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Music Marketing in the Age of Electronic Delivery

Discussion of the discovery and purchasing of recorded music via the Internet.

Robin Whittle rw@firstpr.com.au  7 December 1998  Updated 21 May 1999.

Back to the First Principles main page - for material on telecommunications, lossless and lossy compression of audio signals for music marketing and delivery via the Internet . . . and many other things.
 

In late 1998, there is a lot of action in the distribution of music via the Internet, most particularly in a compressed format known as MP3.  This is the beginning of a major change in the structure of the recorded music industry which for a century or so has relied on record companies pressing pre-recorded discs, marketing and distributing them to retailers.  Radio plays a crucial role in the discovery of music - which I believe is more of a bottleneck than the traditional mechanisms for purchase.

In late 1994 I began work on a project for an Australian government think-tank (the Bureau of Transport and Communication Economics) - as part of their Communications Futures Project.  My brief was to write a ~150 page paper entitled Future Directions in the Music Market - by the end of they year.   Some time later . . . April 1995, I finished the initial 364 page Future Developments in the Music Market.  It was a fascinating topic!

A hundred copies were printed and distributed around the Australian industry prior to a Music Industry Summit on 27 April 1995.  Plans to finalise the paper and publish it did not work out.

In October 1995, I wrote a paper for conference: Music Marketing in the Age of Electronic Delivery.  It is about 20 pages of text on A4 paper.  This has been at my original web site since then.

Now, early December 1998, I don't have time to do a rewrite to take account of recent developments.  The paper is relevant in its principles, although the timelines for the availability of broadband (> 2 Megabits/sec) Internet access turned out to be rather optimistic.

What I can do now is:

  • Make the paper available.
  • Make some diagrams I did in 1996 available - these really belong with that paper.
  • Maintain some links to sites where action is currently taking place.

  •  
    At some stage in 1999, I hope to properly research what is happening and update the paper.  (7 April 1999 - don't hold your breath!)  I did present a lecture based on this material at the Easter Earthcore on the Murray at Tocumwal.  It was a pleasure to be standing under the red-gums, on a dance-floor in the bush, in front of the DJ tent, talking to and with a hundred people about the fabulous developments I expect to take place in music marketing.

    Please email me <rw@firstpr.com.au> with any suggestions and comments, and especially with suggestions for web sites and other material which either discusses new developments in music marketing, or which is getting on with it.

    While the paper itself, and much of this discussion, relates to recorded music and commercial transactions - my interest is beyond this.  I am particularly interested in the free exchange of music for pleasure rather than financial reward: folk music.  I am also interested in music which is not fixed sound recordings, such as with the use of software to generate music, such as Csound and Koan  .

    - Robin Whittle


     

    1 - Music Marketing in the Age of Electronic Delivery

    Click here to read my paper: Music Marketing in the Age of Electronic Delivery, from 3 October 1995.  It prints out to 20 pages on A4.

    In particular, this paper defines five kinds of copying:

    1. Purchaser copying
    2. Listener sharing
    3. Listener theft
    4. Listener piracy
    5. Commercial piracy
    where the first two are in the interests of the artist. It discusses why it is technologically impossible to stop copying and why it is impractical and, in the case of the first two forms of copying, undesirable to prevent listeners copying music by legal means.  Finally the paper argues that artists and anyone else involved in the commercial distribution of their music must build trusting relationships with the listeners, and make the material easily and cost-effectively available - to encourage people to purchase the music properly, rather than copy it without rewarding the artist financially.

    Here is the abstract:

    By the turn of the century many music consumers are expected to have fast network access, home computers and CD-R disc writers. This will enable them to purchase music via electronic delivery, rather than on physical media such as compact disks. Existing distribution channels and radio's stylistically restrictive music discovery process will be bypassed as artists and listeners engage in two way communication, without geographic restrictions. Radical changes to industry structure are expected. As amateur musicians share music electronically, folk music - withering in the age of mass media - may flourish in the 21st century, in a profusion of contemporary styles.


    There are lots of things for me to consider in updating this paper, but I believe its principles remain valid.

    Things I will be thinking about include:

    Please suggest some more issues to consider and tell me what you think.  I can easily add to this list and include or link to whatever you write, if you like.

    2 - Diagrams to accompany the above paper

    Here are three diagrams, from another paper in 1996, which belong with Music Marketing in the Age of Electronic Delivery.
     

    Today's music industry - bridges and barriers

    The recorded music industry has for a hundred years delivered its product to consumers on pre-pressed discs, and since the 1930's has relied on radio, film and television to enable consumers to discover fresh music.

    The two primary activities - discovery and sale/delivery are shown on the diagram below.  Four major types of industry participant form the necessary bridges between artist and listener.  Discovery is shown in black because it only after music is discovered will it be purchased.  The bottlenecks in discovery in the traditional industry structure are arguably more significant than those involved in production, distribution and sale of the CDs themselves.

    Record companies, distributors and retails form the three span bridge between the artist and listener for the sale/delivery process.  Radio, and to a lesser extent the printed press, television and film, is an essential element in the discovery process.  Live performance and magazine articles are also an important discovery process.

    The diagram depicts direct artist to listener communication for discovery and purchase of music via the Web.  In fact it is likely that many artists don't want to run their own web sites - but will leave some or all of their web presence to intermediaries.  These intermediaries will have lower costs, lower risks and fewer stylist restrictions and limitations on the number of artists they can handle compared to traditional record companies.  The low-cost two-way nature of Internet communication facilitates direct communication between artists and fans - which is vital for many reasons, such as building trusting relationships with listeners, for giving feedback and inspiration to the artists, and for helping the process resemble a community.

    The traditional industry participants all face high costs, high risks and significant delays in profiting from their activities.  This contrasts with an artist who runs their own web site, or who works closely with a web intermediary - they can be earning money directly from sales within hours of recording their music. They face no significant risk or cost if they place hundreds of their tracks on the site.

    The costs and risks of the traditional music industry mean that most of the money which finances it goes into such mundane activities as transport, warehousing, sales tax, retail rental and staff costs, and into financing whatever means are available to promote the product into the popular style feeding frenzy in the hope that its sales will rise, for a time, above the "noise floor" and the participants will actually make a profit.
     


     
     
     

    A second diagram shows quantitatively the flow of money from the listeners towards the artists.  Dotted lines represent intermittent or nonexistent flows.


     

    Like the book industry (and the multimedia CD-ROM industry) the CD based music industry has great difficulty matching the proliferation of product with the enormously varied and unpredictable demand of consumers.  There is high investment and significant time delays in producing large quantities of discs, packages and promotional material - with little reliable information about how many will be sold.

    The risks, delays, costs and multi-layered nature of the traditional recorded music industry structure mean that only a fraction of the money spent by listeners flows to artists. The true industry structure is more complex - for instance collection societies (not shown) collect money from radio stations, and many public places such as shops and entertainment venues (not shown) and distribute an ideally large proportion to the composers of the music.  Music industry copyright and commercial relationships are complex and cannot be shown fully here.

    While it may be true that certain industry participants are rapacious or way out of touch with the true needs of artists and listeners, the existing industry structure does follow naturally from the technological limitations of mass-produced CDs and uni-directional mass media for promotion and discovery.

    The Internet part of the model assumes that listeners have Internet-connected computers with significant hard disk capacity and a CD-R writer - this is becoming common.  It also assumes that music at the quality which they want to purchase can be delivered via the Internet conveniently and with relatively low costs.  We are yet to really arrive at this point. MP3 at 128 kbps may sound like the original 44.1 kHz 16 stereo recording in most situations, and at a Megabyte a minute, this is about one seventh of the file size of a losslessly compressed version. Still, a 33.6 kbps modem can only download about 10 megabytes an hour - so to gain an hour of music at 128 kbps will take about six hours.  There are serious convenience and cost issues for most users at present with this arrangement, but they can be expected to be reduced over the next few years with lower Internet costs, and especially the widespread use of HFC cable modems, ADSL and other broadband local-access technologies.

    Assuming this does happen, a listener can discover music by searching and listening in real-time.  They can then pay for an hour or so of music, and spend only about USD$5 to download it into their machine. (That is 60 Megabytes of MP3 or around 360 Megabytes for music which can be compressed losslessly to 60% of its normal size.)  The CD-R writing can be largely automated, and the cost of the disc is just a dollar or so.  This leaves quite a few dollars to go to the artist (to cover their costs and to create profit from their music), whilst still being cost-competitive and a lot more immediate, personal and personalised than the traditional approach of buying music on mass-produced pre-pressed discs at a shop.

    These lower costs, lower risks (listener chooses exactly what they want, rather than having to choose between album packages) greater immediacy and absence of stylistic and geographical barriers can be expected to lead to a net increase in the amount of music purchased, with a resultant increase in the funds remaining with artists - even if the total listener expenditure remains the same as it is with the traditional industry model.  Considering the many benefits of the electronic delivery model, it would not be surprising if (in the absence of CD-R and Net-based copying) that total expenditure would rise - because there is a vast unmet demand for music which would be translated into more action with a more efficient and friendly business model.

    However the effects of the ability of users to copy music are hard to predict.  In the current atmosphere of rebellion against the record companies - often held in low regard by listeners and artists - copying seems to be all the rage.  I am optimistic that the two-way, low risk, low-cost, immediate, personal communications of the Net will facilitate artists and listeners building trusting, lasting relationships which are conducive to the artistic development and financial viability of music development in a vast range of styles, and especially for artists who are just developing their work and are yet to attain widespread recognition.
     

    The current industry places many stylistic restrictions on the music which can be discovered via commercial radio.  These are more fully discussed in the paper.

    There is a vast range of music and an equally (or potentially) large range of interests amongst listeners.  This goes far beyond the straight jacket of the kind of music which is compatible with commercial radio.

    There is an immense  potential for an explosion of diversity - in new styles of music as well as the rediscovery (or the fresh discovery for most listeners) of fields of music which have existed for decades or centuries but which have never yet been discovered by an individual simply because no radio station in their area plays it.  For instance, a single 1 1/2 hour Indian classical music program on a community radio station here in Melbourne (3 MBS) has opened my ears to a wide range of music (which to my ears is less formal and more varied and lyrical than Western classical music) which I would never have otherwise become attuned to.
     


     

    3 - Sites concerning electronic delivery and alternatives to the traditional music industry structure


      Updates 8 April 1999:
     
    Check out http://www.spinner.com ! They use streaming audio at under 28 kbps using the Real Audio format to provide over 100 "channels" of music - carrying over 150,000 pieces of music.  It is basically like over a hundred radio stations, with music and occasional brief ads.  The player has banner ads and the American voice ads are synchronised with them.   The current artist and track information is visible on the player, and there are ways of saving this information for future reference and linking to sites with more info about the artist (supposedly - no info was available for the artists I tried).  A link is provided to Amazon.com to buy the CD - again, on the those I tried, it just went to a search form.  There is a "rate a song" facility which gives feedback to the artist/record company.

    There is no published play-list, nor can you request tracks.  Sound quality is so-so - 4 kHz maximum or so - and it can sound a bit warbly.  Still it is possible to get used to the sound quality and enjoy the music.  You need a good Internet link, and plenty of CPU power, otherwise the audio is cut out and replaced by a hiss.  The hiss is a nice touch - better than silence.  Another nice touch is the long breaks of silence between tracks - to give each piece of music its own space.  Unfortunately, Internet usage by other programs can lead to loss of sound for fractions of a second or for quite a few seconds.

    This represents advertising supported "radio" - where the ads are targeted and generally not of the audibly intrusive type (because they are banner ads).  What's more, the response to the advertising is generally measurable, because the user clicks the banner ad.  The scope of the "radio" is global to people with Internet connections of 28 kbps or above.  It is 24 hours a day.  There is no limit to the number of "channels" one company can produce.  Nor is there any limit to the number of companies who could provide such a service.  It is inefficient having a single source of 100 or so audio signals all being sent as individual packets from a server in California.  However, there is no technical reason why the client software could not work with the nearest server site - where server sites get a single feed and send it out to multiple clients.

    The audio traffic to my Windows Spinner Plus 1.5 player was about 5.3 UDP packets a second, each carrying about 500 bytes of data.  With packet overhead, I estimate this represents close to 3 kbytes of data a second, or 10 megabytes an hour.  Raw Internet traffic costs in Australia (due to the high cost of the fully used Pacific cables) is about AUD$0.19 per megabyte - which is what I pay via my Telstra Internet connection. In addition there would be HTTP traffic for the ads.  So at AUD$1.90 (AUD$1.20) an hour, it is not as cheap as listening to the radio.  Such costs are not an issue in the USA - but may be in other countries.  The sound quality is crappier than AM radio too - though it is generally stereo.  What you do get is to see the artist, track and CD details in real-time - impossible on ordinary radio (but possible with Digital Audio Broadcasting).   In my brief experience with the trance and trip-hop channels, the music is good.

    Spinner.com was established in 1996 as TheDJ.  Record labels send two copies of their CDs to Spinner so their music can be part of their library.
     
     

    What is fantastic about this is the specialisation of the "channels".  The top-level categories are:

           Rock, Oldies, Themes, Top Hits, Mood Food, Classical, Jazz & Blues, Urban & Dance, Country & Folk, World & New Age.

    In the Urban & Dance category are the following "channels".  (BTW - I hate the radio/TV term "channel" being used with Internet communications, but here is it probably appropriate.)    Here they are, with the tracks playing when I looked:
     
     
    Acid Jazz
    Electric Soup
    Corduroy
    Hybrid Incorporating Elements of Jazz, Funk, Hip-hop & Soul
    Ambient
    English Country Music
    Funki Porcini
    Refined Electronic Expression
    Disco
    Don't You Want My Love
    Debbie Jacobs
    Bell-Bottomed Dancers: Shake Your Groove Thang
    Freestyle
    I'll Be All You Ever Need
    Trrinere
    Debbie Deb, Lisa Lisa & Stevie B Serve Up Funky Lil' Beatz
    Funk
    Summer Madness (Live)
    Kool & The Gang
    I Wants to Get Funked Up!
    Hi NRG Dance
    Won't Give Up My Music
    Pulse
    Pop, Miami Bass and Euro Dance Music
    Hip-Hop
    Word Up Doc
    Armand Van Helden
    I Got Two Turntables and a Microphone
    House
    Extreme Pressure (Deep Down Dub)
    Fono
    House Music All Night Long!!!
    IDM
    The Lightening (Digital Remix)
    Photek
    Dance Music For The Intelligentsia
    Jungle/D&B
    20 Tracks Mixed By Kemistry & Storm
    Kemistry & Storm
    Future Urban Breakbeats...Step to It!
    Mega BPMs
    One Word
    Love Lee
    Electronica's Best Found Here
    Old Skool
    Bounce, Rock, Skate, Roll, Pt. 1
    Vaughan Mason & Crew
    Breakdance to Hip-hop's Roots
    R&B - Fresh
    Georgy Porgy (radio Edit)
    Eric Benet
    Today's Freshest Urban Grooves
    Slow Jams
    Age Ain't Nothing But A Number
    Aaliyah
    Laid Back Smooth Grooves for an Unobtrusive Mood
    Soul
    At Last
    Etta James
    Food for the Soul from the Godfather, Queen and King
    Techno
    On Your Own
    Regg & Arkin
    Breakbeat, Electro & Detroit Techno Beats for Your Feets
    Top Jammies
    Radio Edit
    Case & Joe
    The Beatz from the Chartz
    Trance
    Jazz Trippin'
    Praga Khan
    Electronica For an Altered State of Mind
    Trip-Hop
    Wierd Planet
    Headrillaz
    Hip-Hop for Spaceheadz
    Urban Divas
    My Lovin' (You're Never Gonna Get It)
    En Vogue
    Sisters, Homegirls, and Assorted Soulful Singers

    I think Spinner.com is an impressive enterprise and a very significant development in music discovery and marketing.  Bravo!!
     

    Updates 21 May 1999:
     
  • The New York times has a number of articles tracing the ongoing drama in the music industry.

  •     http://www.nytimes.com/library/tech/reference/index-music.html

    This reqires registration, but that is free.  There are articles there by Neil Strauss, Matt Richtel, John Markoff and Jaron Lanier.

     
  • The new Real Audio G2 audio (and video) compression system provides extraordinarily good mono sound quality at 20k bits per second - a data rate which is easily streamed in real-time through the Internet and ordinary modems.  Frequency response is up to 10 kHz - implying 20kHz sampling, with a compressed audio data rate of 1 bit per sample!  How do they do it?  Dolby AC3 encoding apparently.  I would not have thought this sound quality was possible at those data rates.  It is not perfect sound quality at all, but it is 1/6 of 128kbps MP3.  The sound quality is quite enjoyable for many types of music.  The player is free (Windows and Mac) and so is the encoder.

  • Progressive Networks: http://www.real.com/

    I got the free RealPlayer G2 for Windows from here. You can also pay for a version with graphic EQ and display etc.  It also plays MP3s.

    I got the free encoder from here.  There is also a luxury version you can purchase.

    Ideally all these compression standards would not involved proprietary technologies - they would be open standards unencumbered by copyright and software patents.  Perhaps Progressive Networks is doing such a good job of this field that it will dominate it, largely through excellence and making their players, encoders and software (for integration into other company's programs) available on a reasonable basis.  They could become to audio what Adobe is to vector graphics (via the Postscript language, and its derivative, the PDF format).

     
  • There are lots of links to streaming "Net Radio" sites at Progressive Networks: http://www.real.com/

  • Here are some other links to streaming audio sites.  The first is to a system comparable to Spinner.Com (described above).  There are over a hundred channels, and direct clickable links to artist information and to purchase the CDs of the music currently playing.

           http://www.netradio.net/

    The TechnoIndex site lists streaming audio sites for music of specific genres.

          http://www.technoindex.com/internetaudio.html
     

    
    


     

    Last update  21 May 1999