December 2007
The definition of success in the music industry has always varied, but for artists in the age of iPod's, mp3's, and online connection, musical success comes from reaching as many people as possible.
James Sawyer, 25, is a singer-songwriter from Campbellville, Ontario who released his debut album, Next to You in 2006. As of 2007, he has sold just under 1000 copies, about 500 of them being physical CD's. The rest of Sawyer's sales come from the 30 companies that market his music digitally.
Ever since the introduction of the online music sharing service Napster in 2000, internet music stores have become a widespread phenomenon. Online music stores allow for the purchasing of albums or singles off of the store's website. Apple's iTunes is the most recent and by far, most popular of these online stores, having sold three billion songs as of July 31st, 2007. Sawyer isn't too concerned with this new form of purchasing affecting his overall sales. "I see it as the future...online selling gives me the opportunity to sell to people all over the world."
Sales of digital songs have been on a dramatic increase; according to Neilsen SounScan, 582 million digital singles were purchased in 2006, which was a 65 percent increase from 2005. Even major record labels are begnning to latch on to internet success. In May 2007, EMI allowed iTunes to start selling it's catalog of song online for the first time. Sawyer owns and operates his own record label, Interstate Records 66, and finds that record labels, both major and minor, and undergoing drastic change. "[The labels] are mainly becoming distributors of music...we are in a transition from the old record company business to the new independent and online business." When you couple this transition with successful online album sales, online single sales, ringtone sales, and more, it's a wonder that every recording artist hasn't abandoned the compact disc completely. So the question is, is there any room left for the CD in the digital age?
Sawyer seems to think so, though he remains a little skeptical. "CD's will be around for another 10 years at most, only because you won't see parents or grandparents downloading tunes anytime soon."
Physical music sales have already suffered in the market; according to the Canadian Recording Industry Association, physical music sales fell 35 percent in the first quarter of 2007, a 12 percent drop from 2005 to 2006. Online promotion, however, is soaring. Music videos promoting songs have leapt from television to computer screens with the introduction of Youtube. When the video-hosting website began showing music videos, Sony Music, EMI, Warner Music, and Universal Music all signed licensing deals, allowing Youtube to promote artists legally.
One of the controversies surrounding digital sales came with the online release of In Rainbows, the seventh studio album from English rock band Radiohead. Having fulfilled their contractual obligations with EMI, the band released the album on their own website and gave buyers the option of naming their own price. Recent surveys revealed that despite the option of being able to get the album for free, the average price paid for the album was between ₤4 and ₤5. The release followed that band's recent sentiments that record labels were no longer needed and had becomes a "decaying business model".
This shift in marketing and sales has also become apparent in social networking sites such as Myspace. The website allows for artists and bands to set up their own webpage, where they can post songs for free download, as well as promoting and advertising for upcoming events. Online promotion such as this enables a musician to record from their basement and still be heard without need of a record label.
Charles Wallace feels a little differently. The 21-year-old musician plays the saxaphone in Bound, a Toronto band that is releasing it's debut album later this week. Though his band is currently unsigned, Wallace feels that major labels still play a role in the distribution process. "It all depends on how far you want your music to reach your audience. If you only want it to reach Toronto through word of mouth, then that is fine. But if you want it to be heard by everyone in Toronto and across the Atlantic, then you need a major record label. Your music will not be able to get into HMV or even Walmart by yourself. There is no representative and buyers will think nothing of you."
In addition to the regular CD format, Bound will be offering its album on sonicbids.com. a website that permits showcomers and promoters to download their music for a price defined by the band. Wallace and his band haven't discussed offering their music through major stores such as iTunes, but are taking it into consideration. "Seeing how we are an up-and-coming band, providers such as [iTunes] are not a bad idea, but we need to think of profitability."
According to an analysis by the Future of Music Coalition, the profits of an artist are calculated as a percentage of the suggested retail list price, which is usually about $16.98. From this price, the record label deducts a 25 percent packaging cost, a 10 percent breakage cost, and a 25 percent new technology cost, leaving the new price at about $8.58. The artist then receives 10 to 14 percent of this price per album sale, which equals between $0.86 to $1.20.
The contract between iTunes and an artist is seen as a "reseller agreement". In essence, Apple buys the songs from the artist and sells it in their online store for $0.99 per song ($1.29 for popular singles, $9.99 for most albums). Out of the $0.99, Apple keeps a portion, and the rest is sent back to the record label who distributes the remaining money to artists, producers, songwriters and etc. Sawyer is selling his album on iTunes, receiving $0.64 per download due to owning his own label. The Future of Music Coalition reveals that major label artists receive between $1.00 to $1.40 per album download -- about a $0.20 increase between a CD sale and an online sale. iTunes also has no deductions for packaging, breakage, or new technology, which makes it far more profitable than the regular business model.
Why is it then, that musicians keep releasing albums in CD format? "Because it sells," answers Sawyer. "I have sold more CD's that I have online." Artists like Sawyer reely on their emotional connection with audiences during live shows to sell albums. "Musicians need to sell merchandise at live events...that's where we make our money. When I play a show, I react with the audience and give an emotional memory that makes them want to buy an album. With [online sales], you don't have that interaction."
And the reason CD's are in decline? According to Wallace, it's a question of quality. "[CD's] are being hard pressed compared to the other mediums that are available," he says. "All audio and video formats are being replaced with newer and better formats that can hold more data and improve sound and video quality." iTunes markets its songs with Advanced Audio Coding (AA), a format designed to have a more efficient sound quality than the mp3 format on a CD.
Even though the place CD's hold in the ever-expanding digital market is shaky at the present, their future appears grim. With the continued enhancements being made to digital music, the CD is slowly losing its hold on the music market. Online stores and webpages have evolved and produced a quick, effortless way to access songs for a small or even non-existent price. Artists and bands can also make greater profits through online services due to the lack of deductions that are present in most major record production deals. Sawyer believes that audiences will always demand a hard copy of music, whether it be a CD, or a new innovation. "[People] will need to have something to buy at a concert or a store, like a memory stick with digital songs". Whatever the technology is, it's difficult to say just how long compact discs will remain current before their eventual digital replacements overrun them.