The Times, They are a Changin'

The relationship between the major record labels and music downloading has been strained, to say the least. The majors often like to blame downloading as the cause of their downward spiral.

When the compact disc was introduced just over 25 years ago, it provided a healthy shot in the profit arm for labels. This novel format offered the convenience of the cassette, with significantly better fidelity. People pay for convenience, and the majors profited greatly - not only on new releases, but also on music fans replicating their LP and cassette collections on compact disc.

The rise of the digital revolution, portable players, and the explosion of peer-to-peer networks and bittorrent delivery provided a new challenge. Previously, any "copy" of a release, in the analog realm, would largely have a decrease in fidelity. Transferring music from an LP or cassette created what audiophiles would call a generational loss - a copy that, while still highly listenable, would bear the noise and other artifacts inherent to analog transfers.

Given the digital nature of the compact disc, 1:1 copies with a modest computer were no problem, and the loss of fidelity was effectively zero. Before the rise of high-speed Internet connections and massive hard drives, the MP3 codec allowed this music to be compressed into a much smaller file than the Redbook standard 16 / 44.1 uncompressed file. This file was much easier to transmit over the Internet, and though lossy, was still very listenable. The MP3 codec continued to be refined, and today these files have become the norm for downloadable content, legal or otherwise.

Apple saw the light early on in the game, and arranged with some of the major labels to release their catalogs digitally through their Itunes store. Apple dominated, and continues to dominate, the market with their portable Ipod players, and having content available to their customers via the Itunes store at a price less than a new compact disc was just good business. Unlike compact disc releases that could be ripped and traded as MP3 files on peer-to-peer networks, Apple used a protection scheme, Digital Rights Management, which allowed the purchaser to only play the music on a select number of computers. While this protection could be defeated by the more savvy and ambitious user, it certainly helped the alleviate industry fears at least a little, and the number of releases available through Apple's Itunes store increased exponentially.

Earlier this year, Apple began offering higher bit-rate files that were free of the DRM protection, for a slightly higher price, to enable customers to play the files on software other than their own Itunes player, and to support portable players other than the ubiquitous Ipod. Not every major label represented in the Itunes catalog has given the green light on this update, so presently; releases without DRM are somewhat limited. The switch was such a success, that Apple recently adjusted their pricing scheme so that both protected and unprotected files are now the same price.

At the end of the day, successful sales are all about perceived value.

Prince toppled the apple cart in July by giving his latest album, Planet Earth, away for free in Sunday editions of the U.K. newspaper the Daily Mail. Over 3 million copies were distributed this way, much to the chagrin of Prince's European distributor Sony/BMG. Far from a free promotional tool, Prince opted out of the speculation process of the current, stagnant label environment. Industry analysts point out that Prince's last release sold 80,000 copies in the U.K., whereas this time he was paid $500,000 above and beyond the royalties on this album. In short, be ended making over eight times as much, and sold out twenty-one consecutive concert dates, while the Daily Mail sold an additional 600,000 papers. They were able to leverage the promotion and increase their advertising revenue, which more than offset the monies paid to Prince.

Most recently, and perhaps more daring, was the exclusive online release of In Rainbows by the internationally acclaimed act Radiohead. Formerly on EMI and currently without label support, Radiohead released the album online to their fans with a new twist - the price was negotiable. A potential customer could pay as much as they wanted, or nothing at all. They also had the option to purchase an opulent box set for about $80 featuring two vinyl records, a compact disc of the album, a second compact disc of additional music, along with artwork, photos, lyrics and the immediately downloadable digital release. Released on October 11th, over 1.2 million people downloaded the album in one day, with the average price paid being between $5 and $8. Numbers on the box set sales are not available yet, but industry analysts suspect net sales of the download alone to be $6-10 million.

Independent artists have been leveraging technology for a while, using content rich websites, social network environments like MySpace, and offering their music for sale online in a per-track format like Itunes. The buzz of the blogosphere even propelled local artists Tapes 'n Tapes into the national spotlight. Sure, these examples can't compare with the pull of a name like Prince or Radiohead and their respective success with technology, but the appeal of a more DIY ethic, with less dependence on the dinosaur that is the recording industry, is evident.

The times really are a changin'.