Minimal investment and the greediness of digital distributors are making artists worse off than ever before, according to David Lowery who spoke at this years SF MusicTech Summit. The Cracker and Camper van Beethoven founder focused on gross revenues and expenses, exposing what percentage the distributor takes and what the artist receives. Lowery calls iTunes parasites and is adamant that the ‘old deals’ with the major record labels were better deals for the artists. But I’d like to know how digital downloads stack up against CDs in terms of value for money for the fans.
Don’t thank Steve Jobs
Some folk credit Steve Jobs for revolutionizing the music industry because he offered 99 cent tracks on iTunes. I’d like to point out that Apple wanted to increase sales of iPods and used psychological price setting in order to fill them with content. While Apple was seemingly revolutionizing the music industry, you’ll actually have to thank Wal-Mart for pushing the cost of music down. In October 2004, Rolling Stone had an article about Wal-Mart’s push for $10 CDs. Wal-Mart had pushed for lower CD costs years before iTunes entered the market. Apple generates over $4 billion in net sales each year. So why aren’t digital downloads 49 cents?
Who are the real losers?
Music consumers are getting ripped off. The average number of tracks on a single sided audio CD is 12.54. The average price of a CD is $15.99, therefore each track costs somewhere in the region of $1.25. Today the cost of CDs is hovering around the $10 mark, and in some cases even less. At $10, individual tracks cost 77 cents. Play.com has CDs for under $8, driving the cost down to about 60 cents per track. So why are digital download stores charging 99 cents a track?
CDs are better value for money
Let’s say I rip a $10 CD, I can store my files in high quality WAV or FLAC format. I have a physical object hopefully with a fancy color front and back cover. Sometimes a booklet is included with lyrics and artwork. I would have to pay (13 x 99 cents) $12.87 on iTunes to download the same album. Paying $2.87 more to get less.
In many situations, the files you download are much lower quality then ripping the CD. Many digital download stores still sell low bit-rate MP3 files at 99 cents a pop. Some stores still employ cumbersome DRM mechanisms and WAV files, if they’re available can be priced as high as $2 each. The cost to download the same album is $20, twice as much as the CD. It’s not like me to stand up for the big 4, but how are they offering better value for money than the ‘new model’ digital download stores?
Are digital download stores too expensive?
David Lowery says the ‘new model’ is adversely affecting artists, but don’t forget, it’s really bad value for the fans. I still think it’s a good idea for labels to use iTunes. Many fans are willing to pay extra for the convenience of using iTunes, that’s their decision.
If you want to use a digital download store and ensure the maximum amount of the purchase goes to the artists, purchase music on Bandcamp. Bandcamp offers HQ downloads and many labels sell albums on Bandcamp at prices where the individual tracks work out at less then 50 cents each. You pay less, there’s no DRM, the artist gets paid more and the label has more resources to expose more artists.
I’m interested in find out what you think. Are digital downloads too expensive? How much do you think is a fair price to pay for downloading music?