Two Tiered Future of CDs? (1 Viewer)

[Lee Scoggins]

Friends,

I have been thinking about the popularity of the Stones SACDs and the generally aweful music retailing situation as discussed in the Wall Street Journal today.

Some food for thought:

I wonder if we might see soon a two-tiered approach to the market:

Tier 1 - High Resolution Audio (no need to debate which or if both) that people purchase to listen to their favorite bands in greater sonic detail. Premium is paid for high quality graphics, jewel cases, DSD or PCM recording, etc. Copyright protection cuts down on pirating, but likely does not eliminate it. Digital outs eliminated from CD players. In essence, one pays to have own copies of music but is rewarded by great quality with bulk of CDs now in "hybrid" format. Money drives more classic titles into campaigns similar to Rolling Stones remasters. High rez players drop dramatically in cost as decoding chips hit high volume plane. User can copy music but only in analog output form.

Tier 2 - Downloadable MP3 type music, offered on websites by labels for small per song charge, or free for a couple of "teaser tracks" from record label. Sharing is encouraged as way to rebuild label goodwill, but quality is limited by low-rez nature although perhaps with better compression scheme. Labels use tracks as loss leader to create interest in the premium-priced (but reasonable) high rez album verions.

Do you share my view of one possible audio future?

Why or why not?

 

[KeithH]

Lee, there are two key issues that a format switch will not address. One is the paucity of quality new music coming from the major record labels. The record labels don't want to face the (bad) music, but they must. Lagging music sales are in part due to the record labels putting out bad products.

The second issue is the high price of music (CDs). A premium-priced format or two such formats is not the answer, even if it/they offer higher resolution than CDs or MP3s. The record labels want everyone to believe that the proliferation of the MP3 is hurting album sales. Well, high prices of CDs are, in part, driving more and more people to download and copy MP3s. This is a subject that I don't want to dwell on here further.

 

[Micahel C]

Lee, I really don't see hybrid cd's becoming standard in the foreseeable future. Not because of retail pricing, but due to the fact that all of the record labels have been paying royalties to Sony & Philips since the advent of the cd. Patent rights for the cd format have now expired, so all record labels are now able to issue redbook cd's without royality fees. While many may issue sacd's or dvd-a's as an addition to their normal releases, going to a hybrid disc for the bulk of their sales would mean going right back to paying royalties again. I just don't see that happening any time soon.

 

[Lee Scoggins]

Patent rights for the cd format have now expired, so all record labels are now able to issue redbook cd's without royality fees.

Yes, but Sony and Philips could drop their pants completely on the royalties to get the format started and then collect higher rates in the future or try to gain the revenue stream from pro market and consumer sales.
These all just hypotheticals...just trying to guess what might work better.

 

[Jagan Seshadri]

I'm curious, do DVD-Audio discs command royalties from record companies? If so, who gets the gold?

-JNS

 

[Mike Broadman]

Hey, I work on jazz and classical recordings mostly. Talk about two dead genres...

I don't think classical is dead. It's just that those listeners aren't as likely to blow wads of cash on music. Younger adults and teenagers spend more, and they are into pop.
Jazz, on the other hand... I don't even want to talk about how it gets stepped on in this country.

 

[Lee Scoggins]

The basic rules of business are simple: if a product isn't selling, it is because the product is of poor quality.

Agreed, I was just trying to brainstorm out a way for the labels to get healthier so that artist development has more of a chance.

 

[Jeff Ulmer]

The basic rules of business are simple: if a product isn't selling, it is because the product is of poor quality.

This is simply not true. There are numerous factors that affect sales, and the quality of the product has nothing to do with it. If it did, why would McDonalds be the biggest fast food chain in the world?

The primary factor in any form of sales is promotion and marketing. If people don't know about your product, they won't buy it.

Another factor is price. The item has to have a perceived value that justifies its cost. This has nothing to do with the cost of production, but entirely to do with what people think it's worth, which is largely a marketing issue.

Quality of product is at the bottom of the list.

As for SACD and DVD-A, both will remain niche formats IMO. While we have DVD-A up here, it simply isn't selling, and SACD is nowhere to be found at major retaillers.

 

[Lee Scoggins]

Jeff,
Check in the aisles under The Rolling Stones

 

[Thomas Newton]

protection ... Digital outs eliminated from CD players. ... User can copy music but only in analog output form.

No thanks. Why would I want to give up the ability to make custom compilations, or to listen to music on a computer as well as on a stereo?

Why would I want to muck around with setting analog volume levels on a MiniDisc copy of a CD (set the volume too high, hear that wonderful digital clipping)?

Why would I want to close the door on a portable that is as intriguing as a 20 GB iPod? The idea of being able to take several hundred of my favorite albums on vacation (without carting around a truckload of CDs) is very appealing.

 

[Rachael B]

Jeff makes a good point about marketing. It used to be that whatever got airplay sold. That's over, apparently. First, much of the music they're pushing is so bad that no matter how much it's played people won't buy it. Secondly, the younger set wants downloads. They are very cool on even buying CD's. They might warm up if CD's went way down in price but maybe not.
The labels have no viable business model until they sell downloads with no strings attached. I believe that's the only way they can get the all-important youth market back. Physical media might gradually become an audiophile only market?
I saw an article somewhere that suggested that by and largely that the labels only prime market left is lower socio-economic folks without computers. They can only get music via physical media, but they can't afford much.
The big five have made every mistake possible bullying the market. And, then there's the prices....!:frowning: I believe "payola radio" is obsolete too. I haven't listened to anything but the University of Tennessee's 2 stations (New Rock 90.3 & 91.9 classical & jazz) in ten years. There's a growing disdain for payola radio with it's limited playlist and horrendous commercials.
The music industry's future is bleak, the big five's anyway. They have no viable business model just decaying markets based on gouge prices to maintain earnings. That's about the limit of my brain's power to reason this night. Anyway, my brain is more intrested in HOT ROCKS at the moment. The labels wish that audio-vidiots like me were a dime-a-dozen but they're not. Bullying the market won't make it so either.

 

[Lee Scoggins]

That's over, apparently. First, much of the music they're pushing is so bad that no matter how much it's played people won't buy it. Secondly, the younger set wants downloads. They are very cool on even buying CD's. They might warm up if CD's went way down in price but maybe not.

Good points here Rachael.
I find today's music positively non-musical to be polite about it.
And look at the strong redbook sales of old classics like rock groups.
As for high CD prices, the industry brought this on themselves. Producing even a relatively small batch, pricey audiophile CD can be as high as say $1.00 per disc, artwork included. And the selling price of many new CDs I saw at Borders is $16 and that's on sale. The pressure comes from label overhead as the majors continue to play Pariah Carey $20 million, spend millions on dead Michael Jackson recording sessions and other insane contracts. Also, the record producers take a significant cut.
I can't blame teenagers for not wanting to this much money on a new album. From a strategists point of you, the labels need to cut costs, rework large contracts down significantly and experiment with using downloads to attract new album buyers. Yes, and stop making people upset by attacking everybody. What they gain in piracy stopped, I bet they lose tenfold in PR damage.
It really could not happen to a nicer bunch of people.

 

[Mike Broadman]

Lee, now you're talking. That's a more accurate description of what the problem is. I don't think high-res will come into play. It's all about the business model.

NP: Miles Davis, We Want Miles

 

[Jeff Ulmer]

Producing even a relatively small batch, pricey audiophile CD can be as high as say $1.00 per disc, artwork included.

I don't know where you are, but you certainly can't do small runs for that kind of money up here, and you are only covering replication costs, not the production of any of the masters or artwork, not that this has anything to do with what it should retail for.

As for The Rolling Stones SACDs, they still aren't available here, and even if they were, you can't base a discussion on the state of the industry on one artist, especially one that has been around for almost 40 years. It isn't representative.

 

[Lee Scoggins]

As for The Rolling Stones SACDs, they still aren't available here, and even if they were, you can't base a discussion on the state of the industry on one artist

I was joking around - see the grin!

 

[Rachael B]

Lee, there are plenty of intresting musicans on College Radio. I never find out who all of them are because of the industry's failure to implement the RADIO DATA SERVICE and poor anouncing. There are more intresting musicans than ever, but the vast majority are ignored by the majors. If somebody doesn't fit in their little stereotypes (formats), they're right out. If you want these obscure artist's albums, you can't necessarily get them.

People want downloads and internet radio as means to discover lesser known music and the major put up every roadblock possible. They've made their bed! Best wishes!

 

[Lee Scoggins]

There are more intresting musicans than ever, but the vast majority are ignored by the majors.

I completely agree and this is a basis for my idea to have a premium priced, but still low, content rich format such that these good folk can get discovered and signed.

The mainstream artists on the Video Music Awards were generally aweful last night - did you see Justin Timberlakes (and I use the word very loosely) performance?

And of course, one of my favorites Norah Jones stood no chance for her performance on MTV2...

 

[Jeff Ulmer]

such that these good folk can get discovered and signed.

While this may be the goal for a lot of people, being signed is often the death knoll for artists. There is the saying about being a big fish in a small pond. I know dozens of bands who thought they were getting their "big break" signing to a major, only to find themselves months down the road with no shoes, no money, no label, and not owning the album they paid to make. While the distribution and marketing power the majors have is useful, being a small band on a big label can be worse than going independent, other than the advance.

 

[Lee Scoggins]

Jeff,
I am not sure about this. If the majors don't start developing good talent, how are we going to hear a better selection of music?
I guess that I may be suggesting that there be smaller contracts with higher quality artists, rather than this "top heavy" pyramid of just a handful of over-exposed artists who receive a vast proportion of the label development dollars. In other words flatten the pyramid as much as possible to allow easier moves up and faster moves down the pecking order. There will, of course, always be superstars that are very well paid, but more diversity would result from a flatter artist structure and damn do we need more diversity!
If you take what you said to the extreme, we would have a world of mostly indie artists which is not bad from a content standpoint but I think distribution would be very limited and local in nature. And there would be far less economic incentive to be a musician.

 

[Jeff Ulmer]

I think we already have enough diversity, what we don't have is a business model where independent acts can get better distribution. It would be nice to think the majors would be willing to foster develoing artists, but let's face it, that is not what they are good at, at least not any more. Now, the majors are the powerhouse behind one hit wonders, good at the glitz and the gloss, but not for making sure talented individuals get the exposure they deserve. Hell, these days, the majors spend more money making mini movies than records.

Realistically, there has never been a sound financial incentive to be a musician, other than the myth that selling a million records will make you rich - it doesn't, it makes the record company rich. Properly approached, an artist can make MORE money selling independently than they can on a major, since they are taking a larger share of every record sold.

For the sake of argument, let's assume that the same artist is selling parallel albums both independently (ie direct) and via a major. The net price is $10 (after cost of production to keep the math simple). Chances are the artist makes $1 per CD on a major label (I'm being generous, since unless the artist has some business savvy, they are getting paid a percentage of wholesale, not retail), while they would make $10 per CD direct. It takes a whole lot fewer sales to make the same net income as an independent. However - and it's a big however - as an indie, the artist has to foot all the costs of making the CD up front, then has to finance that until the CD sales recoup the investment (if they ever do).

Advances aside, the chances of the artist ever seeing an additional dime from all those CD sales on the major are slim to none (expenses, deferrals, hold backs...). I recall a conversation with a certian lead singer of a very popular 1970s band, where nearly 10 years after releasing their previous LP, their label still owed them somewhere in the neighborhood of $32 million in unpaid royalties, which they were holding as leverage against a new album, but I digress...

Of course, without a decent promotional campaign, the indie isn't going to see a dime either. However, this is where the internet could be of use, assuming people didn't feel it was their right to just take whatever they want from the artist without compensation. Since you can reach a global market on the net, your distribution potential is unlimited, either selling direct to fans, or to disributors in different markets.

You likely aren't going to move the same number of discs you could through a major, but you don't need to make equivalent income. If the busines model were to move in a direction where it became the norm to buy directly from the producer, the industry would thrive with fresh talent, who aren't being coerced into homogenising their music on the whims of some guy on the 14th floor of a Manhatten office complex, and the playing field would level, since delivering the goods means putting up a website, licking some stamps and paying a visit to the post office.