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Yes! And beware of behind-the-scenes attempts to build in a "media fee" into cable and cellphone 
subscriptions.

All-you-can-stream subscription models are like satellite radio: it may be viable if costs can be 
kept low enough, but it's not a mass-market product that most people will pay for. At best it can be 
a profitable niche, but certainly not profitable enough to copyright owners to avoid selling 
downloads and/or physical product directly to consumers.

----- Original Message ----- 
From: "Jim Sam" <[log in to unmask]>
To: <[log in to unmask]>
Sent: Thursday, April 22, 2010 3:11 PM
Subject: Re: [ARSCLIST] More digital downloads news


> Hi Tom,
>
> One thing you overlooked is the experimenting with subscription models
> (Rhapsody, etc.) and ad-supported models (SpiralFrog, et al.).  When Napster
> first hit, everyone and their mother was advocating either or as a way to
> get people to pay for digital downloads.  Today, the first is a footnote and
> the second one is a total failure.
>
> Jim
>
>
> On Thu, Apr 22, 2010 at 6:14 AM, Tom Fine <[log in to unmask]>wrote:
>
>> Just got an e-mail from Deutsche Grammophon's DG Web Shop online store that
>> they are moving into
>> Universal's company-owned online store system, moving away from the 3rd
>> party operator who had
>> handled the store backroom and fulfillment operations. I interpret this as
>> proof that Universal has
>> become comfortable with selling downloads directly to consumers, cutting
>> out the middleman. This is
>> probably necessary for survival as the CD format dies off. If a download
>> song can only be sold for
>> 99 cents, and most songs don't get downloaded very often (the "long tail"),
>> then the smart music
>> megaglomerate must capture as much of that 99 cents as possible. Paying
>> Apple or Amazon a large
>> percentage to handle marketing and backroom doesn't produce enough cash to
>> justify the
>> megaglomerate's existence. My bet is, going forward, iTunes store and
>> Amazon will lose most of the
>> major-label content or will have to take a much-reduced cut of sales, with
>> most of the pie returning
>> to the copyright owner. In the case of Amazon, an argument can be made that
>>  it costs less to
>> provide a download service than to pay people to warehouse and ship CD's,
>> so therefore the copyright
>> owner is due a better cut -- unknown whether this will wash with the
>> business-savvy Amazon.
>>
>> Which makes me wonder -- perhaps someone who owns or works for a music
>> label on-list can answer
>> this -- does Amazon take the same percentage for digital downloads as for
>> physical CD's? Someone
>> told me, years ago, that the markup on CD's is about double, so the label
>> gets about half the retail
>> price. This might have changed, because I think I heard this during the
>> collusion years when CD
>> prices were higher. I think I read somewhere early in the iTunes days that
>> Apple takes a 1/3 cut for
>> iTunes downloads, maybe more.
>>
>> Anyway, it's interesting (to me at least) how far the market has evolved
>> since iTunes hit the scene.
>>
>> 1. phase one - MP3 downloads were unsanctioned by the copyright owners, and
>> almost all were piracy,
>> the Napster heyday.
>>
>> 2. phase two - Napster shut down, crackdown on consumers, DRM formats,
>> eMusic and other small
>> operations emerge offering legit downloads of DRM-free MP3, but not from
>> Universal, Sony or Warner.
>> Content mainly from Fantasy Group and smaller labels.
>>
>> 3. phase three - iTunes hits the scene, complete with distribution deals
>> with most major labels,
>> everyone on board soon after. Original format is DRM proprietary and very
>> lossy, but evolves to
>> DRM-free less-lossy Apple proprietary format. Amazon soon joins the party
>> with DRM-free less-lossy
>> MP3 downloads, usually for less money than iTunes when priced on a
>> whole-album basis. There is much
>> overlap between Apple, Amazon and eMusic, but not 100%, and some eMusic
>> downloads are still very
>> lossy (not upgraded from original 128kbps offerings).
>>
>> 4. phase four - the labels dip their toes into selling directly or at least
>> directing consumers
>> directly to download sites. I would assume this coincides with the death of
>> brick and morter retail
>> stores, so labels no longer have to worry about teeing off distributors and
>> rack-jobbers.
>> Universal/Verve was early with this, with the Verve Vault website where you
>> could click and buy the
>> out-of-print albums right from iTunes. Other models are like DGG's, where
>> consumers can buy
>> high-bitrate MP3 directly from the company's website. Smaller labels got
>> early into offering
>> downlaods direct to consumers, sometimes including booklet materials, and I
>> now notice that some
>> small labels like Daptone are offering FLAC downloads of full CD resolution
>> at a decent discount to
>> buying the physical CD. This makes total sense for anyone who doesn't own
>> CD plants -- the margin is
>> probably better than paying to have CD's made and then distributing and
>> holding inventory.
>>
>> 5. phase five - around the same time as phase four, a niche market emerges
>> for better-than-CD
>> resolution PCM downloads. HDTracks and Linn, plus some others, are first in
>> this market. Pricing is
>> comparable to suggested retail for SACD. My bet is that this absorbs the
>> SACD niche as the physical
>> format submerges.
>>
>> I think the end of 5" optical discs is inevitable, but it will be a slow
>> fadeout. Also, it seems
>> obvious that there's a lot of excess inventory in warehouses and in the
>> retail pipeline, so it will
>> take years for most titles to completely disappear (much less time for
>> popular titles). Also, it
>> will probably make sense for megahits to be issued on CD for quite some
>> time. I think the back
>> catalog stuff is definitely headed out of print, though.
>>
>> One man's analysis ...
>>
>> -- Tom Fine
>>
>