This is Celia Hirschman with On The Beat on KCRW.
It was announced this week that digital music sales have more than tripled in the last year.
A year ago, digital music was generating about $222 million. Now, in the same period, it's at $790 million. But during this same time frame, physical CD sales are down 6%. That's 6% down in a multi-billion-dollar industry. And while some applaud the demise of the CD sale in favor of the digital solution, it is highly unlikely that digital downloading will ever replace the revenue previously generated from CD sales. Inspite the consumers outcry that they are buying more music than ever before, the music business is headed for an even larger economic reckoning.
Digital rights will continue to be the most exciting development in the music business. The market leader, iTunes, represents more than 80% of all music downloading sales in America and over 20 million iPods sold. That means they own 80% of the MP3-player market. For the first time, Apple is the big dog in the digital park, and that's new for them. Unfortunately, they have a closed system of digital rights management, called Fair Play. Fair Play is a system that allows songs to seamlessly be purchased from iTunes and only downloaded to your iPod and iTunes phone. Fair Play will not allow iTunes purchased tracks to work on a Windows Media-based mp3 player without a sizeable workaround. All other sites use a commonly licensed interface for consumer ease, but thus far Apple has refused to license Fair Play to third parties.
Everyone I know loves their iPod, and advocates would say, why would we ever leave Apple? Maybe so, but one should consider the cost of downloading an entire record collection, only to discover it was incompatible with all other mp3 players on the market. If you can't move your record collection to another mp3 player, how stable is your record collection?
And this is not just an Apple problem. The alternative isn't necessarily better. Take the new Yahoo all-you-can-eat subscription site. Download to your hearts content but end your relationship with Yahoo and you can kiss your record collection goodbye.
The record business is now mired in the business of trying to sort thru all these different rights issues. It was so much easier with the CD, where the labels and manufacturers agreed to use one system. Mutiple distribution configurations has created havoc for both companies and consumers.
With illegal downloading only a click away, labels should always keep their sightlines clearly on consumer value, for the safety of their own future. Labels need to seek sustainable inter platform solutions for music purchasing and portability. Other options, though attractive at the start, ultimately undermine consumer confidence in the long run.
And the last thing the record business needs, is another sense that they are taking advantage of the public.
This is Celia Hirschman with On The Beat on KCRW.