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How to be an Ethical Music Fan in the Age of Streaming, Part 2: The Death of Physical Media?


JoshM

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In this first part of this two-part blog post, I looked at the difficult economics facing all but the biggest stars in the streaming era. Flatting some nuance, that post concluded that purchasing merchandise directly from artists is often the best way to make sure your dollars are reaching them. It also outlined other important actions that fans can take, such as selecting a streaming service that pays artists the highest rates per stream and advocating for models of divvying up streaming revenues that are more likely to help small- and medium-sized artists.

 

Physical media was the elephant left in the room at the end of that post. Why? Because — outside of specific circumstances, such as artists who sell self-release albums through Bandcamp — it’s unlikely that the purchase of physical media is going to generate much income for the average artists. 

 

However, it’s even more unlikely that most audiophiles and dedicated fans will be content subsisting on streaming alone. As TBVO readers know, the best sound version of an album is, at least as often as not, available only on physical media. Moreover, we live in a “Super Deluxe Edition” edition age, where many artists are trying harder to make physical releases meaningful by including everything from elaborate books to memorabilia and clothing.

 

There’s another good reason for audiophiles, in particular, to purchase physical releases. It’s common — and, when it comes to major labels, often understandable — to focus primarily on the artist’s share of revenue. But other folks, such as engineers and producers, rely at least partly on sales for their incomes. Moreover, many of the best labels going — from audiophile labels like Mobile Fidelity, Analog Spark, and Analog Productions to reissue labels like Light in the AtticEsoteric, and Numero Group — are far from hulking corporate behemoths. That means that, in addition to factoring in the incomes of producers and engineers, we also need to add the survival of small audiophile and reissue labels into our moral calculus. In other words, how much Todd Rundgren is getting from Analog Spark’s audiophile-grade remastering of Something/Anything or whether any distant relative of Karen Dalton is making a penny from Light in the Attic’s elaborate reissue of In My Own Time are almost secondary concerns to the survival of the niche labels and dedicated engineers doing the yeoman’s work necessary to put out audiophile remasterings and resissue obscure and out-of-print albums.

 

So, when it comes to in-print releases on labels like Mobile Fidelity or Light in the Attic, it seems clear that the ethical audiophile should shell out the money to buy them, even if they’re available on streaming (though, in most cases, they aren’t). It goes without saying that pirating such releases isn’t fair to the labels. It’s also not in the best interests of audiophiles. After all, if audiophile and reissue labels go out of business, audiophiles will be worse off. 

 

What about in-print releases from major labels? It’s not uncommon for fans to grumble something to the effect of, “How many times will Sony ask me to re-buy Kind of Blue?” It’s tempting to follow up that grumble by asking, “Does it really matter to Sony if I download this reissue off of some dubious site?” When the artist is deceased or when a shady manager is the one actually collecting the royalties, that query might gain even more force. Fortunately, most new major-label reissues can be found on streaming sites. But in the rare circumstance that it’s not streaming, though, fans may be tempted by piracy. What then?

 

Given that the incomes of the mastering engineer, liner notes writer, and others are wrapped up in that reissue, too, I still strongly believe you should purchase any in-print album that you can’t (or aren’t content to) stream. Just as audiophiles would be worse off if Mobile Fidelity went belly up, they’d also regret it if major labels stopped paying people like Tim Young, Miles Showell, and Steve Wilson to remaster or remix classic albums. 

 

Of course, in a world where increasingly extravagant “uber“ reissues sell for many hundreds (or thousands) of dollars, students, pensioners, and others on low fixed incomes might honestly say that they can’t afford them. It’s not my place to judge those people’s actions if their choice is literally between piracy or nothing. But it’s important to avoid Fat Tony-esque “bread and cigarettes” rationalizations.  

 

With the general rule that the ethical music fan should try to purchase in-print releases, let’s turn to the trickiest scenario: used media. 

 

Neither artists nor labels nor engineers get a penny from used media sales. Under what’s known as the “first sale doctrine,” “an individual who knowingly purchases a copy of a copyrighted work from the copyright holder receives the right to sell, display or otherwise dispose of that particular copy, notwithstanding the interests of the copyright owner.” This is the law that makes selling your old books on Amazon or old CDs on Discogs legal, even though the no one involved with publishing the book or producing the CD you’re selling will benefit from those sales.  

 

While this process seems completely natural and uncontroversial to most people today, it’s long been lamented by authors, musicians, publishers, and record labels. As early as the ‘70s, record labels mobilized to push legislation that would’ve required payment of royalties on the sale of used media. Their efforts failed, but that result was at least partly mitigated by the knowledge that both vinyl and tape was prone to wear over time, theoretically reducing the appeal of used albums in those formats. 

 

CDs changed that. 

 

The companies behind the creation of the CD — Sony and Phillips — pitched their new invention to music fans as offering “pure, perfect sound forever.” While the indestructibility of CDs was somewhat exaggerated, it was undeniable that the CD was much more durable than the formats that preceded it. 

 

Ironically, this durability opened the door to used media sales on a scale that the industry had never before contemplated. As Peggy Bachmann noted in a 1994 law journal article:

 

Ironically, the used CD bonanza has been made possible by manufacturers of CDs themselves by introducing CDs as “virtually indestructible.” Unlike vinyl albums and cassettes that deteriorate in quality over time, CDs will continue to have the same impeccable sound quality as long as they are not physically damaged. In addition, thanks to the protection of the “jewel cases” in which CDs are sold, they will also continue to look new over time.

 

The industry made used sales all the more appealing by working to keep CD prices high. As Steve Knopper explained in his superb 2009 bookAppetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age, the combination of low production costs and high sales prices for CDs allowed labels to fatten their bottom lines, creating a boom era for the industry.

 

Even before used CDs or digital piracy became a major concern, labels fought retailers like Best Buy that sought to cut prices on new discs. By publicly working to keep new CD prices as high as possible, labels seemed like they were thumbing their noses at consumers and daring them to turn to the used market. As Entertainment Weekly’s David Browne wrote in 1993:

 

[I]n some ways, the thriving used-CD market is the labels’ own fault. It is common knowledge that CDs now cost as little to manufacture as LPs once did — about $2 per disc. Yet retail disc prices continue to escalate. And the record business enticed consumers to abandon LPs by telling them the CD would never wear out, and now that promise has come back to haunt the labels. If a used CD is as good as a new one, why not pay half the price?

 

Record labels and distributors largely ignored sales of used CDs when they were confined to small independent stores. But when larger chains — such as Wherehouse, a California-based chain with over 300 stores nationwide — began selling used CDs in the early-’90s, they began to take notice, setting off what the Washington Post’s Richard Harrington dubbed “the Compact Disc War of 1993, pitting retailers who sell used CDs at reduced prices against the Big Brothers of Distribution, who maintain that such sales not only keep royalties out of the pockets of artists and producers, but undermine the ‘perceived value’ of new CDs and cut into manufacturers’ profits.”

 

The four big distributors — CEMA (Capitol/EMI), Sony Music Distribution (Columbia/Epic), UNI (MCA), and WEA (Warner Bros./Electra/Atlantic) — announced in the summer of 1993 that they would withdraw millions of advertising dollars from retailers that sold used CDs. In a letter justifying the decision, WEA wrote that “our main purpose in extending advertising dollars to our customers is to generate consumer traffic...exposing the consumer not only to the featured advertised items, but to all of our product.... We believe the sale of used CDs of WEA product lines will diminish consumer interest in, and the perceived value of, our new releases and catalogue products.”

 

The argument that used sales needed to be crushed to protect the “perceived value” of new CDs hardly seemed likely to win over skeptical consumers. But in July 24 Billboard op-ed, CEMA president Russ Bach argued that “like apples and oranges, new and used product simply don’t mix.” Laying out the industry’s concerns, Bach predicted:

 

If left unattended, the used-CD business will grow to approximately 20 percent of unit volume by 1998. This means creative people will get 20 percent less in royalties, if the price of good remains unchanged, and the record companies will lose 20 percent of their income stream.

 

To consumers who felt that a disc that cost a few dollars to make shouldn’t retail for $17, Bach claimed that CD prices were lower in the U.S. than overseas. Still, he conceded that “variable pricing” — such as temporarily discounting new releases in order to reward early purchasers — may be in order. “Reissues should also come out at lower prices,” he wrote. (One wonders how today’s label executives, who rely on a seemingly never-ending stream of back catalog reissues — which are usually priced higher than new releases — would respond to Bach’s comment.)

 

Michael Green, president and chief executive of the National Academy of Recording Arts and Sciences, likely gained more sympathy when he focused on used CDs effects on artists. He told Billboard, “The used-CD market could grow to as much as 20 percent of unit volume in the next five years, and that loss of income will spell disaster for the majority of those in our artistic community who already live perilously close to the edge of financial ruin.”

 

The anti-used CD coalition got a big boost when country superstar Garth Brooks “declare[d] war on used-CD stores,” as one headline put it. Brooks pledged not to let any record store that sold used CDs stock his new album. “The writers are getting nothing [from used CD sales], the labels are getting nothing, and the artists are getting nothing,” Brooks said. “I don’t know how anyone can stand for it…. This is how songwriters make their living, how they feed their children, and now they are rewarded for their hard work by getting kicked in the teeth.” (Retailers, for their part, made clear that Brooks’s threat didn’t faze them. “The idea that we’re going to stop selling used CDs just so we can sell Garth Brooks records is beyond silly,” one retailer told Billboard.)

 

Shortly after the four distributors announced their withdrawal of advertising from retailers that sold used CDs, both Wherehouse and the Independent Music Retailers’ Association, which represented approximately 2000 “mom and pop” music stores, filed lawsuits alleging that the distributors’ actions violated antitrust laws. 

 

Within months, Brooks dropped his threat and the distributors restored advertising dollars to stores that sold used CDs, provided that the receiving retailer: “1) does not sell used CDs that are currently featured in the co-op ads; 2) displays used and new CDs in separate areas of retail stores; 3) does not sell CDs marked for promotional purposes; 4) does not advertise the sale of used CDs with new CDs.”

 

The ironic outcome of the distributors’ war on used CDs is that it helped to draw federal regulators attention to the industry’s minimum pricing practices. In response to retailers like Best Buy slashing new CD prices, the labels adopted “Minimum Advertised Pricing” (MAP) policies that pulled advertising dollars from retailers that sold new CDs at below MAP — a threat identical to the one the distributors attempted to wield against used CD sellers. The Federal Trade Commission charged that such policies violated antitrust laws and cost consumers nearly a half a billion dollars over three years. In the face of the FTC’s investigation, the labels settled for nearly $150 million in penalties and the cessation of MAP policies.  

 

The industry’s concerns about used CD sales persisted into the early-2000s. But by then piracy had begun to create the worst-case scenario that labels had always feared. 

 

During “the Compact Disc War of 1993,” many observers pointed out that the industry’s fight against used CDs was actually a surrogate for its real concern: piracy. “What the record companies are really afraid of with the used-CD market is that it encourages consumers to duplicate a new product and resell it quicker,” entertainment lawyer Don Engel told the Washington Post in ‘93.

 

Labels had fought against home taping in the late-’70s and early-’80s. Even before home CD duplication was possible, CDs made piracy more appealing. After all, copying a CD to a cassette tape sounded a lot more like a commercial cassette than copying either vinyl or another cassette to cassette did. In his Billboard op-ed, Bach argued that used CDs made it easier for consumers to do just that. “Renting CDs is illegal,” he wrote. “In many cases, we believe a retailer’s sale and repurchase of used CDs constitutes a disguised rental in economic effect. It would be easy for a consumer to purchase a used CD on day one for $6, tape it at home, and return it on day two or three for $3. If this isn’t a ‘rental,’ I don’t know what is.”

 

But the real threat was the looming development of the ability to copy CDs bit perfectly at home. Don Kulak, executive president of the Independent Music Retailers Association, told the Washington Post in ‘93 that the used CD kerfuffle simply foreshadowed digital copying. “The communications industry’s love affair with the so-called information superhighway could soon quiet the CD sales debate,” the paper paraphrased Kulak. “Consumers may someday create their CDs at home with sophisticated entertainment technology.” While Kulak’s predicted method (“televisions with minidisk ports”) was off, he wasn’t far from the truth when he predicted, “Down the road, retail is obsolete.”

 

With the mid-’90s release of the first sub-$1,000 CD-R drives and the late-’90s rise of Napster and other peer-to-peer file sharing networks, digital piracy eclipsed discussion of used CD sales. 

 

But the ethical issue of used CDs never went away. It’s still common to find deeppassionate discussions on audiophile sites about of the ethics of buying used CDs, given that neither artists nor producers and engineers see a penny from their sales. 

 

The path not taken was the creation of “droit de suite” (“follow-up right”) that would ensure that royalties were paid on used CD sales, too. Such rights exist for fine art in many European countries. However, as Bachmann pointed out, they’re harder to enforce on mass-produced products like CDs, since “there is only one painting or sculpture, but there are thousands of CDs that constitute the same ‘work.’” However, with justification, she believed that royalty collection societies such as ASCAP and BMI could handle used CD royalties just as they handle radio play royalties.

 

Absent “droit de suite” rights, buying a used CD deprives the music’s creators of income they deserve.

 

So what’s an ethical audiophile to do?

 

When it comes to in-print releases, it’s hard to argue that purchasing a used copy is as ethically sound as purchasing a new copy.

 

But what about out-of-print CDs?

 

Things get murkier here. Many audiophiles would argue vociferously that purchasing a used out-of-print CD is ethically sound, but that downloading that same out-of-print CD from one of the myriad piracy sites isn’t. This argument makes a certain intuitive sense. We’re conditioned to believe that paying for a physical album justifies ownership. But when we’re talking about intellectual property, is that really the case? If the creators of the music contained on that album aren’t receiving any income from our purchase of that physical album, is it really any better than piracy? I doubt that it is.

 

That said, there may be other good reasons to believe that purchasing used media is ethically superior to piracy. As I’ve written before, visiting independent record stores (and small chains) is one of my favorite pastimes. Insofar as used CD sales are helping keep those stores afloat, I think that’s a good thing. 

 

However, that doesn’t obviate the fact that — in terms of generating income for labels, artists, engineers, or producers — used sales are no different from piracy. Given that, it’s hard for me to fault someone who downloads the 1984 “Black Triangle“ CD of The Beatles’ Abbey Road rather than pay hundreds of dollars for a physical copy on Discogs or Ebay.

 

As TBVO readers know, the best version of an album may be out-of-print. So securing these releases (by whatever means) is necessary for many audiophiles. Given that, an ethical solution may be to buy merchandise from the artist whose used out-of-print CD you’re buying or downloading. (Think of it as the musical equivalent of a “carbon offset.”)

 

In an addendum to this two-part series on how to be an ethical audiophile, I’ll discuss why I often shun pirated rips of out-of-print CDs when writing my TBVO columns, outline the cost of buying the various digital releases for each TBVO column, and explain how those costs (at least in part) inspired me to create the donor-supported Club TBVO to help offset them.   

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Economically, there's  a case for used CD sales. A used market encourages people to buy new, as they know there's some resale value to the disc if they don't want it after purchase. 

Obviously, the ability to copy CDs weakens this argument, but it doesn't eliminate it.

 

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In Canada we pay a "royalty" whenever we buy blank media based on the idea that music rights holders should be compensated when we make private copies of our music collections. A "private copy" is a copy you make of your music collection for your own personal use. For example, you might make a copy of the Cowboy Junkies' Trinity Sessions to leave in the 10-disc CD player in your 2002 Pontiac Firebird. Currently it applies to blank CDs, but in the past it included blank cassettes, mini-discs, and even MP3 players. Similar legislation exists in other countries.

 

I suppose they had to claim that rights holders deserve compensation for "private" copies because it would have looked strange to try to tax illegal copies. However, in my case it had two effects. At first I felt this justified trading cassettes with friends because we'd already paid a royalty on the copy - and after all, not all blank media was used to copy music. But this exchange of music resulted in many more legitimate sales because if I liked something I heard on a cassette I usually ended up buying the LP (and then more LPs from the same artist).

 

I didn't buy a CD player until it became impossible to buy new vinyl, and although I bought a lot of blank CDs I used them mainly for data storage. I ended up paying the blank media levy for many years and during that time I exchanged only a handful of burned discs with friends. Eventually it became very difficult to find CD retailers, and I started buying downloads. The Pono music store was pretty good (I didn't buy a Pono player but I did use the store) until Apple bought it and shut it down. HDTracks is overpriced (especially after converting from USD to Canadian) and even when I decide to bite the bullet and click the Buy button, more often than not HDTracks will tell me the content is not licensed for sale in Canada. I've used 7Digital's Canadian store, but I swear I can hear ripping errors in several downloads, and anyway 7Digital got caught in the MQA disaster and there hasn't been much added to their catalogue for several years. That pushed me into a used CD music shop, which was actually making most of their money selling new and used vinyl (thanks to the comeback of the turntable). I was late to the streaming game, and everyone else was cleaning the house and dumping their CD collections en masse. The store had a lot of good music on CD for $5 each. I found a lot of the back catalogue I'd been looking for, and I also ended up buying a lot of music that for one reason or another I wouldn't have bought at full price back when it was available new. Many of these new purchases did end up leading to buying downloads from the same artists (when I could find them). I do check the artist's web site and try to buy from there, but often they just link to the MP3 purchase from iTunes, which I have no interest in.

 

So in my case, and I think this applies to many others, buying used media and trading with friends has ultimately spurred many legitimate purchases. I use streaming the same way, but I still have too many "favourite" albums in Spotify that I'd buy as downloads if I could find them in a lossless format.

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Hi @JoshM One thing I think we shouldn't perpetuate is that there's a per stream rate paid to anyone. This just isn't the case. It's all based on percentages. There is no such thing as a streaming service that pays more per stream. A service that has users who don't stream very much, compared to the others, will appear to pay more per stream. 

 

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On 9/6/2022 at 6:41 PM, The Computer Audiophile said:

Bringing this discussion to the rest of our hobby, the used equipment market is very similar, but different. It's different because selling one piece of gear can enable the purchase of something new. People purchasing $100,000 version 1.0 speakers usually sell that pair to purchase version 2.0. A used CD sale usually doesn't free up cash so someone can afford another CD. Both are similar in that the used sale alone doesn't net the original manufacturer any money.

Another difference may occur with the personal copy (PC), you can't keep a fully functional PC of your Alexas, when you sell them to refinance the next generation.

That may be different with your TBM collection, where I kind of doubt that you only listen to them strictly from your CD player. 😉

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On 9/6/2022 at 1:31 PM, DuckToller said:

Another difference may occur with the personal copy (PC), you can't keep a fully functional PC of your Alexas, when you sell them to refinance the next generation.

That may be different with your TBM collection, where I kind of doubt that you only listen to them strictly from your CD player. 😉

Very true Tom. 

 

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On 9/6/2022 at 12:19 PM, The Computer Audiophile said:

Hi @JoshM One thing I think we shouldn't perpetuate is that there's a per stream rate paid to anyone. This just isn't the case. It's all based on percentages. There is no such thing as a streaming service that pays more per stream. A service that has users who don't stream very much, compared to the others, will appear to pay more per stream. 

 


You’re absolutely right. I referenced per stream payouts just because that’s how it’s commonly reported. However, I understand the payouts are actually mechanical, performance, and ownership royalties, and that ultimately the pool for payouts is determined by each service’s revenue (ad-supported revenue and subscription rates, which vary in cost by country), how much each user streams (since the pie of revenue is static regardless of total streams, except maybe in the case of ad-supported streams), and what payout percentage the service has negotiated with rights holders.

 

The two best sources I found on this were both Sound Charts. I almost wrote more about it in the first part of this post, but I’m still not sure I fully understand it, and the main point I took away from my reading was that streaming as a whole was unlikely to be a good source of revenue for all but the biggest artists.
 

That said, I still think it’s better to pick a higher “per stream” service. Whatever the reason that Qobuz ends up paying more — higher subscription prices, no ad-supported tier, presence in fewer low-income countries, less aggressive negotiation with rights holders, etc. — it’s nice to know that it does.
 

Likewise, I think a switch to a user-centric payout model would help by reducing the incentive for stream farming. 

 

That said, I’d love to learn more if you can clarify more, or if you can point to a good source. It would also be cool if someone from Qobuz could explain it from the inside (within the limits of what they can say publicly).

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21 minutes ago, JoshM said:


You’re absolutely right. I referenced per stream payouts just because that’s how it’s commonly reported. However, I understand the payouts are actually mechanical, performance, and ownership royalties, and that ultimately the pool for payouts is determined by each service’s revenue (ad-supported revenue and subscription rates, which vary in cost by country), how much each user streams (since the pie of revenue is static regardless of total streams, except maybe in the case of ad-supported streams), and what payout percentage the service has negotiated with rights holders.

 

The two best sources I found on this were both Sound Charts. I almost wrote more about it in the first part of this post, but I’m still not sure I fully understand it, and the main point I took away from my reading was that streaming as a whole was unlikely to be a good source of revenue for all but the biggest artists.
 

That said, I still think it’s better to pick a higher “per stream” service. Whatever the reason that Qobuz ends up paying more — higher subscription prices, no ad-supported tier, presence in fewer low-income countries, less aggressive negotiation with rights holders, etc. — it’s nice to know that it does.
 

Likewise, I think a switch to a user-centric payout model would help by reducing the incentive for stream farming. 

 

That said, I’d love to learn more if you can clarify more, or if you can point to a good source. It would also be cool if someone from Qobuz could explain it from the inside (within the limits of what they can say publicly).

Paging @dmackta 🙂

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