Friday, October 15, 2010
Should labels drop the price of CD to £1 ?
Question: Hi Dig,
I just read this article on BBC News, where Rob Dickins (ex-Warner Music UK) has been suggesting that hard-copy albums should now be priced at around £1 to beat piracy, suggesting that the major releases would sell something in the region of 200 million units. Here's the link: http://www.bbc.co.uk/news/entertainment-arts-11547279
I just wondered, from your perspective as the head of a well-known independent label, if that sort of pricing strategy for your CD releases makes sense?
From my own perspective, I used to spend anything from £30 to £70 a month on music, and was never really into illegal downloading of music. But since Spotify have been improving in leaps and bounds, I've been a premium member for nearly a year, and now consume practically all of my music via their client on my laptop when I'm at home (can stream through my Airport Express too), and on my iPhone via their app when I'm out walking or driving. When that's on offer for £10 a month, and I know the artists are hopefully seeing something of that money, it makes sense for me as a consumer and music fan.
I don't think I've bought a CD in nearly a year. Do you think this idea of a £1 price plan is going to change things, or should the labels perhaps be more publicly involved in trying to get people to stream their artists via Spotify, and trying to get more people behind the idea of paid subscription?
Andrew, Glasgow From: firstname.lastname@example.org
Answer: Hi Andrew, well it seems your recent change in music-buying experience echoes that of a whole load of people, including myself. I agree that Spotify is a brilliant service for music fans, its selection is huge, the connection through 3G networks is almost flawless and I am gladly paying the £10 for the monthly premium membership.
Just today I dragged and dropped about 10 new albums like Dimmu Borgir, Spiritual Beggars, The Sword and more into a playlist, and then synched the list to my iPhone. Voila- in about 5 minutes I had an instant new music collection to take with me on the move.
Word is that Spotify (600,000 premium accounts) will link up with Microsoft and be embedded in the IE9 browser placing it into millions of desktops.This will mount a significant challenge to Apple iTunes (with 160 Million accounts) which is expected to counter by launching its own Cloud based streaming service, having acquired start up LaLa in 2009. Google is expected to get into the act as well and launch its own streaming on demand music service- even tho it does this very well currently with You Tube/Vevo anyway. So pretty soon 3 of the biggest tech companies in the world will battle it out to become the dominant music delivery service, most probably incorporating some social networking element into the mix for good measure, hence Apple's launch of Ping in September 2010.
Major Record companies are not the dumb slouches the tech-blogs make them out to be, and their digital strategies have come a long way since taking a battering from the likes of Napster and the file-sharing sites a few years back -when their only strategy was to sue them into legal oblivion. To show their intent, EMI hired a top level Google exec to helm their digital rollout. Pundits predict that record company revenues from digital sales - especially in the future when music is mostly consumed on mobile phones- will actually dwarf the previous physical format-era sale revenues.
The presumption is that the millions of music fans who are currently using File sharing and Torrents to consume billion of music files per day will instead turn to the legal streaming sites on their phone where most of the entire worlds collection of music will reside in the 'cloud' and can be played for free (with adverts) or, for a small monthly fee minus the ads.
Ye Olde Compacte Diske is showing its age. Those shiny discs are 80's era technology which is coming to the end of its life as a medium for music. Though Music Biz analysts think CDs will not die out completely, and could remain as a mainstream format for decades to come, still selling millions of units per year.
People who use Spotify, like yourself, have made the culturally significant transition from the old download & ownership model to listening to music streaming from the "Cloud". This is an important distinction. Many of my friends still insist on owning something, be it the Vinyl LP, CD or even Mp3 files on a hard drive. If its not firmly in their possession, showed off in their collection, then they don't really feel like a proper music fan. Personally, my Cd & LP collection just collects dust now.
Recently I had a shock because my Spotify premium account ran out after the first year, and the original credit card used on the account had expired, which meant it didn't renew properly so the account was closed. I was horrified by this- even though the music was in the cloud,and plainly not "mine"- it still felt like ownership to me.The idea that my lovingly created playlists might be lost forever made me pretty despondent. Luckily on signing up again they were all preserved just fine, so kudos to Spotify for that failsafe feature.
As for the £1 Cds- I understand what Rob Dickens is saying, and in theory he is right, if you lower the price of something enough then sales should soar as fans lose the inhibition to buy. But the costs involved with the manufacture, wherehousing, transportation and retail distribution of physical formats are so high, and with CD being a petroleum product, plus factoring in the fuel for transport, it seems to me that selling at £1 is simply is too low to make financial sense. Earache experimented this year with several new releases like BONDED BY BLOOD selling for around £4.99 at retail price in the shops, and while they have been good sellers, it wasn't a runaway success either. The Fopp chain always has a selection of CDs at £3 and £5 but its mostly deep, old back catalogue which have already recouped their costs years beforehand, very rarely the new releases from superstar acts.
Thinking about it, I reckon CDs will become more of bespoke format, kind of like Vinyl LPs are now, with lavish packaging and designed with the collector in mind, fetching high prices, not low price. If you want a physical format to show off in your collection, you'll have to pay a lot more for it.