meta-roj

gikiski recently brought up a point about minutes and music. now that this subject has appeared, it’s time to dump my thoughts into the ether. (don’t be too afraid, this will be shorter than my post on music monopolies, i hope).

dollars are a fluid, expanding market, but attention is a fixed, limited market. this means that capturing your attention is more challenging than capturing your music-buying dollar. if i have your attention, the dollars will come.

defining the attention market

gikiski’s got some interesting theoretical data, but we can get a better fix. the us census bureau publishes [pdf] this stuff. the relevant table is #920: media usage and consumer spending 1992 to 2002. it’s a bit dated (1998 to 2002 are projected figures), but close enough for blog work.

the top-line figure is 3360 hours of media consumption per person per year (this varies from 3324 to 3398, i’m just picking a nice round figure), and it remains fairly steady. just over 9 hours per day. that does make sense – if you figure you work 8 hours and sleep 7 hours there’s 9 hours left in the day (for most of us). sure, some of your work time might include listening to the radio, but some of your not-work-not-sleep time involves conversing with people, so it probably evens out. in any case, about 9 hours a day passes the “sniff” test – it’s not outrageous.

how are you going to spend your 3360 hours?

according to this table, “media consumption” includes tv, radio, recorded music, magazines, newspapers, books, home video, movies, video games and the internet. that’s a lot of slices in the pie, and the only one we are sure is about music is “recorded music” (radio must be some combination of music, talk news and commercials). for the sake of argument, we’ll give the recording industry half of radio plus the recorded music – about 800 hours, or about 24% of the total attention market

so, madame recording business executive, you have 800 hours a year to tickle my ears – just over two hours a day (2.2 hours)… and there are fundamental, practical limits that apply.

limits on the market

the first limit is that people generally can’t listen to more than one song at a time (and enjoy both). that’s a hard technical limit (i haven’t seen anyone pitching brain-rewiring technologies to expand the potential music market yet). that means you can only cram about 33 4-minute tracks into my head per day (12,000 per year). (and now you know why songs get shorter and “hey jude” is an exception 🙂 ).

the next limit is a personal one. people actually like to listen to the same old songs. a lot. once they fall in love with a track, it gets replayed until it’s “played out.” once it’s played out, it may still worth an occasional listen, especially if you somehow associated some meaning with it.

the third limit is a processing-cost one. rather than putting effort into “finding our music” we generally use filters that that narrow the field [dramatically] so we don’t have to hear things we don’t like. how many bad songs will you put up with before you hear something you like? often, the answer is zero. music consumers have choice, and it’s real easy to skip to the next track or the next station if you don’t like a song. the most obvious filter is the radio playlist. top hits can approach 14 spins a day on a radio station. at that rate, you’ll hear that track twice in your 2.2 hours a day. two of your 33 available slots just got used by one song. and you’ll hear it twice a day, every day, maybe for weeks.

wrap it up, i’ll take it

success is self-limiting, and this gets back to my theory that performers are monopolies.

at the high end of the curve, we run into a problem of diversity. as a performer, i want your attention. i absolutely want 14 spins a day on radio. i want to own as many of those 33-slots-a-day as i can get. if i can get my tune into your head often enough, you might just fall in love with it. once you fall in love with it, you’ll buy the cd. and a ticket to the concert. and a t-shirt. and maybe a poster. and the video. and my next cd. and the next ticket. and the next t-shirt. and you’ll play my tune at your wedding, and aniversaries. and when i issue a greatest hits set, you’ll buy that too. and the special edition box set. and when cds are old and boring, you’ll buy the holographic musicube that has that track on it.

but there is a problem in this market for attention. for every slot the recording industry fills, there’s one less slots for someone elses’ music. the record label’s job is to get you to fall in love with as many tracks and performers as possible – and they can’t do much about increasing the number of tracks you’re exposed to. they can make the tracks shorter to squeeze in maybe just one more (and are doing that). they can make the market broader, and hit everyone with the same track at the same time (and are doing that). and while all this is happening, they have to fend off all the other media so you still have 33 slots to play into (and there are some strong suggestions that they aren’t succeeding).

once they succeed with one track, and you buy that cd, every time you play it also counts against those 33 slots, and they have to push harder to open them up so you can pay attention to their Next Big Thing. so they play the tracks out. if you fall in love enough to get hooked into the money-making machinery, that’s all it takes. after that they have to move you on to the next one as fast as possible, or the machine grinds to a halt. what’s that grinding sound in the distance?

there are hundreds of thousands of performers out their doing their thing, and you just can’t afford the attention to hear them. that’s their problem: finding you, their audience.

i’ve been waiting for a good link into lisa rein (because there are just so many common threads here), and today i found one. in keeping with the tools and results post of some weeks ago, again, it’s all in the approach.

the riaa made a mistake. usually, in civil interaction, when you make a mistake, it’s a good idea to apologize. a little. especially if everyone is watching you and it’s a really big mistake.

obviously, a little story in a little newspaper like the new york times isn’t the whole story here, but… y’know. it’s just an opinion of mine. humility is a good thing. self-deprecation is a good thing too. and apologizing when you bag the wrong ferocious criminal is always a good thing. joi puts it well:

Being sued isn’t like, “oh sorry… wrong number..”

maybe it’s a cultural thing?

just, please, when you apologize, try to be a little more sincere than “my bad.”

since the riaa [apparently] isn’t going to do it, i will.

mrs. ward, i am very sorry that the recording industry association of america incorrectly identified you as a career criminal and music thief. i’m sorry you had to deal with lawyers and paperwork. i’m sorry you had to deal with media and rap music (but only because you don’t seem to like it 🙂 ). and i do hope that the recording industry association of america will make every effort to learn from this mistake and implement changes to prevent this from happening again.

to follow the “open studios” and leads, a leave you a quick pointer to re:combo –

Re:combo is more than culture producing, and is more than software producing, is a collaborative and descentralized art collective, with the goal of develop open music, with all the sound files available and open software and video.

if you think cd prices are bad in the united states, you should see how things stack up for the recording business in brazil. happily, the re:combo people don’t seem to take themselves too seriously, either. and they’re ok with keeping their day jobs.

further evidence that you can mess with the industry, but musicians will do what they do. it’s in the blood, as it were.

update: here’s a couple stories on the re:combo phenom…. from wired and voice of america

tim oren of due diligence has brought in a guest blogger to continue the story of the music. the most recent installment, by kevin laws, gives me some real meat to chew on today. so, with apologies to the vegetarians among us (and kevin, who might take a bit of a beating)….

the high end of the curve

for today’s discussion, we’re limiting ourselves to the “top” of the music industry. for your convenience, i’ve included a table which defines the top. this should give us a common (as in shared) idea of what we’re talking about.

It used to be that the Rolling Stones would tour in order to drum up publicity and demand for their album. No longer – concerts are now tremendous moneymaking opportunities for top artists.

i believe that each performer (or act, if you will) is an enterprise. since we’re talking about the top of the food chain today, let’s get a quick handle on just how big an enterprise we’re discussing. the stones get picked on a lot in these discussions (for many good reasons), and as a result there is lots of information available. about a year ago, fortune (the magazine) ran a piece on the business of being the stones. here’s some relevant numbers:

Rolling Stones Revenue 1989 to 2002 (in millions)
Royalties $56.0
Album sales $466.4
Ticket sales $865.3
Merchandise $135.9
Sponsorships $21.5
Total Stones Revenue: $1545.1

yes, ladies and gentlemen, revenue for the rolling stones is $1.5 billion over 13 years. not bad for a bunch of grandparents and a dead guy (keith died on tour in 1974, but as long as nobody tells him, he’ll never notice. shhh!).

note, also, that the rolling stones are their own label (since 1970-ish). that means album sales, at least on material recorded since 1970, are largely their own – so they count as top-line revenue. for most recording artists, they don’t – the “album sales” line disappears, and you’re left with royalties minus expenses/advances (for more on how this arrangement works, i suggest steve albini’s The Problem With Music, and courtney love’s speech, both of which are widely reproduced. albini and love work together, so there’s some overlap).

of course, missing in this equation is the vast expense required to stage a 30-city stadium tour (and, for that matter, record and distribute an album)… but we can dig deeper. rolling stone (the magazine) has a regular feature on rock’s 50 richest, and the stones are number 2 this year. this is the data condensed into the table at the bottom of this post, so you can see the bigger picture and not just pick on mick.

which end up?

one point that i don’t agree with is that “this [file sharing] has turned the music industry on its head” – perhaps i take the longer view, but from my perspective, the recording industry is what turned the music industry on its head, and we are now in a corrective phase. performing, live, in front of an audience, may have been secondary to the recording industry, but it’s always been central to the music industry. in the tens-of-thousands-of-years long history of humans making music (and trying to making a living with their music), recording is a 150-year (at most) blip.

i also think that performing (as in touring) became a “profit center” for musicians long before file sharing existed (unless you’re prepared to argue that tape-swapping is file sharing 🙂 ). for large acts, like the stones, touring became serious business during the 1970s. go back a decade, and 60s folk acts playing for tips (or drugs? heh), before that, in the 50s big bands playing dance halls – although, in this case, the performances weren’t necessarily tours, they were engagements, sometimes lasting months or years.

there’s money in concerts?

yes, indeed. perhaps more than you realize. the next nit i have to pick is this one:

Ticketmaster’s average ticket price jumped by 10% last year alone.

while that may be true, ticketmaster makes a big deal about how they don’t set ticket prices – promoters and performers (and now, consumers) do. here’s where using the stones as an example can get you into trouble. the stones have a four-decade-in-the-making fanbase – demand far exceeds supply (there is only one rolling stones for all the fans – i’ll touch on this in a bit), and ticket prices (ticketmaster notwithstanding) are kept artificially low. have doubts? check out what brokers and scalpers are charging for stones tickets. sure, the ticket price at ticketmaster may be up 10%, but if you want first-ten-rows seats at a stones concert, and you aren’t blessed by your ancestors (as in lucky), it’s a $700 ticket to ride. no discussion of concert or tour economics can reasonably ignore secondary markets – legal, sanctioned or otherwise. the news that ticketmaster is entering the auction business is big, bold, neon evidence that they know it too.

fans (as in customers) determine value, and stones fans pay $700-and-up for some seats… and there are a lot of stones fans.

monopolies in music

performers are monopolies. this is true of every performer, in every market. for the “rolling stones market” there is only one source: the rolling stones. music is not fungible. cds are not fungible. tickets are not fungible. just try to swap celine dion tickets (or cds) for stones tickets (or cds) sometime.

this monopoly nature is part of the beast, and it’s one of the reasons “giving some of it away” isn’t a problem – in fact, it is absolutely critical. music is about taste. to find your audience, you have to let them sample your goods. that can be at a performance, or on the radio, or on a website, or on a p2p network, or some other new, exciting way. it doesn’t really matter how you do it, but you have to find your audience, and that means they have to hear your music. once you find your audience, they can be yours forever.

performers are monopolies, but they’re just the first in a series of monopolies the consumer faces in this business of music. performers have exclusive deals with labels – one source for recording. performers have exclusive deals with promoters – one source for tours. cities only have so many large venues – one stadium within reasonable driving distance. venues have exclusive deals with ticketmaster – one source for tickets. venues have exclusive deals with coke – one source for drinks. the web is complicated and harsh, and the fans are just along for the ride. how do they get away with this? simple: people love music, and they always will. once we fall in love with a performer, we will bend over backwards, jump through hoops, call radio stations, beg, borrow, steal, and deal with scalpers to see them. and again. and again. and again.

toppling the beast

finally (as in i need to wrap this up), we come to toppling ticketmaster. kevin’s outlined a very particular approach (wait for the contracts to expire, and let big, capable companies bid to replace them). this could work. and it might even be a good thing. but it’s not the whole story.

However successful they have been on the Internet, however, Ticketmaster still has a problem: the Internet cuts the number of middlemen.

here, i disagree. the internet doesn’t cut middlemen. it creates more of them. lots more.

the one-man-in-the-middle strategy is ticketmaster. one source of tickets for them all. one 800 number to call. one website to visit. the real threat to ticketmaster is not cutting middlemen – they’ve already been very successful in keeping the supply chain short. the real threat to ticketmaster is that their suppliers and customers will find a path around them, without them.

sure, there are examples where supply chains do get shorter on the net – but they are exceptions. ebay is an exception.

i sense you have doubts. i have just thrown pie into the face of conventional wisdom.

let’s look at a “more mature” internet market… say, travel. like the concert business, the travel business uses tickets as an allocation mechanism, it is based on limited availability (number of seats), localized monopolies or near-monopolies (serving particular destinations), and large consumer demand. unlike the concert business, it’s been wired for decades. there are lots of suppliers (air, rail, bus, cruise, charter, whatever), lots of consumers, and lots of middlemen.

think fast: did you buy your last airline ticket from the airline? from an affliated airline that doesn’t serve your particular destination but does have a peering arrangement with that airline? from a travel aggregation website? from a travel agent? a package tour business? a discount aggregator? a last-minute aggregator? an auction site? name-your-price reseller? did you get a discount for using a particular credit card? did you trade in frequent flier miles? did you get a package with a hotel? count the middlemen, and don’t stop until you get to ebay to unload that trip you bought and can’t use yourself.

update: the guys at ventureblog have joined the fray, with just a slight twist on the theme.

update: kevin laws has commented on the ventureblog post.
(more…)

it seems i’m dancing with tim oren a lot these past several weeks, which is, i must say, interesting. tim’s latest, which is a lucid rationale and a bit of a mechanism to drive a stake at the heart of the music business bears some comment.

my “set of disclaimers” – i do have a vested interest in this material.

in deference to tim, who really embraced the pirate theme, and because i’ve been running the mencken slitting-throats line for seems like years now)…. with a hearty yo ho ho, i cast my eye upon the bounty of of Britney…

today i’m going to ignore the “recording revenue” completely, and leave it as an exercise to find recording artists that actually make a living on royalties from their recordings (happy hunting… 🙂 ).

to touch the issue of concerts and promotion. scarcity at the top end of these segments is very much tied to a couple bottlenecks in the market – ticketmaster and clear channel.

i’ve written a few things (1, 2) here about ticketmaster, and actually spent much, much time prior to my blogging days studying this creature. an off-the-cuff phrase i used often about ticketmaster – “the third most-hated monopoly in the united states” – after microsoft/the cable company/the phone company (#2 – depending on your background) and the federal government (#1). the story is an old one, and a complex one, and not worth reviewing in gory detail here, but two data-points of interest are that in 1994 (with the pearl jam incident), ticketmaster was adding $3-6 to the price of a ticket. today, it’s $10-15 (to be fair, the price of first-class postage has gone from 29 cents to 37 cents during the same period). point two: ticketmaster holds the keys to venues run by more than 8000 clients.

clear channel is the other bottleneck in the system – they own or have exclusive rights to 135 venues around the country. 135 doesn’t sound like much, but dig into their web a bit and you’ll find this: “In 2001 the Music Group generated approximately 70 percent of concert ticket revenue in the U.S., and produced more than 30 major music tours by such performers as U2, Madonna, Janet Jackson and *NSYNC.” pick a random clear channel “top 40” (that’s “today’s hit music”) station and look for a playlist and you find 29 or maybe even 36 songs. it’s a natural fit. you integrate promotion (radio) with production (concerts) and take a (growing) cut at both ends.

with the bloodshed in the recording side of things, the record labels are coming to the party:

EMI will not only release Williams’s next six CDs, it also gets a cut of his lucrative merchandising, publishing, and touring rights. In effect, it becomes a multi-interest entertainment business rather than a mere record label

i’ve tried to keep this short, but i think one other issue bears comment… for the past several months, i have been exploring the “low end of the power curve” – and it’s been an interesting and strange journey (with a nod to the dead). tim’s got a point here. this is the region of least resistance, and it does have some interesting qualities related to scale. (and i know how those kooky venture capitalists like that word! – usually in the phrase “that doesn’t scale”).

consider, for a moment, that guitar manufacturers give away a few guitars to the “top end of the power curve” as promotions to get their gear seen (and heard, presumably – more on that in a second!), then sell on the order of 1.5 million guitars to the low end every year. to a large extent, this is selling a dream, and it’s based squarely on a bountiful market model. bb king fan? lucille is a gibson – and you can have one too. can’t afford lucille? you can stay in the gibson family all the way down to several hundred dollars. perhaps the guitar of porn stars is more your style… honestly, i don’t know if jenna jameson plays a guitar, but we have photographic evidence that she can hold one. in any case, the guitar makers count on the dreams of the masses (this is one of the social functions tim mentions). every teenaged guitar-wiz wannabe, from blues to porn has to buy an axe. the dreams of musicians make a perpetual goldrush. there’s always a new set of ’49ers ready to pack up their ford econoline wagons, load an amp and an axe, and hit the road looking for gold (or fame, or women, or a drummer). many are going to find fools’ gold (in the form of a record deal advance with many zeroes on it).

an important lesson in any goldrush is that it’s very difficult to make money finding gold, but it’s relatively easy to make money selling shovels – and shovels are good at both ends of the power curve. some guitars even look like shovels.

so, with that, i return the volley to the rest of the net… with, it would seem, much more to come.

i’ve been working in and around music for what seems like a long time (but, i have to maintain some perspective on the matter.) i am far from an expert. i am far from the “final answer” in all this. what i do bring is, i think, a different perspective. and today i’m going to attempt to share some of that perspective with you.

this is probably good for me, since i find presenting my material (particularly material that i’ve put a lot of thought into) difficult. i guess on some level, once i’ve fully embraced a way of seeing a problem or a solution, it seems odd to me that you don’t already see it the same way. at the same time, i’m probably notorious for tangential, oblique and seemingly barely-related perspectives. so, this is a bit of an exercise, and hopefully, in that exercise, i’ll have something to contribute to the ongoing discussion on the subject of music.

i’ve decided to focus very narrowly today, and address a “foundation” concept in my work with music and performance. that concept is: where is the money? and i limit the scope of this question to the performers and creators.

in a review of the history of music, a few things become clear (to me, anyway).

first, and critically important, is that people will make music. the drive in humans to make music is simply incredible and, i think, unstoppable. i don’t mean to step on any archaeologist toes, but something tells me that music is right up there with and maybe even a bit ahead of language at the birth of civilization. we’ve been making music since we realized we could bang on (or blow into) hollow logs and make interesting sounds (in any case, certainly long before the concept of a lawyer or a copyright ever existed).

second, this drive is also unevenly distributed. some of us don’t have a gift or talent for making music, and some are simply astounding. some of us have a huge drive to make music, and absolutely no talent to back it up (sorry, keith). some of the most talented among us have horrible stage fright, or simply no opportunity to develop their skills. the universe conspires in most interesting ways.

third, music is a specialization. it takes a lot of time, dedication and even some (occasionally expensive) tools to make music. the challenge for musicians, is to provide for the basic necessities of life (food, shelter, groupies) and still have enough left over for the music (strings, drumsticks, gas money). so, there’s the problem. how do you make enough money as a musician to be a musician?

in general, i find that there are three ways to make a living making music: performances, patrons and recordings.

performances: certainly the oldest tradition of the musician is the performance. this approach has the lowest barrier-of-entry – you can literally pick up your instrument (or clear your throat) and start making music. busking on a busy corner on the left bank, or playing in a stadium full of 60,000 people. no matter the scale, the point of performance is that you (the performer) meet your audience. and, if you’re talented, entertaining, or have whatever it takes to reach the audience you’ve found yourself facing, then maybe, just maybe, they will throw you a coin. long, long ago, maybe they would invite you to stay in the village for dinner and give you a little food for the road. if you were really good, maybe someone in the village would make you some new shoes (gas money) so you could make it to the next village.

patrons: there’s also a long tradition of patronage for the arts. this can take many different forms – you can track down a composing prodigy, and put them up in one of your country estates and give them expensive hand-crafted instruments and let them do what they do for the glory and status. you can commission a song for someone’s 37th birthday party that includes a few juicy tidbits from their life. or you can hire a composer to make the soundtrack for your big hit movie. the common thread here is that the musician generally has to be “established” in some way to get the good gigs. so the “barrier to entry” problem here is how to hone your musical skills to the point where anyone would be your patron?

recordings: the birth of the recording industry is generally credited to the 1877 invention of the gramophone. with a little bit of a stretch, we can push the date back to 1857 with the phonoautograph (but that is a stretch, since it didn’t really offer a way to play back the recording). so, we have 126 (or 146, if you’re feeling generous) years of “recording industry.” in that 150 years, the recording has become the centerpiece, the raison d’être for most [american] musicians.

there is no shortage of businesses that are created to support and/or exploit (see the american idol clip above) musicians and performers. the challenge for these businesses, and for society as a whole is to keep the musicians fed, clothed, and doing what they do best – entertain and engage us.

the musicians among us will do what they do, whether they get paid or not.

apologies to the original speaker, but someone said it before me. now it’s just a pop-under-culture touchstone, and a hook for me to hang this entry on.

i recently went into a bit of a [private] rant on one of the components of the eclipse project. in that rant, i decried the relevance of writing “magnet content” that would actually attract (as in “magnet”) working musicians to the project. on top of that, i have some rather strong opinions on the quality of writing in the field. i’m going to reprise (in a non-musical sense) some of that for you today.

not only is music a subjective personal experience (and all the more so for those who make the music), but the books and articles are crap. i mean that in a nice way. they are well-intentioned and sometimes include valuable information. but, when it comes right down to it.. there are too many variables – you have to focus too narrowly to make the written content relevant (this applies only to acoustic guitar players who use nylon as opposed to steel strings) – so it’s very, very difficult to make it broad enough to sustain a publishing market.

yes, magazines have become more and more segmented (and there probably are several magazines for acoustic/nylon enthusiasts), but, if the intent is a broad audience, you have to generalize a bit, and when you do that in the realm of making art, you sacrifice the details that would otherwise make your material valuable.

i’m generalizing a lot here, so i’m going to take a moment to apologize to david gibson. david gibson has written a 3.5-out-of-5 star book on mixing. he’s taken an unorthodox approach, and he’s probably served people very well. i haven’t read this book (it’s called “the art of mixing”), or seen the videos that followed. what i did see was a excerpt that was published by the industry magazine artistpro in their may/june 2003 issue. david, i’m sorry, but now i have to pick on you (and your editors).

artistpro ran a 3-page excerpt from this book. in this excerpt, called “instrument eq” we learn important things about equalization of instruments. the most important lesson, based solely on repetition is “get the mud out.” i wish i could make this stuff up, so here are the relevant quotes from the excerpt from the book that should be useful.

kick … normally have a huge amount of the muddy range taken out, as much as 10dB, in the EQ range around 150 to 300Hz.

snare … Occasionally, it is necessary to take out some of the muddiness around 150 to 300Hz.

hi-hat … It is also quite common to roll off the muddiness in the bleed from the rest of the drum kit (around 150-300hz).

bass … On some bass guitars, it is necessary to take out some of the muddiness around 150 to 300Hz. However, if taken out too much, the bass will sound too thin and wimpy.

guitar … Occasionally, it is necessary to take out some of the muddiness around 150 to 300Hz.

vocals … Occasionally, it is necessary to take out a bit of the muddiness around 150 to 300Hz and a bit of irritation around 3000 or 4000Hz.

piano … Commonly, a bit of mud is taken out around 150 to 300Hz, and a bit of boost is given around 5000 to 6000Hz.

acoustic guitar … It is important to take out the mud around 150 to 300Hz more or less depending on the mic placement (keep the mics away from the sound holes).

now, i just want to reiterate, that all of these quotes came from a three-page article in a magazine. it applies to almost every instrument described in the article (the exceptions being “organ” and “horns”). these are such broad strokes as to be useless in any practical sense. three pages on “eq for guitar” might provide some interesting observations, quirks, anecdotes or experiences from gibson’s vast experience, but we’re left with a paragraph that says “get the mud out” and a few other generalizations. the problem is that artistpro isn’t targetted at people who only record guitars (and how many of those people actually exist?), so the substance is lost to make the market.

so, yes. thanks for trying, i guess. maybe there’s more in the book (better be!), but this was… well, a letdown. and it’s indicative of the problem of creating “magnet content” about art. this is ostensibly a practical guide to a practical issue that faces many musicians, and is supposed to be a “magnet” for the book. as far as i’m concerned, it fails on every count.

there are a number of news [ny times- registration required] stories [ap wire via tampa tribune] and the retail perspective [san jose mercury news] that explain the biggest event in the recorded music industry since britney kissed madonna. there are also a number of other things going on, including a rumor about an riaa amnesty program, ticketmaster getting into the auction [ny times – registration], business [cbs].

all this news has reverberated (i couldn’t resist that one) in some pretty well-known blogs, with a piece on legal music downloads at kuro5hin, a bit on rock concerts at ventureblog, the channel at due dilligence (tim oren) and finally, the declaration that music cds are dead by philip greenspun.

i guess that gives you some insight into my surfing habits, but with all these powerful opinions floating around the net, i thought it was time for me to step out on a limb (plank?) and take a stand. after all, i’m working in the “music business space,” so if i didn’t have an opinion on all this, my work isn’t very relevant. i should also say that i actually look forward to possibly working with some of the people i’ve just mentioned – if i don’t burn those bridgets in public right now.

i hope to not repeat [too much] the generally excellent analysis and commentary, so i do suggest checking out those links.

the short version of this kicker story is that one of the big-five record labels (vivendi-universal) has announced plans to drop the wholesale price of most of its retail packaged cds from $12.12 to $9.09, and the recommended list price from $16.98 to $12.98.

so, here’s the short version of my opinion: this is a good thing. the rest of the labels will follow suit. this is the first axe-blow that will eventually destroy the established music manufacturing and distribution infrastruture. and the cd will be with us for quite some time to come.

(what will be interesting is how and what bits get put on those cds)

now, for the long version…

this is some pretty sophisticated company i’m insinuating myself upon, and maybe that’s why we disagree a bit. i’m a little closer to the ramen-based lifestyle, and from here, the perspective is different.

there are some very crazy economics at play in the music industry – economics that conspire to both artificially raise prices and keep prices artificially low. there are group interactions, intangibles, power structures and standard practices that i will try to avoid, just to keep this “long version” short enough for people to actually read. i’m sure i’ll take some other shortcuts – i fear this is going to get huge, but i’m going to try to make a point rather than write a dissertation.

part one – reduced cd prices are a good thing
you will be very hard-pressed to find anyone who thinks that retail packaged music cds are a “good value” today. the easiest (and most common, it seems) comparison for the average consumer to make is a film (dvd) and a soundtrack (cd). on the surface, this makes sense. both come in little plastic packages. both come on polycarbonate discs. both come with pretty cover art. i’ll pick on chicago, just because it was a popular film, it’s a musical, and it’s a recent dvd release. the cd lists for $18.98, and is discounted to $13.49. the sa-cd lists for $18.98 wth no discount. the dvd lists for $29.99 is discounted to $19.45. (i picked an online retailer that shall remain nameless and linkless. these are the prices today. your shopping habits may vary).

so, i can get about an hours’ worth of music for $13.49 or $18.98 (depending on the format), or i can have an hour-and-a-half of video, audio, and all those cute little extra tidbits they pack into a dvd for an extra $5.96 or $0.47. faced with that choice, the choice is obvious.

now, i should explain why this comparison isn’t entirely valid – people don’t think that way and they certainly don’t shop that way. movies are an immersive experience with more continuity than albums. it’s very difficult to “pick a scene” out of a 110-minute movie and totally fall in love with it. you (well, most people – you might…) don’t buy a dvd for “the phoebe cates coming out of the pool scene,” if you hate the rest of the film (or never saw the rest of the film) – you buy the whole film. in contrast, the way the music industry is set up, that’s exactly what you’re supposed to do. you buy the cd because of the hit. the one song (1/10th? 1/15th?) sells the whole album.

now, there’s a lot of potential explainations, but it comes down to tradition (“standard practice”), and it’s a tradition i don’t think i should get into (long story, short blog). the recorded music industry has really, always, been about selling individual tracks. sure, there are a few exceptions and “concept albums” that have made the short and glorious list of hits, but basically, it’s “hits” – and the rest of the album comes along for the ride. if you get a “second hit” from an album, it’s gravy. anyway, it’s worked exceptionally well, for an exceptionally long time. and, by the way, in the past few years the industry has been phasing-out the cd-single (and that was even more obviously a bad value), but the legacy lives on. the recorded music business is about hits.

the record industry also has a long history of increasing prices with each new format, and these formats get cheaper and easier to mass produce – good for margins, bad for consumers. this works because there are so few labels (read: cartel).

the market has spoken, and packaged cds are not worth $16.99 anymore, for a lot of different reasons, including those horrid square waves.

so, it’s a good thing that vivendi-universal is bringing down prices, and they are actually quote bold to be first.

part two – the labels will follow suit
since i’ve introduced the concept of a record label cartel, i can keep this short. once one member of the cartel breaks ranks, the artifically-maintained prices collapse.

one thing that might not slide every cd on the market to this new price point is the idea that cds from different artists are not fungible. there is some overlap, to be sure (say, between madonna fans and britney fans, to bring in another important music industry news item), but there isn’t a whole lot of overlap between britney fans and rolling stones fans. each performer becomes a “monopoly” as the sole source of material that will satisfy their fan base. it’s possible that some recording artists can sustain higher prices in their small niche, but the broader die is cast.

part three – the manufacturing and distribution of music will crumble
most of the “retail price” of a packaged commercial cd comes from the distribution and retail layers of the current multi-tiered distribution model.

there is pressure from consumers to lower prices (and at least one label has responded), but there is also pressure from large retailers to improve margins (do you want to sell your stuff at walmart? walmart calls the shots). the industry has been “eating its own young” for a long time now – squeezing independent and small chain retailers out of the market.

vivendi-universal has gone out of their way to preserve the “retail margin” – actually increasing it a few percentage points – but it’s a few more points on a much smaller pie – so unless this move radically increases sales volume (and i don’t think it will), the net cost to the retailer will be huge. say goodbye to the few remaining indie stores, say hello to big boxes and the internet.

and once the cartel has only a few, big (cartel-like) retail outlets left to sell their polycarbonate discs, they won’t be able to sustain anything. the battle of pennies between vivendi and walmart will squeeze every last penny out of the existing business model.

a lot of people have been predicting the downfall of the music business for a while – now you know how it will happen.

part four – the cd isn’t dead yet
the cd, as a package (or as barlow might say, a bottle), will be with us for a long time. it’s “good enough” – and that’s really all it takes to sustain a format in the market. but there’s more… it’s got a degree of “future proofing” that few prior formats have had.

sure, the fundamental technology for a vinyl record is not much different from a 78 to a 45 to a 33.3rpm disc, and to some extent, they were “backward compatlble” for a generation or so, but the neat thing about the cd is that the “needle” is light (and the spindle speed is irrelevant), and as such, a “smaller needle” [higher frequency] used in future generations can still track all those designed-for-780nanometer pits or marks on cd’s all the way back to 1982.

it’s physical (and this does have some advantages, despite the technologists desire to strip away the bottles, you do need something to carry your wine, or it will run out between your fingers and leave you with a sticky mess), it’s portable, it’s relatively difficult to screw up, it’s cheap, and there are literally billions of devices around the world that can read it – including just about all the new dvd and other fancy optical drives.

people immersed in technology don’t differentiate much between music cd and data cd – so let me throw another bit out there in the cds favor. bandwidth. let’s say you can read a 650megabytes cd in about 3 minutes on your fancy 56x variable-speed super cd drive – that translates to 650MB / 3 m * 8b/B * 1m/60s = 28 megabits/second. (this is an easy place to pick on – but go look up broadband penetration in north america – and then compare it to a .056megabit/second dialup). then, consider the mp3 format. mp3 is another format that has proven itself in the market as “good enough” – it’s lossy, it’s not for audiophiles or purists, it’s got problems and disadvantages, but (and this is all that really matters), it’s good enough and people are using it. combine the two and you can get not 74 (or 80, or 99) minutes of audio on a disc, but more than 7.5 hours (650MB * 8 b/B / 192kb/s * 1000kb/Mb / 60s/m / 60m/h = 7.52 hours). two “good enough” technologies make a powerful combination.

now, i don’t mean that we’ll never escape from the horribly flawed bottle that is the 120-millimeter-diameter polycarbonate disc, but i do mean to say that just because the business model(s) that spawned its creation are failing (in dramatic form), should not imply that the format itself is also failing. in fact, the cd “bottle” may be the best legacy for these failed businesses.

anyway, we have the determinism theme recurring here. cd’s were designed for audio, but that’s hardly all that they are used for today, and as long as they have applications, manufacturers will support the format.

oddly enough, cassettes were designed for dictation machines, but updated chemistry made them “high enough” fidelity for use in a boom box or walkman. good enough that they are still sold. (and just in case the techo-elite reading this blog have any doubts, the vivendi-universal press release included this line: “Concurrently, UMG will also reduce its wholesale price on cassettes so its MSRP for top line releases will be $8.98.” the margin on cassettes is a lot worse than the margin on cds – but vivendi, at least, still finds some value worth pursuing.)

if we can’t kill the cassette after 20 years with the cd, it’s going to take a lot to kill the cd.

update the denver post has a piece that, coincidentally, used chicago as an point of comparison between the music and film industries. it’s worth checking out. i’ll have some more thoughts on this piece later.

i’m still wading through the ever-expanding pile of reading material, and today i found this, which is ticketmaster’s response to the string cheese incident’s lawsuit.

quick background: string cheese incident is a jam band. and a popular one. with a whole set of businesses wrapped around their music and performances. one of those businesses is a ticket-service business. as you might imagine, bands like to sell tickets, it’s kinda how they do business.

now all this is news, but it’s an old story (pearl jam went one round with ticketmaster in 1994 and lost). so, i’ve been following, but not commenting, until now. it just got interesting (and i’m a couple weeks behind). in an august 11 press release, ticketmaster makes the following statement in response to the sci lawsuit:

SCI’s ticket demands have forced Ticketmaster’s clients to make an unfair choice: either breach their contracts or lose the ability to host the band’s performance. SCI’s unfair leveraging of its popularity to achieve its for-profit ticketing goals is both improper and illegal.

leveraging popularity to achieve for-profit ticketing goals is both improper and illegal? someone remind me: how did ticketmaster get these venues to sign these contracts? i’m sure it had nothing to do with leveraging popularity, because that would be improper and illegal. right?

this nearly escaped my attention with the pile of things to read around here, but wow. you really should read the whole thing. in small chunks, so the legalese doesn’t glaze you over for the rest of the month. emphasis below is mine. this is from the ticketmaster privacy policy.

By purchasing a ticket, or completing a registration form so that you are able to access a purchase page for a ticket, to a concert, game or other event on the Site, you consent (i.e., you opt-in) to us sharing your personal information with the venues, promoters, artists, teams, leagues and other third parties associated with that concert, game or other event (“Event Partners”). We cannot offer you a separate opportunity to opt-out, or not to consent, to our sharing of your personal information with them. Event Partners may use your personal information in accordance with their own privacy policies, and may consequently use your personal information to contact you and may share your personal information with others. You will need to contact those Event Partners who contact you to instruct them directly regarding your preferences for the use of your personal information by them.

i can only begin to express the level of concerns i have after reading this statement. i’m no lawyer (shoulda…), but this reads to me that if you even THINK seriously about buying a ticket from ticketmaster (“.. completing a registration form so that you are able to access a purchase page”), you’ve pretty much opted into spam, catalogs, fliers, junkmail and just about everything in the world from any company that even remotely does business with ticketmaster or any company that does business with a company that does business with ticketmaster. and if you don’t like it, it’s your responsibility to figure out who ticketmaster gave your data to, and ask them to stop.

do you even get to see if tickets are available without “registering”? i’m not about to register to find out. perhaps one of my good readers is already ‘registered’ and can enlighten me a little…

in the meantime:

If you have any questions or concerns about this privacy policy, the practices of the Site, or your dealings with the Site, you can contact us at legal@ticketmaster.com. You can also send us mail to:

Privacy Officer
Ticketmaster.com, c/o Legal Department
8800 West Sunset Boulevard
West Hollywood, CA 90069

yes. i have concerns. you should have concerns too.

and no, i don’t think i’ll be doing business with ticketmaster anytime soon.