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I too agree with the general thrust of Tom's analysis. But I would like 
to point out that on average physical goods still accounted for
80% of the approximately 500+ million albums that were sold in the US 
market in 2007. In 2008 that percentage is diminishing steadily as it 
has been for years and for some releases like the recent Coldplay album 
the hard/digital split is more like 70/30 which is a major change. But I 
do think that the physical CD will persist as a legacy format and until 
we start getting higher res digital delivery platforms it will remain 
the more desirable format for people who actually care what music sounds 
like. I am of course thrilled by the much vaunted vinyl resurgence and 
think that will only continue to flourish as a modest but hearty segment 
of the overall marketplace. I also think that the CD, especially a 
brilliantly executed one like /Lateralus /by Tool, or /Stadium Arcadium/ 
by the Chili Peppers will remain a viable format especially as a 
keepsake for the concert experience. However, I do think that the flash 
drive represents an extremely interesting tributary for the delivery of 
media-rich content and one that I am currently exploring.

AA



Mark Jenkins wrote:
> Tom,
>
> I totally agree with all of your statements below.  In fact, it's the
> direction that our company is working towards (we're not selling direct
> to the consumer yet, but I do see the day when this will happen, and
> similar to the way you describe).  Up to this point iTunes has
> discouraged variable track pricing (for some unknown reason), but we
> manipulate our album pricing to make it a much more reasonable deal for
> the consumer (obviously, at this point, in the US, the mechanical
> copyright costs are a limiting factor, because on digital downloads in
> the US, the full statutory PHYSICAL mechanical rate of US$0.091 per
> track is being collected in exchange for clearance by Harry Fox, even
> though (as of yet--but probably this fall this will change) there is no
> statutory rate for digital downloads.  I personally would love to see a
> viable lossless format for downloads, in ALL genres (there are a few
> classical sites that do this on a limited basis, of course) as an
> alternative to iTunes, and I think this is something we will be looking
> at as a company in the near future, whether via FLAC, .aiff or .wav.
>
> In regards to your comment about de-leveraging manufacturing and
> distribution assets, we did that as a company 7 or 8 years ago.  All
> warehousing and manufacturing for us is done by third parties, and even
> inventory doesn't shift to our books necessarily upon manufacture (it
> depends on rate of sale, time of year when manufactured--a lot of the
> summer is utilized by pressing plants in anticipating product needs in
> the 4th quarter, and it allows them more efficient ways of utilizing
> their equipment and staff, but the excess inventory may remain on their
> books until needed).  
>
> The valuation of content companies will, of course, be more predictable
> and definable the more that digital becomes the greater share of the
> business.  Instead of inventory, returns, and other factors that are
> currently factors in valuing content companies, these will be replaced
> by a more manageable, definable revenue stream which the marketplace can
> depend upon.  The profitability issue, as you are correct on in regards
> to today's marketplace, will also undergo some revision as some of the
> "shotgun" disadvantages of launching new artists (millions of unsold
> units of inventory, for example) are taken out of the picture.
>
>
> Mark Jenkins
> President, Licensing Division
> Madacy Entertainment LP/Countdown Media
>  
>
> -----Original Message-----
> From: Association for Recorded Sound Discussion List
> [mailto:[log in to unmask]] On Behalf Of Tom Fine
> Sent: Thursday, July 17, 2008 7:37 AM
> To: [log in to unmask]
> Subject: Re: [ARSCLIST] Wonderful Mercury Reissues
>
> I think, if Big Music is to ever save itself, it will eventually get out
> of the manufactured-CD 
> business except for huge hits sold at Wal-Mart and the equiv. in other
> countries. Niche-market stuff 
> like Classical and Jazz will be sold as downloadable digital files. Now,
> the key question is --  
> what's the profitable play? I think the copyright owners should sell
> CD-quality (or better) 
> downloads directly to the public, at $1 per song or $10 per album, and
> include downloads of 
> printable, high resolution graphics so those so inclined can burn and
> make art for a close proximity 
> of a real CD. Amazon is already driving down the price of lossy-format,
> low-quality downloads and I 
> can see these settling at 25-50 cents per song or about $5 or less per
> album, which is more of a 
> reasonable price (although I still wouldn't pay my own money for
> low-grade lossy formats of anything 
> that sounds the least bit decent). Thus iTunes and Amazon can fight over
> the commodity price of 
> lossy formats and the copyright owners could retain the full-quality
> market and price it to be 
> profitable (if they can make money off $15 CD's, with manufacturing
> infrastructure having to be 
> supported, distribution networks taking a cut and retailers taking a
> cut, surely they can make more 
> money at $10 downloads sold right to the public -- if not, they will
> never have a viable business 
> model).
>
> If I were making strategic decisions for a large copyright holder, I
> would begin now by 
> de-leveraging my manufacturing and distribution assets. The thinking is
> -- let 3rd parties hold the 
> real estate, labor costs and capital of production plants and warehouses
> and contract-manufacture 
> the few dozen titles a year that will sell enough copies to justify
> distribution thru the Wal-Marts 
> of the world. Everything else (and I do mean _everything_ that's in the
> vaults) would be sold 
> direct-to-consumer as downloads. The revenue structure changes to more
> of a annuity than quarterly 
> quests for hits, so perhaps this business model is not what Wall Street
> would prefer, at first. But, 
> over time, if it's run right, the revenue stream starts to resemble a
> utility company and such 
> things as reliable dividends can be set up and thus the stock becomes a
> good long-term play. The key 
> thing Wall Street has to get out of its system is the myth that the
> music business is wildly 
> profitable -- it's not and it never has been. Hits are a fluke,
> slow-building revenue over time is 
> the rule, especially with niche genres like classical and jazz. With
> popular music, the 
> profitability of mega-hits is eroded by all the misses in a catalog each
> year.
>
> -- Tom Fine
>
> ----- Original Message ----- 
> From: "Steve Abrams" <[log in to unmask]>
> To: <[log in to unmask]>
> Sent: Wednesday, July 16, 2008 8:30 PM
> Subject: Re: [ARSCLIST] Wonderful Mercury Reissues
>
>
>   
>> When I tried ordering from Archiv a few years ago they were not
>>     
> sending anything abroad.
>   
>> I have found that I can frequently obtain CDs from Amazon.Com at
>>     
> better prices than ordering from 
>   
>> the UK.
>>
>> For example, the most recent Living Stereo SACDs are  11.98 USD, with
>>     
> several a dollars less and 
>   
>> older items at less than 9 USD. Shipping to the UK is 3 USD.  Most
>>     
> items can be bought new at 
>   
>> lower prices from associate sellers.  By contrast the price for recent
>>     
> issues from Amazon UK is 
>   
>> 13.99 GBP plus 1.24 GBP shipping.  That is the equivalent of 30.5 USD,
>>     
> nearly three times the 
>   
>> price.  The records sold by Amazon UK are pressed in Europe. Also
>>     
> shipping from America is almost 
>   
>> as fast as from the UK.
>>
>> UK prices do include 17.5 per cent "purchase tax."
>>
>> Buying records directly in the UK I have had the best luck with a firm
>>     
> called Crotchet, who also 
>   
>> send records abroad.  Otherwise I buy directly from companies such as
>>     
> Symposium and Preiser.  I 
>   
>> have also had good luck dealing directly (by email) with Bongiovanni
>>     
> in Italy.
>   
>> Steve Abrams
>>
>>
>> ----- Original Message ----- 
>> From: "Tom Fine" <[log in to unmask]>
>> To: <[log in to unmask]>
>> Sent: Thursday, July 17, 2008 12:31 AM
>> Subject: Re: [ARSCLIST] Wonderful Mercury Reissues
>>
>>
>>     
>>> You are correct, some of the newer ArkivCD's do indeed have full
>>>       
> booklets. But the Mercury were 
>   
>>> in the original ArkivCD series and unless they started reproducing
>>>       
> the booklets somewhere along 
>   
>>> the lines, they did not as of a year or so ago.
>>>
>>> As for shipping to Europe, I wonder if that has to do with specific
>>>       
> ArkivCD license agreements --  
>   
>>> were you ordering a BMG/Sony title the time you had trouble?
>>>
>>> Here in the states, I've had generally good luck tracking down "new
>>>       
> and used" options on Amazon 
>   
>>> for out-of-print classical stuff, but not always. Some titles are
>>>       
> ridiculously expensive used and 
>   
>>> one then wonders what genius bean-counter at Big Music Co X decided
>>>       
> to take it out of print if it 
>   
>>> obviously is still in demand enough to command high prices used. But
>>>       
> many other titles can be had 
>   
>>> cheaper than original street prices, sometimes still shrink-wrapped.
>>>       
> There are a few companies, 
>   
>>> Newbury Comics, ImportCD's, etc, that must have bought out inventory
>>>       
> from dead record-store 
>   
>>> chains at pennies on the dollar and can now sell out-of-print but
>>>       
> still shrinkwrapped titles for 
>   
>>> $5-8 each. For instance, I was able to get several titles from the
>>>       
> original RCA Living Stereo 
>   
>>> reissue CD's that are now out of print but never issued on hybrid
>>>       
> SACD's for a few bucks each, 
>   
>>> still new in the wrapping and not RCA Music Club editions. Same with
>>>       
> several of the late 90's 
>   
>>> Decca Originals reissues.
>>>
>>> None of this is to cast any aspersions on ArkivCD -- those guys are
>>>       
> doing a great service to 
>   
>>> music and music fans.
>>>
>>> -- Tom Fine
>>>
>>>
>>> ----- Original Message ----- 
>>> From: "Steve Abrams" <[log in to unmask]>
>>> To: <[log in to unmask]>
>>> Sent: Wednesday, July 16, 2008 6:56 PM
>>> Subject: Re: [ARSCLIST] Wonderful Mercury Reissues
>>>
>>>
>>>       
>>>> Some Arkiv reissues are now being produced with booklets.  I just
>>>>         
> purchased my first Arkiv 
>   
>>>> edition - the RCA transfer of the 1947 recording of "Four Saints in
>>>>         
> Three Acts".  This CD was 
>   
>>>> never available in Europe, so far as I know, and has become quite
>>>>         
> difficult to find second hand.
>   
>>>> The transfer is excellent and the 32 page booklet with Gertrude
>>>>         
> Stein's libretto is included.
>   
>>>> There was no problem ordering from the UK.  Some time back when I
>>>>         
> tried ordering from Arkiv they 
>   
>>>> would not sent stuff abroad.
>>>>
>>>> SA   TTTTTTT
>>>>
>>>> ----- Original Message ----- 
>>>> From: "Tom Fine" <[log in to unmask]>
>>>> To: <[log in to unmask]>
>>>> Sent: Wednesday, July 16, 2008 10:39 PM
>>>> Subject: Re: [ARSCLIST] Wonderful Mercury Reissues
>>>>
>>>>
>>>>         
>>>>> The ArkivCD's should be CDR "clones" of now-out-of-catalog CD's. I
>>>>>           
> tried a couple and they 
>   
>>>>> sound fine to my ears, keeping in mind that CDR media can be more
>>>>>           
> fragile than manufactured 
>   
>>>>> CD's. Too bad they don't reproduce the booklets, which were sweated
>>>>>           
> over profusely. Since 
>   
>>>>> Universal chose to take so much of the catalog out of print, this
>>>>>           
> is the only way to hear a lot 
>   
>>>>> of this material if you missed the original CD's. Arkiv does a nice
>>>>>           
> job keeping the brand 
>   
>>>>> alive. By the way, they have also reissued a bunch of other
>>>>>           
> Universal material, particularly 
>   
>>>>> Decca and DGG. And they have a bunch of EMI and Sony/BMG reissues
>>>>>           
> out there also. I think the 
>   
>>>>> ArkivCD program is now well north of 2000 titles.
>>>>>
>>>>> -- Tom Fine
>>>>>
>>>>> ----- Original Message ----- 
>>>>> From: "Roderic G Stephens" <[log in to unmask]>
>>>>> To: <[log in to unmask]>
>>>>> Sent: Wednesday, July 16, 2008 12:06 PM
>>>>> Subject: Re: [ARSCLIST] Wonderful Mercury Reissues
>>>>>
>>>>>
>>>>>           
>>>>>> Hi All,
>>>>>>
>>>>>> I've been very pleased with my Arkiv CD purchases in
>>>>>> the past, but I thought you all should know about the
>>>>>> Mercuries that are being reissued by the label, and
>>>>>> I'd be interested in any comments regarding them by
>>>>>> Tom Fine.
>>>>>>
>>>>>> This is from an email I just received from them:
>>>>>>
>>>>>> "It's been an audiophile extravaganza this month at
>>>>>> ArkivMusic, with our sales on the fabulous BIS label
>>>>>> from Sweden (lots of titles back in stock!) and the
>>>>>> RCA Classic Film Scores series (my favorites this week
>>>>>> are the film scores for Errol Flynn and the Prince
>>>>>> Valiant Suite from Franz Waxman).
>>>>>> We round out the month with one of the most
>>>>>> fascinating audiophile labels of all, Mercury Living
>>>>>> Presence. Mercury was a special label in many ways, an
>>>>>> American company, from the heyday of classical
>>>>>> recording in the U.S., that reproduced some of the
>>>>>> most sonically realistic sounds at the dawn of the
>>>>>> stereo era. Precious few stereo LPs were pressed when
>>>>>> these recordings were issued, and they became some of
>>>>>> the rarest and most collectible classical discs ever.
>>>>>> ArkivMusic has now reissued over 60 releases from the
>>>>>> Mercury catalog, all of which are on sale for a
>>>>>> limited time."
>>>>>>
>>>>>> Rod Stephens
>>>>>>
>>>>>>             
> The information in this email is confidential and may be legally privileged.
> Access to this email by anyone other than the addressee is unauthorized.
>
> ****************************************************************************
>
>
>