i don't keep up with iTunes or legit online music buying or anything remotely related, so i apologize if this topic has been breached before. i read about this in the latest issue of MOJO (an ish that deserves a topic of it's own).

summarized by bort:

Amazon.com has stated that every day, they make more money on items that didn't sell at all the previous day than they do on all their current best sellers put together. the point being is that if you stock enough stuff, the slow-selling items are as much a money-maker as the mainstream hits.

Universal Records is going to test this theory, and make 10,000 (yes 10,000) previously out of print/unavailable albums available online for legitmate digital download. the physical copies of albums that can no longer be found (or go for hundreds on ebay) will be "reprinted/undeleted" in digital form and available to buy. the cost of digitising the material can range from hundreds to thousands of dollars, but Universal thinks this strategy has potential and can be profitable.

Just thought it was an interesting idea/story, and it proven successful, I wonder if other labels will take heed. Imagine, ANY album EVER MADE, could be yours at the click of a button...*

*as it is, i think there is A LOT of music that is already available online and can be accessed many many different ways. But as much as there is available, i've got to believe there is literally 10,000 times as much stuff that hasn't entered into the digital age...

bort

Broached, not breached.

no, i meant breached. it means "to broach each topic (twice)"

Ahhh.

Stupid stupid major labels. Amazon makes money on the "old stuff" that didn't sell at all the previous day because they're a clearing house for people selling used stuff. Amazon doesn't hold the inventory--their only carrying cost is bandwidth, and it's a sunk cost for them, so they capture a fee at what amounts to 100% gross margin.

Universal will fail at this point because, I believe, the public has not yet adopted the electronic/digital format. The vast majority of folks want an album/disc. 20 years from now, things might be different, but for now folks want a hard copy. If Universal truly wants to cash in on its back catalogue, they need to find a way to mass customize (horrible biz buzz word, I know, but it applies) the production. Someone could browse the catalogue, order a title, and Universal could burn, package, and send the item. There's no inventory carriage, but at the expense of scale. If they can find a way to price it so that it generates enough gross margin, it could work.

I'm not sure how I feel about this. On one hand, it makes an incredible amount of material available and (presumably) easy to locate.

However, since it will take a substantial investment of money and time to convert these recordings to digital formats for public consumption, will they record companies take that route as a method of reducing production costs and expenses of real albums?

I've never made a record, and I'm not that well-versed in the numbers, but I would assume that recording a work digitally and subsequently tossing it in the database for download is significantly less expensive than manufacturing a physical copy and distributing it. It is way to easy to start thinking that you can make more money by reducing expenses. That's not true. I think I'm just wary of the record companies taking the easy way out and throwing everything in this database, while not giving a good goddamn about physical albums anymore.

My second concern is digital rights management. I doubt they will be free of DRM restrictions or a ridiculous TOS. After the whole Sony malware debacle, I'm not real hip to putting anything from a record company on my machine that monitors my behavior, tracks my online browsing (blessed Obner!) or can only be played on one device.

On the surface, I think they may be stepping in the right direction. Unfortunately, there's plenty of time for people unwilling to understand the bigger picture to muck it all up.

Damn. Billz and I should have just gotten together and shared a byline.

HARD HITTING.

Are you at all aware of how many songs are legally purchased /downloaded every month?

Edit: well over a billion just on iTunes apparently

I think it's safe to say that the public has adopted the electronic/digital format.

The albums that go for hundreds of dollars on eBay are collectors items, not generally purchased for the songs but because the buyer wants to be one of the elite who owns that particular record. I'm sure there are some who pay a pretty penny for an album they can no longer get at the local record store but few will pay hundreds unless they are a collector.

I think universal is fooling itself if they think converting previously unavailable songs to digital format and making them available is going to be a huge money maker. It will likely be profitable if they choose the right artists/albums but it will hardly be noticeable. Still, if they can make money rather than lose it, it's probably worth trying.

If the Russians can do it, and give you a choice of quality ranging from 64kpbs MP# to lossless audio, I would think the big American companies could also.

i hear different reports from different sources but i've heard that online d/l music sales tripled in 2005 from 2004, and that 6% of the music industry sales are online d/ls (i've heard that number is 12% or more as well).

also, the online d/ls are tracked on their own singles chart in the UK now.

while i myself prefer the physical copy to mp3, and while i think the digital age has "arrived but not taken over" it's probably right around the corner. i think your "20 years from now" projection is a little off Billz. more like 2 years. 20 freekin years from now Obner will be a NNYSE traded corporation and everyone will be listening to techno music in little chips implanted into potato chips so that when you eat them you hear the sounds...and stuff like that. and don't forget jet packs.

Per an Apple press release. What percent of label sales is a better gauge, because that's how the labels make money. What's the penetration rate? Last I saw, it is generally between 5% and 10%.

Contrast this with airlines, whose on-line ticket penetration is less than 30%. Here's the difference: airlines charge you more for a paper ticket, electronic tickets have been around for 15 years, and you don't keep an airline ticket--it's not the actual product, the transportation is. Plus, airline tickets have been distributed exclusively through an e-commerce channel for about 35 years (the CRS systems--Sabre, Apollo, etc. are some of the internets earliest pre-cursors).

A music album is a lot closer to an actual product than an airline ticket, the technology is much much newer, and there are very few market forces that steer a user to the electronic channel.

Further, most people are only buying single songs, the adoption rate for complete albums is remarkably lower. Compound this with the market for old catalogue, versus the current top 40 that appeals to the younger generation (i.e. the ipod crowd early adopters who account for the vast majority of on-line music purchases) and this venture looks less and less attractive.

If Universal is justifying this as an "investment" in order to generate some kind of early mover advantage in a new marketplace, then debate it as such. If I were running the show, I wouldn't be throwing my shareholders' money in that direction. When the channel develops to the point where I can participate profitably, then I'll jump in. The value of my company is in my catalogue, not what industry standard channels I develop.

Funny thing is I bet I've bought some of those same releases for two or three bucks used from Amazon. Damn if I gonna pay a hundred bucks just to say something's "mint." Music is meant to play, not frame and display.

on emusic, they're called "booster" packs.

I still think Billz is right on for the most part.

The key issue to me is- look at what segment of the music buying population is paying for and downloading from iTunes and the like.

Now, are they going to have any interest in an album that has been OOP for 10/20 years? And lets face it, for the most part, albums go OOP for a reason i.e. they werent selling.

Eventually Im sure it will be a money making proposition - but I dont think setting up the infrastructure in order to release OOP stuff is the right way to begin. Essentially the record companies want to make money off of stuff that is just 'sitting there' which makes sense- but I bet it will be a while before they see profit specially from this.

Awesome thread


this is the reason I come to Obner















sorry to interrupt

while i agree on billz'z points and i'm not fully respond to him specifically, i'll just point out that at some least some portion (not sure how great) of those single song purchases are exclusive "online only" singles. people are buying them because hard copies just aren't available. it's a gimmick. besides, who buys cd singles now anyways (aside from us)? if old albums have no/few physical copies and are released as "exclusive" online content, that gimmick might work too.

It's not 100% comparable (though it's closer than airline tickets), but look at what the DVD market has done for Hollywood. The studios are slapping any old catalog title they can find onto DVD and pulling in a ton of revenue they wouldn't have seen otherwise.

The size of the audience for old music isn't the same as the audience for old movies, but obviously an album that is unavailable makes you no money. If the startup cost is small enough, and the distribution cost is negligible, why not jump in early? The hot new idea in business at the moment (according to Time magazine) is "The Long Tail"--that the Amazon/Netflix model of "everything available all the time" can be just as profitable as the retail "sell only what's popular" model. Just the fact that Universal can advertise that everything they've ever released is now available at Amazon will drive customers to the site just as Netflix's promise to carry everything on DVD brings you there even though you'd never be interested in 95% of what they carry.

The TV networks started shooting some shows in High Def 5 or 6 years ago, and no one back then really knew when sales of High Def TVs would take off--they were investing in the future uses of a back catalog. Of course, the networks had the advantage (threat?) of knowing that the broadcast standards were changing to Hi Def whether they wanted them to or not. It would be of tremendous benefit to the record companies if they could force the market to go download-only and get rid of hard copies altogether, and this is certainly a push in that direction.

Hope not though--I've never bought a download and most likely won't until I have to.

I wonder how many of the downloaded song "sales" are really free promotional givaways. I think Pepsi was giving away free downloads under pop caps for a while.

I bet these free givaways are really used to inflate sale numbers.

Just like Prince moving 2 (or whatever) million copies of Musicology because they counted the 500,000 free copies he gave away with concert tickets.

at least this will mean more copies of out of print records up on soulseek.

Not if they DRM the fuck out of them.

I think Amazon, when they say "old stuff", means totally obscure discs that they due stock that do not sell everyday. Like the Peter Adams. i bought his disc thru Amazon, but I bet they didn't sell one the day before. They sell bazillions of discs this way apparently. I don't think they are referring to their used stuff which they don't stock.

As far as not being embraced, every kid I talk to has no care for owning an actual cd. They just want to get the stuff onto their iPod and never think about it again until they buy a bigger iPod.

i have faith in the revolutionary army of computer nerds who crack it every time. the worst drm can do is make it somewhat inconvenient.