Digital Music Intermediation Part 6
In describing the “Virtual Value Chain”, the authors of “The Move to Artist-Led Online Music Distribution: Explaining Structural Changes in the Digital Music Market”(2005) claim that “the emerging digital music market supports dramatically reduced production and distribution costs”. Since the same recording is used for both physical and digital distribution, recording costs stay the same. According to the RIAA, “there are many factors that go into the overall cost of a CD — and the plastic it’s pressed on, is among the least significant. CD manufacturing costs may be lower, but it takes more money than ever before to put out a new recording”(RIAA, 2003).
Although “Digital Tech Consulting expects online media stores to generate $7 billion in revenues by 2008, up from under $250 million in 2003”(IT Facts, 2004), the digitally distributed product requires additional marketing, promotion and technology spending and there is no evidence that digital sales will produce enough revenue to cover these new expenses. It has also been suggested that since “record companies are taking such a large cut from tracks sold online that many of the burgeoning online music stores will go out of business”(Andrew Orlowski and Charles Arthur, 2004). This is not sustainable and hence, not beneficial to any of the players in the long term. This will become more significant if major labels decide to raise the wholesale prices of songs that they claim “were originally set artificially low in a bid to stimulate demand.” (CNN Money, 2005)
The authors make subjective claims and provide no supporting bibliographical references therefore affecting the reliability of their conclusions. Two sentences in particular stand out: “Audiophiles claim there is loss of quality, but most people hear no difference in quality with digital music vs. a physical CD.” There is no qualitative evidence of audiophiles ‘claims’ and no definition of ‘quality’. Within the same paragraph, the authors claim that “recording or “ripping” digital music at 96kbs or higher provides similar audio quality as a physical CD”, again with no references to listening tests or that “similar quality” in this case, is lower quality. According to a PC World double-blind listening test, “the lowest rate that is really usable for MP3 is 128 kbps; any lower, and the quality begins to suffer significantly.” (Baguley, 2001)
The basis for much of this future model is the successful implementation of digital rights management (DRM). It remains to be seen how effective these encryption schemes will be. Technology experts believe that DRM for digital music, however applied, is fallible. One such expert believes that “given a functioning implementation of [DRM] technologies, we are confident we can defeat them”. (Felton et al, 2001) There is also always the possibility that anything that can be heard of seen can be rerecorded using a high quality signal path and digitized free of DRM with minimal loss of quality. The articles conclusions also lack practicality due to assumptions related to the creation of an IP Rights Enforcement Body. This fictitious group is described as “legal bodies [who] contribute to the value chain by enforcing IP rights and fighting piracy”. Whether the RIAA suing Napster creates value or not, is debatable.
“The Move to Artist-Led Online Music Distribution” which was chosen to be part of the Proceedings of the 38th Hawaii International Conference of System Sciences, fills a need within the music industry for a description of potential roles in the future for both music and technology players. The explanation uses specific, real-life examples to illustrate the application of abstract business proposals. However, the validity of the conclusion is put in question by the use of highly subjective interpretation of evidence and editorial. The arbitrary inclusion and exclusion of actors within the model, such as P2P as a viable marketing platform and the addition of a non-existent IP Rights Enforcement agency described as “legal bodies [who] contribute to the value chain by enforcing IP rights and fighting piracy”, suggests significant bias toward RIAA interests and hence, impacts the reliability of the conclusion.
Since 2006, we have seen the majors pulling out all the stops on the Internet. They have married and divorced iTunes, ripped down and posted content to YouTube, and generally throwed everything at the kitchen sink to see what sticks. The sticky question: “How do we get money from these free-loading deadbeats?”
One of the more recent endeavours is trying to sell DRM-free music. I believe that this is a subtle way for the labels to admit that what sounded sensible a few years ago simply didn’t work and annoyed people with limited device interoperability. It’s not that they have given up, but that they have realized that the recorded track is now a loss leader; most practically for the youth demographic most likely to steal their wares. MP3s are now the perfect viral marketing vehicle for the product: the artist.
Digital Music, Media Technology, Online Advertising, Social Media
