Tuesday, March 04, 2008

The cost of digital distribution

As part of the general answering-questions-without-answering-them policy being used these days by the record company, Matt Phillips of the BPI turned up on last week's Guardian Tech Weekly podcast. When challenged why digital download albums cost roughly the same as physical albums, when there are no costs of bits of plastic, or driving things about in trucks, or warehousing , Philips answered a different question, saying that he was sure that customers would much rather pay 50pence an album or nothing an album, but that there are costs for distributing content. (I'm paraphrasing slightly).

Well, yes: there's not a zero cost in selling online, and now we're getting a glimpse at exactly how much the record companies are having to find to get their stuff to digital customers. It costs about a dollar to get a track onto Amazon's MP3 service. Obviously, there are other services which need to be loaded, but it's hard to see there'd be very much more cash for the labels to find. We're still having trouble seeing why online music is so bloody expensive.


Anonymous said...

In fairness it costs a bloody fortune if you try and do it yourself on a large scale. But you can get an album onto itunes for about $35 via cdbaby (add p+p labour and a 9% commission _after_ itunes). I'm surprised that itunes don't take a bigger cut tbh as they already have the whole distro business by the balls (itunes cut is currently pretty low - possibly even below cost). I'd guess that's what the labels are thinking and they are trying to figure out how to create/promote alternative channels. But before you say it's not up to consumers to fund labels' future business expansion, you have to bear in mind that the rights owner is of course free to charge whatever they like. (OTOH, this should be factored in when they go lobbying for _new_ laws like copyright extensions).

ManxStef said...

@anonymous Or you can use Tunecore, which'll cost you around the same, except you trade the percentage for an annual maintenance fee, which works out better if you sell a reasonable amount. If you do it on a large scale, it still works out a hell of a lot cheaper than pressing CDs: the minimum amount for getting proper silvers done is a run of 1000, costing between £700-1000 depending on printing & case options. You'll get a hell of a lot of albums onto iTunes/AmazonMP3 for that sort of money, cash that would be better spent on promotion and hopefully generating more sales as a result.

You're right on the main point, though, that the content owners are free to charge what they like. (Well, unless the stores don't let you.) Of course, the public then look at the prices, think they're outrageous and go and download for free from dodgy sources instead.

Not that I think this is at all right – I run a very small label, pay for all my music and hope that fans will do right by us – but when you misjudge how much most people are willing to pay through legitimate channels, you have to accept that the dubious but free alternatives will cut into your business significantly more than if you charged less.

My personal opinion is that albums on iTunes should be £5 and individual tracks 50p, and I'd happily take the profit hit in the hope of selling increased numbers. (I'd also buy more music digitally myself.) Looking at retailers such as Amazon(+3rd party shops), CDWow, etc. you'll see that they ship a charting album to you for in the region of £8, with free postage, the same price as an iTunes album but complete with full-quality audio, a physical disk, artwork and case, as Simon points out. That's not right, and the industry's doing itself no favours by pretending it is.

boni samuel said...

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