R.I.P. MP3, The Decline of Digital Downloads
By: Carlos M. Perez/peacerocker July 14, 2010
Today, Digital Music News is reporting that; "According to Nielsen Soundscan, paid downloads slipped a modest 0.2 percent to 597 million units during the first half in the US, a possible prelude to bigger declines ahead."
Bill Nguyen, one of Lala's co-founders called Lala's technology "the end of the MP3." While others laughed and brushed Nguyen comment aside, I took it serious and did an in depth evaluation of Lala's concept. I was so simple and made too much sense not to embrace it.
As we all know by now, Lala was bought out by the biggest Internet music download website, Apple. I've heard people say;' Apple did it so they could eliminate what was a real threat to their bread and butter, iTunes' digital downloads.' If that's what you are seriously thinking, you'd better think twice. Steve Jobs may be a lot of things, but one thing he is not, is stupid. Jobs' has the uncanny ability to stay one step ahead of the his competition. The quickest way for Apple to jump into the clouds, was not by playing catch-up and developing their own technology, it was buying the company that was perfecting the technology. Let's not forget that Lala had a fully operational non approved iTunes app a year before they were bought out by Apple. Lala was 4 years ahead of it's time.
After acquiring Lala and shutting it down 6 months later, Apple now finds itself "Between A Rock And A Hard Place." If they fully embrace Lala's technology, they be shooting themselves in the foot, digital downloads are iTunes bread and butter. If Apple just sits on the technology and doesn't continue to develop it, they will be left behind and in a position that Job's does not like to find himself in. In addition, Apple has to walk a fine line because of the unique relationship they have with the record labels. Just recenlt the record labels were given a blow by the result of Pink Floyd's lawsuit preventing their label, EMI, from selling Pink Floyd albums on a track-by-track basis and to pay royalties for those sold single song downloads.
NPD's "iTunes Usage Report," released today, between seven and eight million people "expressed strong interest in a free cloud-based music option, and many were willing to pay a subscription fee to access their own music libraries from multiple devices and platforms." If this is not proof of where music is headed, I don't know what is.
It is very clear that the record labels don't like websites that let you upload your music, listen to you music and then having the ability to re-download your library. What's to prevent anyone from uploading their songs and then download the same songs to a friends computer or even worse, selling their songs? This opens up the old copyright infringement argument record labels have been defending the past decade.
Record labels have just recently started to embrace the new music streaming concept which Rdio and Mog have fully embraced. Though not 100% behind the concept, they now realize if they do not change their 1950s way of thinking, they will soon go the way of the dinosaur, extinct!
Not only does in-the-clouds music streaming make sense, it's also one of the consequences of the advancement of technology. Simply look at the numbers; the cost of an MP3 vs the cost of subscribing to an all you can eat music streaming service, such as Rdio or Mog. For about half of what you pay for a digital album, you have unlimited access to over 7 million licensed songs a month. Rdio and Mog's licensed catalogs are also growing on a daily basis. For an additional $5.00 a month, now the cost of a complete digital album, you can stream their 'compete' catalog using your smart phone.
Paid digital downloads will continue to decline until one day they will become obsolete. Just like MP3s put a halt to physical Albums sales, Internet music streaming is doing the same to music digital downloads. Without a doubt Rdio, Mog and other music streaming websites are making headway into the mainstream music market and the reason for the decline in digital downloads. As more companies jump into the mix, the faster paid digital downloads are going to decline.
R.I.P. MP3s.
Locating MOG account...
Comments (30)
i'm not going to miss MP3'S. i went right from listening to my own cd's to lala. that's the way to go!
Grace, I did the exact same thing. MP3s have been out of my life for about 2 years now.
Thanks for stopping by and reading my post.
Thanks for posting this peacerocker. Let's hope the new digital services are better quality, movies and video games keep getting better, this stuff is losing more frequencies than an am radio. Let's hear it for good sounds!
TOOL is another band that doesn't want their albums sold on a track by track basis. They say it takes away from the listening experience, which me being a fan of TOOL, Floyd, & other bands of that genera tend to agree with them. I'd still like to have that option. I'm stuck in the CD phase because I hate listening to music & having it disrupted by my virus update.
My big question, now how do the main players come out making a living off the cloud??? the musician??? Once the internet came to be, music sales have taken a continued downward spiral, remember...without the musician we have nothing to write about or listen to. They are even cancelling concerts left and right, due to lack of sales.
Lack of cd sales, mp3 sales diving...concert sales down. What is next for the musician...I don't care about Apple, MOG or Rdio...who's taking care of the main player???
Okay...I've ranted enough.
@Fig , you're welcome. I am sure the quality is going to get better. Already Rdio has a higher bit rate than most other sites.
@RGM, At least with PF we are able to stream music, once Tool, Metallica and those that don't even stream their music get on with the program things will get better. I have my virus scanner which runs live and then it scann my computer like at 3am.
@YCRY, Free advertising based music streaming models aren't profitable and the reason most sites are now going subscription. Even though right now it's only $5.00 a month, I am sure once it all catches on, they will double, triple or even quadruple subscription fees. I am sure they will be headed just like cell phone plans, tiered and possibly eliminating the all you can eat plans. Artists need to start standing up to all these greedy people because if not for the artists none of them would be where they are.
It's companies like iTunes and record labels that continue to rape and kill artists. Specially the older one's, i'm talking about the pre-digital age artist. iTunes get's 30% of all sales while the record label get the remaining 70%. Unfortunately that's how most older contracts were executed and based on the old 1950 mentality of record sales where singles was the way. At least by PF wining their lawsuit it now obligates record labels to compensate artists for single sales which come from a full album. They were actually keeping all the monies saying that when the contract was way back(before the digital age) it said "physical cd" sales not singles taken from albums. In my opinion, there has to be a total restructuring of the Music Industry. Artists need to be top dogs, followed by the consumer, then the record aggregators and last on the totem pole should be the record labels. The Internet will cause all these things to right themselves.
I don't care for Apple either, but I am sold on the Rdio/Mog music models. What don't you like about them?
Hey Peace, I was just writing about this very topic on an Apple message board. Funny.
I am in the camp that really, really hopes Apple adopts some sort of cloud hosted streaming (and soon). I absolutely got hooked on having my whole library anywhere, anytime with Lala. I'm less concerned about the music subscription service, but I will say I've enjoyed the experiment here on Mog.
I have literally hundreds of playlists on my iTunes and it was very cool that Lala could import them. I find the task of recreating playlists on Mog, Playlist, iMeem, Rdio cumbersome and redundant.
I have generally been against paying subscription fees for music that I can't own. That's why I really like the idea of Apple letting me have access to the music I've already acquired legally.
The licensing is such a sticky area though. I'm not sure how long it will take the record companies and Apple to agree on what's fair.
I think $10 a month is too steep. Especially if i don't own the music. $5 a month seems reasonable, but I hate the idea of shelling out an additional $5 just to have the option to access it on my phone. I mean, my laptop is mobile but I don't have to pay extra to use it there. The premium to have it on a phone seems like a money grab.
I hope Apple gets the streaming part right. I don't think they'll ever embrace the social aspects that I've unexpectedly grown really attached to on Lala, Mog and others. The social element seems to be a topin on which Apple is content to just barely scratch the surface.
curtjanka, I believe Apple will be directing their in the clouds music service towards people like yourself. Your harcore iTunes music users are the ones that are going to make or break the new iTunes. It all depends on what type of service they are going to release and the cost of it, if any. They can support a free service until the sales of Mp3s get to the point where they are no longer willing to support it, then maybe they will go subscription. As long as you keep buying digital downloads from them, you will be able to stream them.
To me it just doesn't make sense having to pay for the streaming of music I already own and that's what the record labels want us to do and where I believe iTunes is headed. Because of that I believe what we now call music 'ownership' will also become a thing of the past.
Usually what drives the market price is consumer demand. Record labels think they can now set music streaming prices. Someone on the inside of one of the music streaming websites said that the record labels are the ones that set the price of the music downloads. it shouldn't be that way and one of the reasons they are fighting the change to music streaming models as much as they can. But at the same time they are burying themselves. The greed that has been driving the record labels for decades is also going to be their downfall. Internet music streaming consumers will not pay what the record labels want us to pay. They basically want to double dip, make a profit off the sales of physical cds/mp3 downloads and also want to make a profit from the streaming of the same music we already own. That's not going to happen and will be the death of the MP3.
Hopefully soon Apple will put an end to all the speculation and release their in the clouds service. In my opinion, anything less of what Lala use to be will be a huge disappointment.
To your point, I think it would make sense for Apple to include the streaming service for free to anyone with a Mobile Me account. It fits right in with that service and may be an extra selling point for Mobile Me. But Apple will have to get the labels on board. Maybe a portion of Mobile Me sales go to record labels?
curtjanka, you're right. Earlier when you said; "The licensing is such a sticky area,' I think is where Apple is running into problems.
I want my vinyl back!!! Good thing I kept all my boxes and boxes of records!! I'm feeling nostalgic now....cd's extinct??
My goodness, this dinosaur will be left in the dust.
Next we will be reading all our books and newspapers via the internet or mobile devices. UGH!! I'm so old school!!
Thank you Peace...for the share of info. on both spectrums...be that of MOG/Rdio or Apple.
I'm still missing Lala!!! Was user friendly and rocked!!
Totally agree that Steve Job's is not stupid, I mean how does your worth be higher than Microsoft and not having a brain running the show??? Not by accident by any means.
My whole grip still goes back to the musician getting screwed.
Later, great post by the way.
OOPS>>>>my whole gripe still goes back to the musician getting screwed !! (correction)
curt- try Nutsie.com for your itunes library anywhere. I believe it automatically imports the playlists too. And, I think it's free to stream from your computer. And I think they have a mobile app. They also had an itunes sidebar to make things real easy, last time I looked.
As for Apple's plans. Unless they are re-branding everything and moving things around and creating a new design for the gui, it doesn't make sense to me that they would not have just kept Lala as a wholly owned subsidiary and just introduced itunes cloud access (or whatever they want to call it) powered by Lala.
Something tells me minus the 10 cent songs, it's not just going to be Lala re-branded, functioning in the same manner and that means the itunes store model isn't going to change all that much.
If the hold up in re-introducing whatever is coming is the label rights, and if they didn't retain all the label rights that Lala already had, then they should not have made the move to shut Lala down when they did. Aren't they losing money everyday that they could have been gaining had they not shut it down?
We shall see what comes next, but I would not expect to see a Lala clone.
times were great when musicians were actually getting screwed because they wanted to.
My virus scan seems to be always updating. At least twice a day, & sometimes takes up to an hout to do so. I have other programs that do also. I'd like to have a hard copy in the end.
YCRY/RGM, I couldn't agree with you more. Digital is convenient. It is commonplace. But that doesn't mean it is better. Especially from the perspective of your commisioned remixes. I love my vinyl, have a love/hate relationship with my cassettes, and I'm not completely in love with my MP3s. However, I own them. They are mine. And I will not be forced to send them upstream just because the record companies refuse to give them a suitable home.
Starting to think that no one will ever touch Lala. I was so lucky to find it and of course it was taken away. :(
Just want to make the point tthat Apple don't care too much about eating iTunes with a cloud solution. It's there to sell high-margin hardware. But it also tells them that if you own enough of the marketplace that making pennies per unti adds up to insane amounts of cash. Sellin gsubs to the cloud works because you're making many millions of a few cents a month. I've seen it happen in mobile, where UK network O2 nade an extra £1.5 billion in a year when the margins got slashed to about a penny a call - everyone started using the phone all the time because it got cheap.
As to artists getting paid...that's the responsibility of the music labels, which is a different story. There's money in streaming - but the mechanics of capturing it and giving it back are hidden behind guys who don't want to share.
jonh, iTunes is making 30% off each music download they sell, that's a whole big chunk of change. The record labels get the other 70% to split as they see fit.
One of the things Pink Floyd did by winning their lawsuit against EMI was to make sure Artists will begin to get paid for online sales. The record labels think that because the old contracts only mentioned physical album sales, they didn't have to pay artists when they sold anything on line. That's how ridiculous and greedy those fools are.
Now they got a whole lot of catching up to do. No wonder EMI finds itself financially strapped and almost on the brink of going under.
PR - strip out the mechanical and other rights royalties and Apple makes about 20c a track. That's a volume game compared to the $100 or more they make per unit on iPad, iPhone, iPof etc. That's what I meant by them not caring too much and using the software to sell the hardware. Since they have about 70% of the download market the sums are significant, but they also have over 70% of the music hardware market.
The Pink Floyd suit was about the amount they get paid, not not getting paidf at all - labels have been pushing the physical royalty rates onto the digital sales and then applying packaging deductions, new tech discounts, etc. This is why it took so long for Led Zep to go digital - they wanted a 50/50 split and Atlantic kept waving their 40 year old contract.
peacerocker says Jonh I see what you meant, thanks for clearing it up.
Ref PF - You're correct, my misstatement, I should have said "their fair share." PF took EMI to court over a dispute relating to download royalties and the right to keep the sale of their albums whole. The Judge sided with PF and also ordered the band's royalties to be recalculated. Something needs to happen soon to stop all these disputes about on-line streaming and sales.
i'm trying to remember the last dispute of this type that stopped.
not only is technology advancing at an unheard of rate (thank you Jonh for breaking the ice on pointing out the value of the hardware and software in the big picture) but as it develops so do new battles over every aspect of usage.
@Bforn: I'm just about having different option's. I don't want to stifle technology.
:)
@John: So where do the publishing companies come into play in all this? You can copyright with the Gov here in the U.S. which I hear is not cheap, & a pain in the rear. But you get to keep 100% of your royalties. & I'm a little confused about the whole 200% ownership of a song instead of it being %100 with BMI. Sounds like funny money IMO.
@RGM I just got this in the mail today .... Maybe it may help you.
Music Law in the Digital Age
Learn how copyright and music collide online in a cutting-edge, plain-language guide for today's music industry. "Music Law in the Digital Age" by Cecily Mak (General Counsel, Rhapsody) and Allen Bargfrede (Attorney and Assistant Professor, Berklee College of Music) is now available at Barnes and Noble and Amazon.
More info at http://www.musiclawinthedigitalage.com
Thanks, I'll look for those. So how has it changed from 20 years ago from just a writers rights stand point?I have "Music Business Handbook & Career Guide" by David Baskerfield. It's a college text, & it was just scratching the surface of digital music back in the 80's. I would think the rights of the writer/composer were the same now as was back then. The only thing that I could see change is just the format or media it's presented in. It still would be considered a product. I write & register music as many of my musician friends do also. Not only them but friends involved in the motion picture business. It's gotten so bad that I'm starting to see the seeds of entertainment welfare, which is tax dollars. I know people in those business's would be for it.
Ray - The writer/composer rights remain the same; how they get paid has become more and more complex as the formats keep multiplying. Unfortunately there are vested interests at every turn trying to make sure they get the maximum they can, nearly always to the artist's detriment. I'm not familiar with the US rules in the way that I understand UK and EU laws and practises so I'm sorry that I can't say anymore. But reading lots of books and web sites is always a good way to go. :-) Try looking at the Ascap site, there's a fair bit there and it seems a few lawyers are happy to share their knowledge online of you hunt around for it.
@John: That's what I thought, just wasn't sure. Thanks for the info, & the advice. I been toying around with the idea of pitching music for varies forms of media. I have a few friends who do it already, & always encourage me to do it. Not enough money to live off of I hear,but a decent amount of spare pocket change.
Great post, I miss this community. Real happy to be back!
Hey, peacerocker, what a flood of emotion you've unleashed! Personally, I side with Grace and the other folks who prefer their own CDs and records to the MP3 format -- even though I've bought my share of AACs.
The key to me is AUDIO QUALITY. That's why I'm willing to pay MOG what it needs, and why I killed my XM subscription. Perhaps a generation has grown up not knowing what High Fidelity sounds like, but I do, and that's what I'll pay for. If Apple offers me 320-kbps music on a Zune-pass type of deal, I'll consider it. I don't much care about having my iTunes stuff in the cloud, because it's already on my iPhone.
But I DO expect a battle royal this autumn amongst Mog, Spotify, Zune (on Windows Phone 7), Google Music, Rhapsody, Apple Whatever and Whatever Else. I just hope that consumers insist on BIG bandwidth audit. KEEP ON MOGGIN!