With news making the rounds that major record labels could stop producing CDs as soon as 2012, the key question is why? Understandably technology progresses and we’re living in a digital age, but is the music market ready to go 100% digital? Personally – I don’t think so. I admit I’m often a downloader; my iTunes eases my boredom but a high percentage of my catalogue comes from physical CDs. In fact, I have quite the collection; but fully relinquishing the availability of physical music? I’m not for that at all.
One study I found directly compared the profits of record labels and artists through varying formats. For the sake of the removal of CDs in search of a wholly mp3 format, I'll just refer to those findings. For every retail album (at a low end royalty deal) sold in America, this set of statistics suggests that $1.70 goes to the label, while only 30 cents goes to the artist. On the contrary, a retail album CD at a high end royalty deal - both of which are sold at $9.99 - $1 goes to both the label and the artist. Self-pressed CDs allow for $7.50-$8 to go to the artist, while - being assumedly self-funded - none would go to the label. Clearly, there is a lot of room for movement within CDs as to who gets the largest stake through sales.
On the contrary, when it comes to Amazon and iTunes mp3 downloads that sell at 99 cents, 9 cents will go to the artist whereas a staggering 53 cents go to the label. Online streaming sites pay loyalties to the artist and label for every play - www.last.fm paying $0.004 to the label for each play, compared to $0.00075 to the artist. The same idea is also visible with Spotify's loyalty payments with $0.0016 being paid to the label and $0.00029 to the artist. While the numbers per play seem pitiful, when you equate that to millions of plays per month that total does start to multiply drastically.
It would be naive to suggest there are no benefits to the digital format. Of course, we can acquire music from the comfort of our own homes and at a lower price. We can put it on our laptops, carry it around with us on our mp3 players and generally access more with greater ease. It’s quantifiably a lot simpler than going into a music store in search of an album that might not even be there.
But surely that’s half the fun? Isn’t there that little bit of childlike joy in us when we walk into a store, find the album we’ve been waiting for and bask in the fact we’re finally holding it in our hands? What makes this move different to the changes between previous formats?
The first big wave was, of course, vinyl; something which is now considered a novel or collectable item. In the current climate, artists release vinyl as added bonuses. Yes, they work; but how many of us actually have a fully functioning record player? While that fate is far off for CDs considering their compatibility with laptops, etc, you can’t help but wonder if that’s just a step too far in terms of digitisation. Are we really facing our final farewells to anything other than a digital future? Surely the fact that Blackberry essentially crashed not long ago would tell us that, in reality, the world is not ready to go digital in its entirety.
The difference between the move from vinyl and this move to digital is that it seems that this will truly eradicate the physical ownership of music. CDs are more modern, yes, but they can still be physically held in your hand, come with a sleeve of artwork and inlay, and so on. The move to CDs in the first place may have been met with scepticism, but it was a more compact and modern version of its predecessor. Admittedly, it was far more convenient than tapes. I think we’ve all had one incident where we had to wind it back in because it had gone wild and was escaping from its casing. Digitisation is not a new version of vinyl, the tape or the CD, it’s the move to eradicate the need for them entirely.
We’re simply just bystanders to Moore’s Law. Every 18 months there will be a new product that is either half the size or twice the speed as its previous incarnation. Whether or not we like it, there will be new technological advances aiming to eradicate the need for handheld items. I’d half expect that some scientist is presently working on a chip that slots in your head and when you think of a track, it starts playing in full.
While the world does need technological advances to progress, we do need to keep a consideration into what impact this will have. The likes of Kindles have revolutionised being able to read books without lugging them around, but – unsurprisingly - I am a traditionalist and prefer the books in my hand. This form of digitisation may have made millions for those who create e-books and their readers, but it saw Borders – previously a world renowned book store – going bankrupt.
Mark Evans, an executive at Borders, wrote an article of six reasons why the company failed; the first of which was their failure to adapt to the internet and digital age. He said, “They dropped the ball on e-books, but by the time this became an issue they were just trying to figure out how to keep the whole house from burning down around them.”
The “digital age” has become such a powerful tool that refusal to adapt adequately and immediately will cause serious downfalls, but, again, not everyone is willing to get behind the idea. Where is the line at which you aren’t forced into the new era but can keep your business safe?
Watching a recent Steve Jobs documentary, Richard Branson spoke about how the revolution in music caused by iTunes was the force behind the closure of Virgin Music stores. An article from the time of Virgin’s mass closure, written by Greg Sandoval, accurately speculates the causes, painting the picture by saying, “On one corner sits a Virgin Megastore, once an icon of hipness and high-end music tastes. Signs blare from the facade: "Store Closing" and "Up to 40 percent off”. Just across Stockton is a stainless-steel storefront uncluttered by text. Only a single Apple logo glows from the metal and the overall feeling created is of permanence and futuristic technology. Arguably, Apple has done more than any other company to advance digital music, which has driven the CD into obsolescence and retailers like Sam Goody, Tower Records, and Virgin Megastores out of business.”
Does this further push mean it will put more out of business? HMV is our last prime mainstream music store in the UK. Do we really want to see them go out of business too? It’s proven time and time again that digitisation is forcing businesses to close. We still have the likes of FOPP around, but if HMV can’t withstand this vast change, why would we expect smaller retailers to? Not everyone is able to accommodate the resources and, realistically, why would you need a physical store for an online format?
The theory is simple: money. While the initial figures suggest that the labels will make more profit through the simple selling and streaming of digital tracks, common sense would tell us that production costs will seriously decrease by doing so too. I don’t know the exact figures, but back in 2003, Phillip Winn noted “the label is out $400,000 before a single album is sold”, and they expect to get a return on that only after half a million units are sold.
Steve Albini – a rock ‘n’ roll producer – wrote a lengthy article/breakdown of costs that may be a little dated but still remain relevant in terms of stark comparisons in profits. Without delving wholly into his work (I recommend you read it for yourself regardless), the final breakdowns claim that the record label – in this given scenario – would earn $710,000 while each band member in question would earn little over $4000 each.
I’m not naive enough to think business is about more than money. Some will thrive in the art of music or being involved in something they love, but when it boils down to the core basics – money is integral. But why kill an art form for it? Pink Floyd’s ‘The Dark Side Of The Moon’ cover is iconic. I’ve seen it on everything from t-shirts to key chains in Scotland to America, but why would people bother to make covers or put overriding thought into something that will be rendered irrelevant?
Consider this: A digital track eradicates the need for packaging, the need for distribution, the need for physical artwork and the need to be stocked. Removing the costs of all that, it also eradicates the need to split money earned with the likes of stockists like HMV. It removes most of the middle men and will result in more money being saved between the album’s completion and it being available for sale. Added to that, although the cost it sells for will be dramatically reduced, the percentage at which the record label make per sale is raised. Referring to the initial example – 53 cents of a 99 cents sale is a staggering percentage if applied across the board.
This will have a positive impact on the music industry, and it pains me to say it. It will cut labels’ costs and make them millions in the process, but for you and I – the regular person who likes to hold a CD in our hands, or even works at a music store – the future isn’t as bright. As previously cited, it’s proven time and time again that digitisation creates profit for the big guns and puts thousands out of business and, let’s be honest, why would the labels alter their way of thinking?
If they’re resolute on their digitisation, there’s little we can do to stop them. I will continue to buy CDs until physically impossible because I resent the removal of physical music in return for profit. Business is business, I guess. However, I don’t think replacing the phrase “Hey, look at my CD collection” with “Check out my iTunes library” will be quite as impressive.
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The “digital age” has become such a powerful tool that refusal to adapt adequately and immediately will cause serious downfalls, but, again, not everyone is willing to get behind the idea. Where is the line at which you aren’t forced into the new era but can keep your business safe? 
