"Customers are letting us know that new music is worth a tenner. Why bother with burning at that price? It is a good value proposition to the customer."
——Don VanCleave


As the Copy-Protection Debate Polarizes
the Music and Tech Industries, Some Think
the Solution Lies in the Cost of CDs
Digital debate, anyone? In recent months, CD burning has replaced file-swapping as the primary alleged culprit as the music-industry slump continues. Below are eight items that together trace the growing fissure between digitally savvy consumers and the people who are trying to sell them music when they can get it for free.

Got an opinion? Wanna share it? E-mail it to us and we’ll probably put it up. As reader opinions show up, we'll add them at the bottom of the page.

Item: A new CNN/USA Today/Gallup Poll reveals that 17% of adults who go online at home, at work or at school say they've downloaded music. On the issue of Internet file-swapping, 43% say it should be legal, 46% say it should be illegal and 11% are undecided. On whether record labels should employ technology to limit the copying of CDs to a small number of copies, 48% are in favor and 42% are against.

Item: "NEW YORK, NY - April 8 - BMG will start issuing copy-managed promotional CDs in the United States as part of its overall approach to protecting the use of copyrighted content, it was announced today by Pete Jones, President and CEO, BMG Distribution and Associated Labels… ‘Intellectual property is at risk from rampant bootlegging, file sharing and CD burning, and music is only the first medium to fall victim at the costs of royalties to artists, revenues to labels, and jobs to the industry. We have a responsibility to protect the work of our artists but, at the same time, BMG wants our consumers to enjoy reasonable use, which the second session enables for both a PC and a secure portable device.’"

Item: "NEW YORK (Reuters) - The music industry, hurt by slumping sales due to raging piracy on the Internet, may soon have an ally in Best Buy Co. Inc., the No. 1 U.S. retailer of both entertainment software and consumer electronics… Although Best Buy sells items like CD burners, MP3 audio players and personal computers used in CD copying and Internet music swapping, it supports the push by some music companies to produce CDs with anticopying technology, Chief Operating Officer Allen Lenzmeier told Reuters on Monday. ‘I think there's going to have to be some type of copyright protection that comes out," Lenzmeier said. ‘Hopefully, we can facilitate a solution’ that makes consumers willing to pay for music instead of swapping files on the Internet… Some kind of anticopying process, whether in the hardware or software, is necessary to prevent consumers from making numerous copies, Lenzmeier said, but it should not prevent them from playing a CD they purchased or from making a copy for their car."

Item: Covering the NAB convention in Las Vegas for the San Jose Mercury News, Dawn C. Chmielewski zeroed in on the keynote address given by Netscape co-founder Marc Andreessen: “‘If a computer can see it, display it and play it—it can copy it,’ said Andreessen... [pointing out that] Microsoft and other early software companies, such as Lotus, tried elaborate schemes to copy-protect their programs. But as volume increased—and prices dropped—the industry grew like wildfire, and piracy loomed less large. ‘My prediction is that is exactly what's going to happen to the entertainment industry,’ said Andreessen, adding, ‘Digital media is the biggest opportunity the entertainment industry has ever seen.’

Item: "SAN DIEGO - April 10 - Gateway, Inc. today will publicly take a stand with consumers on the digital-music debate, launching the first mainstream marketing campaign by a technology company supporting consumers’ right to enjoy digital music legally… The company also declares its support for activities that are accepted today, such as converting a legally acquired CD to MP3 format for use in a portable player, or burning a backup copy of a legally acquired CD as a safety measure but which could be outlawed by a bill proposed by Sen. Fritz Hollings of South Carolina… An independently conducted, national opinion survey commissioned by Gateway last month indicates that 44% of U.S. PC owners currently have a CD burner. The survey suggests that consumers who’ve adopted digital music technology want to keep using it, and report that their use of it is compatible with a healthy, profitable music industry. For example: [A] Of consumers who say they have downloaded music from the Internet, 73% say they now spend the same amount of money or more on music purchases. [B] 53% of computer owners say they’d be more likely to buy a CD if they could first download one track from the Internet. Only 10% say they’d be less likely to buy given this ability."
          Hilary Rosen responds to Gateway’s ad campaign: "The Gateway commercial is fun, but their website is nothing but a gateway to misinformation. No one has proposed anything that would 'prevent all digital copying.' If Gateway truly believed that illegal copying hurts all artists and labels who make the music we enjoy, they wouldn't be relying on these misleading scare tactics—they'd be working with us to find a solution to the piracy problem. If only they would devote a little bit of the millions of dollars they're spending on this ad campaign to help stop illegal downloading...but that wouldn't help them sell more CD burners, would it?"

Item: In the current issue of Interview, rising star John Mayer explains to Elton John that younger music lovers have learned to "investigate records to find out if they’re good before we buy them, which is why Napster took off. It didn’t take off because [we wanted things for free]. We’re ready to spend the money; but the thing is that in the past we bought records that were front-loaded with one or two singles and the rest was crap. So now the middle finger means, I’m gonna take only what I want from this record, because I know he rest of it is crap, because I heard it, and I’ve already given this band, or this record company, so much money before and they’ve given me a coaster with a single on it."

Item: According to Don VanCleave of the Coalition of Independent Music Stores, "It was hard for any store to escape selling tons of Ashanti this week. It was no doubt helped by the UMVD rebates that retail passed on to customers. Even though it is a $17.98 release, the rebating got the price way down at most accounts. Actually, taking a quick look here, price is driving most of the sales in the CIMS Top 10. Ashanti (with rebate), Norah Jones, White Stripes, Nappy Roots, Hatebreed, John Mayer and N.E.R.D. are all lower-priced releases. That is seven, or 70%, of our Top 10. Hatebreed is at the $14.98 price point, and the rest enjoy a wholesale price that allows a $9.99 or below shelf price.
          "For anyone who works the floor of a record store, the subject of price points is a hot topic. You see, we talk to customers. You know, the people who pull out their wallets to fund all of our careers. Increasingly, those customers are letting us know that new music is worth a tenner. Why bother with burning at that price? It is a good value proposition to the customer The one area of our prerecorded music inventory that is still thriving is in the used bins. I opened my store in 1988 and generally priced used at $9.99 or less. Most used bins are still at that level even though list prices have steadily increased during that 14-year period. Many people that have tried to experiment by pricing used $18.98 SLP CDs at $10.99, only to get bitched at by customers. There is a natural resistance level to the compact disc costing more than $10. Period.
          "Been in a Wherehouse store lately? In our area Wherehouse store, 50% of the floor space is used now. Why? Because that price point is where the customer demand lies… The customer enjoys the choice of purchasing a blockbuster movie for $15 on DVD or having a friend burn a copy of that new artist that he is interested in. Increasingly, the choice they are not making is spending $20 on a release that they know has at least one song they are interested in.
          "In an article in USA Today last week, NARM Prez Pam Horovitz was quoted as saying, ‘Do we have a competitively priced product? If our only response as an industry is to stop copying of CDs, we may be missing a consumer message’. We think she is spot-on with this comment. Copying CDs for all of your friends is very bad and needs to be addressed by the artist community, but we think most of that would go away with reasonable product pricing… The real challenge for all of us is to figure out how to...make money at lower list prices. Or, as Interscope is doing with the new Eminem, including a special full length DVD in with the CD to increase the perceived value to the customer. I would say that the writing is on the wall."

Item: Technology Daily reports that "The Global Entertainment Retail Association (GERA) of Europe council met this week and concluded that there should be more communication to retailers about anti-piracy efforts... The group asked that if the recording industry releases secure CDs, that there be interoperable technologies to ease consumer confusion, information for consumers about the restrictions imposed by the technology through labeling on the CD, and information for retailers about which technology is being used and why. 'Retailers support the fight against piracy,' Bob Lewis, GERA-Europe vice president, said in a phone interview. 'This is not a competitive issue. This is an industry issue. Why are they not talking to retailers who serve the customers?’”'

Once again: Got an opinion? Wanna share it? E-mail it to us and we’ll probably put it up. See below.

Reader Viewpoints
I believe that a service such as Napster clearly facilitates copyright violation. However, I must say that I tried it a few times to download tracks by artists I had heard about and EACH AND EVERY TIME was compelled to go out and buy records by that artist. As someone who buys a lot of records, I think that says something about the value of downloads. I am also somewhat finicky when it comes to sound quality—badly encoded MP3 files don’t do it for me—I need CD quality at the very least and will happily pay for a nicely mastered, packaged CD.

Brian McPherson
Law Office of Brian H. McPherson
Manager/Modest Mouse

yes, i wholeheartedly agree that the lowering of the cost of cds would increase record sales. case in point: ashanti. her cd was priced at $8.99 at certain venues. the result: 500,000 in first week sales and a #1 debut on the charts. even lower sale cds are enjoying renwed interest. for example, i was in the target's music department last tuesday (4/9), browsing for a worthy purchase. what i noticed was most of the cds priced $7.99-9.99 (res, trik turner, john mayer, the white stripes, among others) had completly sold out, leaving only those over-priced releses in full stock. if the music industry simply heeds the call of consumers and lowers the price of cds, they will enjoy a vast jump in sales.

Henry Corpus
Emporium Records Outlet

Digitally savvy consumers have not stopped paying for music. But they're paying someone else - the ISPs and the Telcos. These are the companies that labels need to collaborate with now more than ever. If the industry can incentivise monitoring and reduction of piracy across ISP's networks and encourage ISPs and Telcos to reap greater revenues through new digital
distribution businesses and value added services (like exclusive content, recommendations, community environments, tastemaker forums, etc) then the issue can start to be addressed in a commercial manner. Copy protection and other technical solutions will only serve to alienate consumers and, sooner or later, encourage circumvention solutions. The reality is that the licensing revenues that labels used to call "ancillary" need to be grown into "primary" revenue streams alongside CD sales. Of course, the danger of this is that  the labels will try to push those revenues too hard, too fast, and end up destroying the new channels that they're so desparately in need of. Adopting the consumers' perspective is so much harder than anyone expected.

Jeremy Silver

When we opened the phones on our radio show regarding "Downloading and Burning," many of our callers intimated that they recieve no clear message from the industry as a whole. They have heard music people say that they encourage sharing and love Napster, while others are equating these practices with a savings-and-loan-level theft situation. Why doesn't the RIAA consistently push a clear and concise message from the industry in all media clarifying the position of the majors? If they already are, they are not doing a very good job of it.

Ian Faith
Ian Faith's Music Scene Revue
(Radio Show on KRLA 870AM)

(The following is adapted from a piece I wrote for slantmagazine.com on Mike Greene’s Grammy sermon, but it applies here as well.) Greene claims file-sharing apologists offer a myriad of excuses, yet these excuses are admittedly valid ones: downloading doesn't replace CD buying, it's simply a substitute for radio, a format that has become so formulaic you can practically predict the next song almost as easily as you can next week's #1 TRL video; "greedy" record companies have cannibalized the singles market, forcing fickle consumers with little in the way of discretionary dollars to purchase full-length albums at $18.98 a pop or, say, download a track or two. Most file-sharers do not download 6,000 MP3s in two days, the number Greene "claimed" his three-student army "ripped." (Want some more of Greene's fuzzy math? The RIAA estimates that 3.6 billion songs are illegally downloaded every month. That's 43.2 billion a year or, assuming that the average album contains 12 songs, close to 4 billion albums illegally downloaded in one year. In 2001, the industry didn't even sell one billion albums according to Soundscan. In essence, Greene is suggesting the industry has been denied an absurd 400% profit increase in the last year.)
          Yes, artists should be paid for their work, but developing artists can only benefit from such exposure in the long run. Superstar acts that make most of their money on the road probably wouldn't have even noticed the loss. But, of course, there's the matter of principle—stealing is wrong no matter how you look at it. Yet you just can't blame sluggish sales on the Internet. Greene's dramatic speech wasn't only disturbing because of its sermonic tone, but for its indolent finger-pointing. The alleged culprits are consumers who are communicating a very clear message to the industry: Your product is not worth its price. These are the people who determine the value of a firm's product, not the other way around.

Sal Cinquemani
Studio Distribution
Distributed Labels Publicity

Very good points are made. I love music and in Australia I felt that $20 (roughly $10 US) was OK. Now it's $30. I can't afford it. I save up and buy box sets by artists I know. The current debate about the state of the music business shows that the age-old policy of spending vast amounts on some acts and hoping for huge hits is going to die. Industry figures are now saying that we need to spend money wisely helping artists develop. The business model of 5% of the acts making the money does not make sense. Better to develop artists slowly and see the benefits flow from a long career with plenty of music that people will buy over time. The back catalogue is always the most profitable part of the business. Check out my website www.indieinitiative.com for details of goings on down under.

Neil Wedd
Edifice Complex

Melbourne, Australia

This oughta be interesting... (9/30a)
Michael and Kyle find a feast of hip-hop to chew on. (9/30a)
Like a broken record... which it is, figuratively speaking. (9/30a)
We enter the month that was once known as Rocktober. (9/30a)
It was a surprisingly easy "Habit" to break. (9/30a)
New categories! New rules! New WTF!
It's the one you didn't see coming.
"Who took my passports?"
Allow us to apologize in advance.

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