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The CD roars back from the dead

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Analysis The decision by the Bertelsmann Music Group to slash CD prices in Germany only marks the latest stage in the comeback of a supposedly outmoded medium.

The CD is alive and well after all, it seems. In truth, it never really went away. CD sales have rocketed in 2004 - they topped 300 million units in in the first six months, up seven per cent compared to the same period last year, according to Neilsen research. The other booming sector of the music economy is the peer to peer networks. By some estimates a billion files are being downloaded every month and four million users are logged on at any one time.

Buoyed by a feverish hype from techno-utopians and Apple fanatics, the DRM music stores such as Napster, Apple's iTMS notched up only 54 million downloads between them in the same period, and conspicuously missed their sales targets. OD2 is merging, iTMS missed its target by 30 per cent, and the bricks and mortar retailers have abandoned their plans to offer a rival online downloads service. So much for the "future of music"!

"Right now, we're not forecasting the death of the CD anytime soon," Jupiter Research analyst Michael Gartenberg told CNET recently.

The stick and the carrot don't seem to be working - and hence Bertelsmann's price cuts.

Such is the power of the Reality Distortion Field, however, that the resilience of both p2p file sharing and the CD format has surprised many. Both channels are proving to have stickability that the online DRM stores would die for. At the New York Times, author Randall Stross offers one suggestion why: the audio quality of downloaded music is inferior, and customers aren't getting the real deal. Stross cites Wes Phillips, of Stereophile, comparing "128 [kbps encoding] to an eight-track cartridge, and the combination of iPod and iTunes to "buying a 21st-century device to live in the 1970's."

(Artists and labels who have confidence in their own reputations - Warp Records and They Might Be Giants, to name but two - have no worries about making much higher quality music downloads available unencumbered by DRM. Warp's are encoded at 206kbps, Giants at 256kbps.)

But perhaps the problem is deeper. Full marks to Apple for making the experience quick and painless, but maybe it's a little too quick and painless for its own good. Where it can, iTunes Music Store offers individual song downloads, and indeed, there can't be too many people who haven't bought a CD for one song, to find the rest of the album is full of clunkers.

But why stop there? Why not just sell the last 45 seconds of Nessun Dorma - the bit everyone can hum? Or the first two lines of the National Anthem - the only words most of us can ever remember?

Retailers like Napplester (thanks to P2P.net for that one) have exhibited too much faith in their own reputations. But music lovers have a relationship primarily with the artist - a very strong relationship - and sometimes with a record label, if it's seen to embody the values of the artistic community. Motown, Blue Note, Stax and Factory are all good examples of the latter. Fans loyalty to artist and label can survive those duff tracks and albums that they occasionally release - the ones Apple doesn't want you to hear. But certainly not the music store they got it from, or the machine that delivers it. (Apple fanatics and techno-utopians have deep and meaningful relationships with the machine in front of them, of course, but the figures we cite prove that these aren't enough, and they're certainly vastly out numbered by people with a cooler perspective). If in doubt, ask yourself how many people you see wearing a Virgin Megastore T-shirt in public.

So the CD and the pirate networks prosper, and the real issue, of paying the artists, looms larger. With the flat fee issue now mainstream (links here), the debate is sensibly shifting away from technology wizardry, and back onto what cultural and legal tweaks we need to compensate the artists. As ever, the answer to a technological innovation isn't technology. ®

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Biometric DRM is 'empowering' says iVue maker
Sony US music service an 'embarrassment'
Peter Gabriel sells digital music firm
Apple misses iTunes sales target by 30%
Jobs: Apple will not meet 100m song download goal
Napster gives away MP3 players
Indie labels reject iTunes
Major labels 'force 70% price hike' on Apple
Labels seek end to 99c music per song download

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