A Sign Of The Times

By Roger Nichols

Downloading Music

Have you heard of Apple’s iTunes yet? Apple started offering MP3s for download at $.99 per song. You can log on and listen to a 30 second segment of any song, and if you like it, you buy it. After one month in operation Apple had delivered over 10,000,000 songs. It is all legal. Apple has licensed the material from the record companies and pays the artist their royalties. It points out one important fact. If you offer a good product at a reasonable price, people will pay for it because it is the right thing to do. Almost the entire product available through iTunes is also available on the Internet for free, but given the choice, most music lovers will gladly pay for their entertainment.

Let’s look at the current system. The record company puts 10 songs on a CD and ships it to the stores. The CD sells for around $16, although I just saw news that record companies are going to lower the prices of CDs… because NOBODY IS BUYING THEM! So, where was I. Oh, yes. If you just like one song from your favorite artist, you have to buy the entire CD.

The record companies have been gouging consumers ever since CDs were introduced in 1984. While the LP cost around $1 each to manufacture, the new CD format cost around $4.50 each. The price of the CD was set at $14.95 with promises that the price would come down as manufacturing costs declined. In addition to the higher retail price for CDs, record companies deducted $1.00 to $1.50 per CD from the artist’s royalties for “packaging costs” of the new format. But that’s not all; the record companies also reduced the artist’s royalty rate on CD. Whatever the artist royalty agreement was for LPs, the record company only paid 75% of that rate for CDs. Unless you are a big name artist, this clause is still in record contracts today. There are no LPs, only CDs, so basically if your lawyer negotiates you a great 20% royalty rate, you will really only get 15% because there is a 25% reduction for CD sales. Some record companies still deduct a $1.00 per CD special packaging cost.

No wonder the record companies are crying. I would bet you that if the record companies started playing fair, and let you pay for and download only the songs you wanted, that most people would stop downloading bootlegs and start paying for the songs they want. It seems to be working for Apple and iTunes.

Here is another small catch. The record companies have licensed mostly catalog material to Apple, and very little new or current releases from the top artists. You still have to deal with the big boys, and you still have to pay for more than you get.

If the record companies got into this new mode of selling one or two of the good songs instead of all the fluff, then it would cost the record companies less to produce product. An artist could go in the studio and cut two songs instead of ten or twelve.

New artist development would do better also. If a group has a couple of great songs, then sign them, put out the two songs, and see what happens. If the new artist flops, then the record company is only out a fifth of the money they would have spent.

I just got an advertisement from DiscMakers, the company that specializes in small runs of CDs for independent artists. They have a deal with Apple for distribution through iTunes. This means that you can cut your songs, press up some CDs with UPC codes so they can be sold in stores, and have your songs uploaded to iTunes so everyone gets a chance to hear them. If you have a web site, you can sell your CDs on your web site and DiscMakers will take care of the shipping for you. You could become a mini Amazon.com!

False Starts

There have been attempts to come up with new delivery methods. There are still a few kiosks around that will let you select the songs you want to buy, and then the kiosk burns your CD while you wait. The problem: Limited access to new material from the major record companies.

IBM and Blockbuster tried to offer a service where you could do basically the same think as the CD kiosk, but on a larger scale. Content would be downloaded to the kiosk via satellite, and besides the CD, you would get the actual color CD booklet. The system never got off the ground. They were never able to get licenses for the songs that would make everyone want the service.

Conclusion

Well, something has to give. Maybe after a few more record companies close their doors. Or maybe after the FBI arrests your grandmother because you downloaded some songs on her computer while you were visiting her last spring. Or maybe after a few more artists decide to leave the record companies and sell material directly, bypassing the middleman. Wait! How about if the record companies lower the price of CDs down to where they should be; $9.95 for ten songs by a top artist. Naw, it’ll never happen.

I saw a guitar players by the freeway onramp holding a sign that read “Please help feed my family. Download my song “The Upwardly Immobile Blues” from iTunes. Tell your friends.”