Apple, Steam and Radiohead: what do they have in common? In the last few years, they’ve proved that digital distribution can be profitable for artists and publishers. The iTunes Store, for example, sells more music than anywhere else in America, including Wal-Mart, that parasitic vine of the retail tree.
What caught my attention about that Apple press release (above) is its language. Take a look at the first paragraph:
“Apple today announced that the iTunes Store surpassed Wal-Mart to become the number one music retailer in the US [...] With over 50 million customers, iTunes has sold over four billion songs and features the world’s largest music catalog.”
What Apple isn’t mentioning — or hasn’t realized — is that it hasn’t sold anything. In fact, the iTunes Store isn’t really a store at all — not in the traditional sense. Neither is Steam or Amazon MP3. Nothing is purchased, because nothing changes hands. What you’re paying for is access to their content library; what Apple and Amazon and Steam are providing is a service.
What that means is — for the first time in a long time — we’re paying to access recorded music, not to own it.
The difference has to do with economics. Goods are tangible and can be transferred from one owner to another. Services, on the other hand, are intangible and can’t be transferred between owners. (That’s all courtesy of Wikipedia, by the way.) Why can’t services change owners? One of two reasons: they’re either absolutely owned, like a skill, or absolutely un-ownable, like Niagara Falls — which you can stop people from looking at, but not from seeing.
Anything you can digitally distribute is like Niagara Falls. Take music as an example. Before personal computers, recorded music was a good — a commodity. It could be bought and sold, it was physically tangible, and copying it was difficult.
Not any more. Recorded music is extremely easy to duplicate; it’s free, it’s simple, and nearly everybody can do it. Distributing copies is almost as easy, since — again — it’s free, it’s simple and anybody on the Internet can do it. Moreover, recorded music doesn’t have to be physically tangible. An mp3 can be infinitely reproduced and distributed, for free and almost risk-free.
In other words, it’s impossible to market and own a digital song. If just one person gets ahold of a copy of it, on a CD or on their computer, the song’s ownership is gone forever. It can be reproduced, redistributed — whatever. Nobody owns the song; they just have access to it, and can give access to anybody else they like.
That isn’t happening enough to sink iTunes or Amazon, though. Why are people paying for music they could have for free? Some folks probably do it because illegal file-sharing is (obviously) illegal or unethical. I don’t think that’s the main reason, though. I think the iTunes Store and Amazon Mp3 are successful because people are willing to pay for good service, especially if that service saves them time — and digital distribution is nothing if not a time-saver.
That brings us back to Radiohead. Last October, they did something unprecedented: they made their new album, In Rainbows, available online for whatever anybody would pay for it. Whatever anybody would pay for it – you could pay ten dollars, a hundred dollars, or absolutely nothing. Moreover, the download speed was great; they did everything they could to provide an excellent online distribution model for everyone, no matter what they paid. They did this on the same day they released the CD of the album for regular price.
How did it pan out financially? About a third of downloaders paid nothing; the average price paid was 4 pounds British (courtesy of The Times). In that case — which I think is representative — a solid majority of people were willing to pay for what they wanted, and moreover, the amount they paid varied from almost nothing to upwards of 40 pounds.
Why did folks pay for the Radiohead album when they didn’t need to? Because they supported the band; because, again, they were willing to pay for what they got, which was time. They got the album right when it came out, and they got it without any hassle.
The iTunes Store is even more convenient than Radiohead’s digital distribution scheme was. It provides a huge library of songs, all high-quality, with excellent download speeds and almost no hassle. All of that givesiTunes a significant advantage over illegal file-sharing networks, which vary in download speed, available content and file quality.
Moreover, songs downloaded through iTunes are unprotected, because Apple has realized that owning a file is impossible. They are providing a service — a content library — and all it takes is 99 cents to acess a piece of it. They aren’t making you pay to listen to their music. They aren’t making you pay at all, because you could download music illegally instead without too much more effort.
What you’re paying for is convenience. You aren’t paying to own the song, because that’s impossible. You aren’t paying to listen to it, because you could do that illegally (without repercussion) for free. You’re paying Apple for their service, and the band for their effort.
That’s an incredible thought: that digital distribution means paying for convenience, not product. It’s hugely liberating, too. Music, on the internet, is free. So are video games, and ebooks, and anything else you can upload. The only thing left to pay for is time, and right now, Apple and its cousins are offering the best deals around.
Genghis Philip
Gordon Levine
i can’t imagine purchasing mp3s because it does feel stupid to cough it up for something so intangible. however, what intrigues me even more is a service like rhapsody, where you can’t burn or redistribute the mp3s in any way except to your mp3 player.
this seems to open up a demographic that’s been underrepresented before: people who aren’t really that into music but want to listen to it all the time anyway. they’re too lazy for the radio now. i want to look into my music folder and see all the things i want, and know they’ll be there (barring incident) until i move or remove them, but increasingly people don’t seem to care about that.
“i can’t imagine purchasing mp3s because it does feel stupid to cough it up for something so intangible.”
I think that’s just because we grew up with music as a commodity. Really, we spend money on intangibles every day. Eaten at a restaurant lately? You could probably make whatever you ordered there in your own kitchen, and with a little practice it’d be nearly as good (and a lot cheaper). At restaurants, you’re paying for ambiance, the experience of being served, and — same as with digital distribution — convenience.
I don’t think it’s laziness that’s turning people away from the radio; I think it’s a control imbalance. People can control what they listen to on their iTunes, and randomize it to a greater or lesser extent, but the only choice they have with the radio is to listen or not. Convenience again: with a library of mp3s and a digital distribution network, you get to hear exactly what you want, instead of turning on a station that played it awhile back and hoping you get lucky again.
What about amazon’s DRM free mp3 store? And in re: the itunes store, you can burn the files you download to an audio CD and the DRM goes bye-bye, or have they found a way around that?