- The Washington Times - Friday, January 9, 2009

ON THE EDGE column:

It’s becoming an annual ritual for this column: scribbling while Big Music burns. According to Nielsen SoundScan, the final, grim tally for 2008 album sales indicated a 14 percent drop from the previous year. Measured against the peak sales year of 2000, album sales have declined a staggering 45 percent.

Digital album downloads continued to skyrocket in 2008 - up 32 percent - but online purchases still don’t come close to shoring up the death spiral of the physical album.

There’s a kind of presentism, however, that infects many of the analyses of the industry’s seemingly precipitous decline during the past eight years.

Often overlooked is that we’ve been here before.

Peter Bogdanovich’s wonderful documentary “Tom Petty and the Heartbreakers: Runnin’ Down a Dream” recounts Mr. Petty’s confrontation with his then-label MCA Records over the pricing of his 1981 album “Hard Promises.” The going rate for an LP in those days was $8.98. MCA wanted to raise it to $9.98. Mr. Petty balked, arguing, “If we don’t take a stand, one of these days, records are going to be $20.”

Why was MCA bent on raising the price of an album?

Because record sales were in a slump that had begun in 1979.

Stan Liebowitz of the University of Texas at Dallas School of Management noted in a 2002 paper that in a seeming mirror image of today’s predicament, album sales were jump-started in the ‘80s by new media formats: first the cassette and then, more significantly, the compact disc, both of which dramatically increased the portability of recorded music.

Despite, or perhaps because of, this successful technological bailout, Mr. Petty’s prophecy was borne out in succeeding years: The price of an album crept ever upward until we arrived at the end-of-the-century absurdity of $20 CDs in mall-rat holes like Sam Goody.

Is it any wonder music consumers were such dry tinder when the fire of illegal MP3 file-sharing was lit by Napster? It’s only logical that if the gulf between the price of an illegal download - zero - and the price of a legally purchased CD had been narrower, the migration to file-sharing sites would have been commensurately smaller.

Indeed, it was the discount of 6 or 7 bucks offered by big-box retailers such as Wal-Mart and Best Buy that helped put those mall-rat holes out of business (as well as, alas, the selection-rich Tower Records chain).

So imagine a world in which the distance between a pirated album and a legal one was, say, $8 or $9. It might look something like Apple’s iTunes Music Store or Amazon.com’s MP3 outlet - where business these days is brisk.

Not surprisingly, the four major music labels resent not just the loss of control over the distribution of music, but the usurpation of their power over pricing. They clamored for years for Apple Computer head Steve Jobs to unlock his rigid 99-cent price tag for singles and $9.99 for albums.

This week, it was announced that the labels will get their wish: In exchange for the labels’ relaxing their requirement of digital-rights-management (DRM) protections, Apple agreed to a $1.29 price point for new singles and 69 cents for older, less desired tracks.

The new bargain gets things half-right.

The most recent data I could find on consumers’ attitudes about the price of music is a 2006 poll conducted by Ipsos for Associated Press and Rolling Stone magazine that found that three out of every four music listeners thought CDs were too expensive. Moreover, 58 percent said they thought music generally was getting worse.

Human beings don’t need an excuse to steal, as is proved by the looting of shops during blackouts or other crises, but such attitudes surely account for at least a portion of those who choose to download illegally.

As Mike Masnick, founder of TechDirt, a blog that tracks business news with a focus on technology and law, tells me, “There’s an element - I’m not saying this is right - of people switching to unauthorized file-sharing to stick it to an industry that has stuck it to them.”

Mr. Masnick is set to make a presentation this month at the MidemNet conference in Cannes, France, where music-industry types will brainstorm about monetizing music in the digital age.

He argues that artists such as Trent Reznor of Nine Inch Nails are pointing the way to a brave new future in which artists can make a living in the digital age by leveraging brand loyalty and offering innovative access points to their content - such as, for instance, a Nine Inch Nails concert-ticket tie-in with an iPhone game called Tapulous.

It didn’t surprise Mr. Masnick that Nine Inch Nails’ album “Ghosts I-IV” was Amazon’s top-selling download last year - despite having been available legally for free through the band’s official Web site.

“Basically, people are more than willing to pay for music if they feel they’re getting fair value,” he says.

He points out further that the music industry isn’t suffering uniformly: The live-concert business boomed in 2008 (although this was due in large part to artists charging higher ticket prices, a luxury the public may not be able to afford in coming years); smaller, independent labels with less overhead and fewer legacy costs are finding ways to survive; and iPods continue to see growth in sales.

What aren’t thriving are those little plastic discs with 12 or 15 songs. By stealing them, buying cheaper versions online or digitally disaggregating them, music consumers are saying loudly and clearly: Physical CDs cost too much and satisfy too little.

This is not a tragedy - it’s reality.

It’s too bad Apple just let Big Music hide from it anew.

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