Music Downloads

The wave of the future has arrived and will become a tsunami in short order!

It all began, of course, with Napster, which was once a private archive of mutually shared files from home users that got shut down by government at the request of the major copyright owners of music and films, which amounts to only a few companies: Sony/CBS/BMG/RCA, Universal/Interscope/A&M/Polygram, Warner/Atlantic/Elektra and EMI/Capital comprise about 80% of the production, manufacture, distribution and exclusive representation of all commercial music in the world.

These same companies now own stakes in virtually every music distribution outlet, except for Wal-Mart, Yahoo and Apple/iTunes. Napster, Pressplay, PlanetOut, CD Now, MusicNet and RealNetworks all have one or more of these “major” media companies as a share holder or partner.

They also own stakes in “record clubs” such as Columbia House (Sony and Warner’s), BMG and RCA.

They are also stakeholders in the record distribution arms of Uni (Universal), CEMA (EMI/Capital), CBS (Sony) and Warner (WEA).

The sales of CDs are slipping dramatically while the incidence of people subscribing to and paying for legal downloads of music is every increasing. For a small nominal fee that varies from $5 to $10 per month or in some instance only a pay per cut (Apple and Wal-Mart) as low as 79 cents each song you can legally download high quality MP3 files or other proprietary files (e.g. Apple’s iPod format), making this quite an attractive deal, especially since there is no worry about lawsuits (and some home users were charged under U.S. and International Copyright Laws) and music quality (it is often far superior to even the best files found on peer to peer outlets such as Kazaa).

Brick and mortar outlets, such as Tower Records, Sam Goody and others, will be forced by the nature of things to change their operations as the atrophy of the CD marketplace is not about to stop.

It has always been hard for new artists to get into the “bins” of many record store chains. Small stores are serviced by “rack jobbers (or syndicates, as they are known in the UK),” while chain store are serviced by the major distributors, who are also going to face “downsizing” as the CD market shrinks even further over the next few years. A few years ago I watched Lions and Ghosts, who were on EMI/America and had a minor hit with “Mary Goes ‘Round,” play and unplugged concert for Sam Goody executives at a luncheon designed to get Goody’s to carry their album in the racks. Just because you’re on a label doesn’t mean you’ll get into stores!

Now, that the face of operations like have changed, it’s hard to get “downloads” unless you offer them up yourself with a Pay-Pal account. It’s also not going to be that easy to become compatible with a popular service like iTunes and their Apple only format. This isn’t your ordinary MP3 file!

What we’re going to be seeing in the future is new artists with limited CD releases who await a fair share of downloads at the “major” services. It is possible the future holds only custom CDs burned by you at home from pay per cut downloads.

To get in store CDs in the future may require an artist sell “big” first in “downloads” to entice the label to invest in pressing 100,000 units. Labels may even cease operating their own pressing plants or scale these operations back.

Next we have to consider what it takes (or costs) for an artist to get any push! Long, long, ago the industry rag College Media Journal (CMJ) used to run a program called "Adventure Picks" in which anyone could get on the program by simplying paying a fee that included two full page ads in the CMJ. We're talking $5,000+ to get distribution to 400 markets with the CMJ issue as one of several "Adventure Picks."

So, what does it take (or cost) to get into a program like Yahoo "Launch?" You have to buy a certain amount of banner ads for a certain period of time. Who pays for all this? The artist? The label? Management? In reality probably all three share the cost, which could easily be $10,000 to $100,000. No small artist can afford to do this type program, even though it's highly effective. I've seen some Yahoo Launch programs as a home viewer and I am drawn to check out the artist. I see their ads on my home page or the news stories I read. I knew smaller artists who "bought" into the far lower costing "" programs and for them it paid off in lots and lots of hits! "Programs" can be very effective for the artist, just not cost effective!

For the little or home artist nothing much will change. They’ll still press small runs of CDs (1,000-2,000 per pressing), distribute them to college and FM radio and take the rest to shows to sell.

It's still unclear what will happen to lesser know artists on major labels. Will they still press 100,000 units and put them into stores or just make a token pressing and see how well the artist fares on iTunes, Yahoo, Wal-Mart and other virtual venues?

The industry is still in flux and only just coming to grips with "legal downloads" with a price adjustment due soon and the big labels are worlds apart from the distributors who feel that any more than 99 cents per download will hurt business. Obviously the share given to the labels from this $1 or less pre cut fee is not enough to replace the lost sales in CDs or keep the artists happy with their royalty checks.

Downloads has not yet become a big business, but it is starting to take the world by storm in the fields of music, movies and videos and software as "virtual" downloads of intellectual property slowly starts to compete with "disks" sold by a brick and mortar store...



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