My Point Of View
(28 July 1998)
Although a few years away, the future of the music industry is in electronic delivery. The revolution has already started...
As music fans are getting use to not finding the music they want at the local stores, they are turning to the "on-line" and the "800 line" outlets. This system is a bit more efficient for the labels and the retail centers (Saving the cost of warehousing and paying for inventory while it waits to be sold.) as in many cases they don't need to stock the titles, they have established distributors do "procurement" for them.
Taking this one step further...it is logical to eliminate hard inventory...create it only as you need it. The present technology allows us to cut custom CDs as they are needed (either stock titles or compilations requested by the customer). On-line and 800 stores could easily burn the CD's as they sell them. Computer CD burners are starting to make headway into the consumer market. Over the next few years it can be assumed that home delivery of digital files will not only become common but will be a major percentage of sales that fall into the "catalog", "hard to find", and "starting or new groups" categories.
When the industry gets to the point when it can deliver movies and other full screen-motion video in real time via home delivery over the internet; there will be no need for home storage of the media (video tapes, CDs, DVDs, etc.)...At this point "pay per view" and "view with advertising" will become the standards. Although a few years away, it is the future and it is coming sooner than anyone can imagine.
What does a time table look like? What are the "stages" of the revolution?
As with many tables/lists of these types, the "phases" listed below are not distinct. They have all started at one level or another. Some will mature faster than others and they might not appear to happen in the order I have arbitrary described... but you can get the idea of what I expect...
Phase One... Most people purchase their music from one place. In the past, they loved to browse through the bins in retails stores, patronising stores with knowledgeable clerks. With the "all knowing" sales people slowly dissapearing from the landscape, we are now in the middle of a shift where people are starting to use the on-line stores to do their browsing. The on-line stores offer more titles with more descriptions and reviews than the liner cards and sales staffs can provide. It can be done in private, anytime from the home, office or school. In 1998, 95% of those browsing and sampling music at on-line stores purchase their music elsewhere. (In some cases other sites, in most cases retail stores.) Although there is an element of "socializing" in visiting a retail store, (which is often sited by industry spokespersons and the press...) this seems to be less and less important for the serious music purchaser. The trend is for online store sales to grow quickly.
Phase Two... People get comfortable purchasing CDs from the on-line stores. The number of retail stores selling only new pre-recorded music will decrease. The amount shelf space in the stores that continue to sell CDs will slowly shrink.
Phase Three... The market is changing from "album" to "single song" attention spans. (MTV generation, our sped up lives.. what ever...) Just look at the increase number of "compilation" and soundtrack projects over the past few years (besides being twice as many each year, they are also selling more copies each.) Music customers will like the idea of being able to pick out what songs they get on a CD. Custom CD makers will appear and fill this niche. The on-line stores will all be set up to do this. Some forward thinking retails stores will offer this. There will be many new companies started that only cut custom CDs selling through the web, 800 numbers, adds in the media...
Phase Four... With recordable media (CD-Rs and DVDs) and faster Internet speeds individuals will be able purchase and burn their own discs. At the same time the prices for hard disc storage and electronic chip storage combined with the compression of files (MPEG-3 and other formats) will make it easy for people not to keep their music in "hard form". They can purchase the music and download it and carry it with them on portable players. (A walkman of the future might be a storage unit which plays back files you load into it via your entertainment center.) At fall '98 hard disc costs, it costs under $3.00 to permanently store an albums' worth of music on your hard drive. (drives will get smaller and cheaper and eventual replaced with chip storage which will be smaller and cheaper yet)
Phase Five... With fast bandwidth and low level satellites providing any music, at any time; why store the music at all? One could purchase the rights to listen to a song:
Any system for digital downloads must be simple and easy to use, this being said, there are some other concerns that need to be addressed before we can digitally deliver our music.
The consumer market is always moving towards faster, better and cheaper ways of delivering product to consumers. This is particularly true of the entertainment industry and "pre-recorded" music. With "electronic" cash (credit cards) replacing checks and cash, consumers no longer need to be present (or mail in) their payment for goods they wish to purchase. With the introduction of 800 numbers, mail order business have grown faster than any other retail companies in the past ten years. Now with the Internet offering an easier, faster, and cheaper way of reaching customers, the landscape will change even more (and faster).
In the end, "pay per view" will be the standard form of video and audio entertainment; offering any selection, any time, any where. Until then, we will go through a transition which will feature storage units (CDs, DVDs, mini-discs) which can be played anywhere and customized to what the customer wants. At first the majority of these devices will be "custom" made by third party companies, later, customers will make their own at home.
As the owner of an independent record label, I'm not too keen on having 100's of "Custom CD" companies having licenses to offer and copy the songs of my projects. At the same time, I would like them to be able to sell my songs, pulling the digital files off one server which I have total control over. For those burning their own CDs at home, I would like all the music web sites to be able to offer my titles, again pulling the digital files off one server which I have total control over.
There are a few companies offering Internet solutions for my business. Liquid Audio, out of California, is one of the leading ones and at this point offers most of what I have outlined above. I have started to encode all my masters using their system and will soon be offering digital downloads at a new web site I will launch this fall. I will maintain inventory on my old titles, but I don't plan to press any more CDs for my new releases. I will burn CDs as needed and offer digital downloads which can be burned onto CDs. While we all go through this transition period, I will help my bands press their own CDs (new projects) and get them stocked with distributors which feed the Internet music sites. I will concentrate on the future and the promotion and marketing needed to help us all get there.
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