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Tuesday, November 4, 2003

defending the cd

i began this as a response to the comment from the man that seeded the last big post, none other than mrg himself. i decided to move this to two new posts mostly because we’re into important territory here – gary’s trying to do something good and important, and we share at least some of the same goals. at the same time, i have some deep, philosophical disagreements with this approach, and in my experience, it’s these differences that can shed the most light on the bigger picture. put on your shades, this could light up fast.

first, a quick thanks to gary for coming into my dark corner of the net and sharing his comments.

this edition is all about the cd, i’ll address some other points later.

anyone jumping in at this point may be well-served (if they have the time) by browsing my own back catalog and gary’s original post and follow ups (1 2 3 4 5). i do try not to repeat myself too much, and tend to weave threads between posts.

the cd may be the “cash cow of the monopoly distribution channel,” but it’s also the salvation of the independent musician… and i’m here to explain why.

the cd is everywhere (and very much not dead)

we may wish the cd were dead, for any of a number of reasons – there are better formats now. better technology. blue lasers. 24-bit samples. 6-channel mixes. smaller packages. lossy compression. lossless compression. drm wrappers. cheap hard disks. new compression formats. networks. whatever your issue – technologists pushing new tech, lawyers pushing drm or audiophiles pushing more bits and more channels – you can find a reason to wish the cd would just go away, but it won’t.

the most important thing about the cd is this: the cd is ubiquitous.

if someone hands me a 12-centimeter polycarbonate disc (that doesn’t come with some funky off-book copy protection gimmick), i know how to make it work. i can make it work almost anywhere because there are millions of gadgets that make it work (call that an “installed base”).

the cd is universally supported, universally available, and well-defined so i don’t have to worry about formats or codecs or channels or bit depth or anything else. if i’ve got an mp3-based portable, i probably can get stuff from a cd into mp3. if i’ve got an ubergeek ogg-based home-networked stereo system, i probably have some clue how to get from cd to ogg.

if i want to make sure that anyone who wants my music can actually listen to my music – online or offline, asia or africa, on a stereo or on a portable or in a car or on a computer, then i have the power to do that with a cd. it just works, for anybody. this is absolutely critical, and it’s something the independant, unfunded, still-working-the-day-job musician can’t get anywhere else.

i simply don’t think it makes good business sense to walk away from that kind of power and utility. especially now that…

…the cd is cheap

it doesn’t take a six-figure pressing plant to make cds anymore. there isn’t a significant barrier to entry. i can make a cd (that works in all of those millions of cd-playing devices) with a $399 desktop, $49 worth of software and a 30-cent blank disc. (that’s pretty cheap, considering i might be willing to spend two or three grand on a guitar…)

if i need a bunch of them, i can get 1000 packaged cd’s for $2.50 each (yes, i can do better, but i’m being conservative). and, of course, economies of scale do kick in… at 10,000 cd’s, i can probably cut that unit-cost in half.

i simply don’t need a big advance from or the blessings of a label to make cds anymore – and if i do it myself, no record label (or record industry association) can tell me how or where to distribute them.

the cd is flexible

with one chunk of plastic, the musician can give her adoring fans 2 seconds of music or 70+ minutes of music.

she can pick the number of audio tracks (red book cd-audio) and include graphics (red book cd-graphics), text (red book cd-text), midi (red book cd-graphics), still images (photo cd), video (white book), and even computer data and executable software (yellow book).

the specifications are well-designed and well-implemented, and with a little help from a blue book and a multisession cd spec, she can mix and match most of them on the same physical cd.

the industry can’t (and doesn’t) control the cd

let me make up a scenario to illustrate this point, and see if we’re still stuck with a “100,000 units of ‘product’ or perish in a dive bar” decision…

let’s say i’ve got 5 good tracks, and i’ve decided to release just those 5. i should find myself a studio, and let’s make it a good one. steve albini has has done some good work, and he’s down with the struggling musician, so maybe electrical audio1 is a good place to do this. let’s say i’ve rehearsed a lot and i can knock out 3 tracks a day, and i’m ok with studio b ($600/day), and some unknown house engineer ($100/day), and we’ll throw in $250 worth of tape, and $150 per day for three days in chicago (because i don’t live in chicago and i want to get there the day before the session). i just spent $2100!

wait! i have a home video my girlfriend shot of my last show. i can take that to my geek friend with the fancy computer and she can make that into a video file i can throw on cd. add a copy of my website, with contact and booking info – why not? – i’ve got plenty of room on this disc… ok, now i’m happy. i have a 5-track audio cd with some bonus stuff. i can also ask my geek friend make these tracks into mp3’s and put them on the website (and on the cd)…

i don’t want to buy too many cds up front – maybe 1000 – with just a paper sleeve. this2 looks like a cheap indie-friendly musician-oriented dupe shop: 1000 cds for $875.

i’ve spent $3000 and i have 1000 cd’s. now it’s time for me to get creative about what i do with them. i might want to give some of them to my friends. i could put them in promo packages and try to get paying gigs. once i’ve got gigs, i could mention them a few times to the audience that loves me (because i’m just that good) and sell some at $5 each (that’s price-competitive on a track-for-track basis with itunes, and you get the video “free”). i could do some other stuff (i am pretty creative), but if i break it out like this: 300 freebies (for promos and friends) and 700 @ $5 each = $3500, then i’m $500 ahead.

yeah, the margin is only 16%, but hey, i’m not losing money, and i got some paying gigs with these things, so i’m actually much further ahead. it is still hard to get gigs without some sort of recording – the mp3’s on the website or the promo cd’s in the mail. sure, i can play an open mic once in a while, but i’m not going to get paid for that unless i can sell something at the show – like cds.

not happy with those economics? find a friend with a home studio and cut your recording expenses. if you’re creative (and we know you are), maybe you can keep $3 or maybe even $4 from each cd without charging more than $5.

building a level playing field

the cd isn’t such a bad deal for the unsigned independent musician, because they can distribute the cd with the us postal service (for people on the website), cdbaby (for people elsewhere on the web) and from their hand to yours (at gigs) and there is nothing the riaa can do about it. (by the way, i think you get bonus points for sending happy people home from your show with something they can touch, but that’s just my opinion and experience. your mileage may vary.)

a 12cm polycarbonate platter by any other name would work the same – whether it comes from vivendi/universal, a new sun records or the burner on my desk. the recording industry gave us the cd and it pushed it hard enough that it became ubiquitous. this is a gift, and those at the bottom end of the music-business curve should take advantage of it. anyway, that’s how you “make money off the cd” – but, like i’ve said continuously, the formula won’t work for everyone, nor should it.

if you’re looking for a “level playing field” that brings a solo independent musician into the same game as the big record labels (in terms of the constrained attention market, at least) you won’t find a better situation than the 12cm polycarbonate disc.

the high end of the curve will always have an economies of scale advantage over the low end, but consider the real difference between my hypothetical 1000-cd production run at $3/cd and the $2.80/cd budget from albini’s hypothetical example (recording $150k + manufacturing, packaging and distribution $550k = $700k/250k units), it doesn’t get much more level than that.

yeah, but can you eat?

if we have a creative and budget-conscious indie musician, they can probably get their unit costs under those of the big labels. sure, it’s not an entirely fair comparision. the label released cds with 12 tracks, and our independent only has 5 (plus a video), but most of the 12 tracks suck, remember? and they’re selling for $18, while our favorite independent is selling for $5. bottom line: the musicians on the label pushing 250k units come away with $16,125 (or 6.45 cents per cd), and our indie comes away with $500 (50 cents per unit).

you may not be able to buy an mtv-worthy video to promote your track, but cd-for-cd, the game is on and the advantage goes to the low end of the market.

no, you probably can’t feed yourself with a $500 return on a recording project, but the idea is to build on that with paying gigs, other merchandise, and other revenue options.

on the flipside, with some skillful shopping, i can buy 8 packages of ramen for $1, so that’s 4000 packages, or enough ramen to feed a band of three, three meals a day, for a year. did i mention this wasn’t an easy business?

wrap it up

the record labels and the consumer electronics companies built the cd. and they paid for a huge, global infrastructure, designed specifically to be functional, easy-to-use and economic. now that it’s built, it would be foolish not to try to use it.

i look at this as “using the tools that the recording industry wrought against them” – you might call it turning the tables.

1, 2 i’ve not done business with these companies – this isn’t an endorsement, just current examples.

update: yes, this is grossly simplified. i tried to keep about as much detail as the reference example from steve albini.

posted by roj at 4:50 pm