent they have no money. Even in Canada the buying power in my profession, teaching is 50% of what it was in 1985. So we're more educated, and it costs far more to become a teacher today needing at least 5 and 1/2 years of university in British Columbia than it did in 1985 which required a one year program and yet we make 50% of what we did in 1985 (and it's still far better than in the United States where a friend made a whole $21,000 a year in California). I don't how far $21,000 goes in California maybe things are cheap!

The Soolos systems reduce space, reduce materials and if you want the cover art you can probably print the screen and get a huge picture of the musician's booklets. And if you have ten friend's you can buy one album between you - my teacher friend would have to, and then you can load that disc into ten soolos machines. Pool your money together to buy the album.