Sunday, September 8, 2013

Why Amazon's New Music Purchasing Options Make No Sense and are Not Economically Sustainable

Right now I'm holding in my hand an album called "Kveikur," the newest release by the Icelandic band Sigur Ros. I really like it. So I bought it.

I purchased the disc on Amazon. Buying it in disc format was about a dollar more expensive than the MP3 version, but I think discs are nice to have because you get the audio in lossless format, and you get the full album artwork.

When I purchased the disc, I was able to take advantage of a new feature that Amazon offers. When you purchase a physical disc, Amazon allows you to download the MP3 files immediately. This would seem to make sense at first glance. Surely someone who purchases a disc should be entitled to listen to that music in MP3 format, because MP3s are just a lower quality version of what is heard on the disc. No one disputes that purchasers of physical discs should also be allowed to convert the files to MP3s and put them on their computers or portable music players.

So why then does Amazon's new feature present a huge problem in terms of economic incentives? When I purchased "Kveikur," I downloaded it immediately, put it on my ipod, walked to class with it, jogged with it, etc. I had complete access to the MP3s for almost a week before today when the CD came in the mail. Psychologically, it's a bit of a letdown to get something in the mail that you basically already own. It kind of takes the fun out of opening the package. But then a more sinister thought crossed my mind. The CD, like all discs sold by Amazon, is in "new" condition, and is still shrink-wrapped. But because of Amazon's new feature, I had been able to access the music without actually unwrapping the disc, and if I wanted to, I could re-sell the disc on Ebay or even Amazon Marketplace, and list it as being in "new" condition. I could probably recover most of what I spent to buy it, while still retaining the MP3 files on my computer.

I would say this is a major loophole. The old notion of "if you buy the CD, you should own the MP3s too" is undoubtedly still a valid one, but this presumes that the purchaser has unwrapped and accessed the CD first. If you can get to the MP3s without unwrapping the CD, then it allows consumers to double dip, and before long the pricing and incentive structure starts to break down.

This feature also presents a more subtle problem. About five years ago I purchased the album "Meddle" by Pink Floyd on CD. The CD edition I owned was a remastered version done in 1994. Then in 2011, most of Pink Floyd's catalog, including "Meddle" was remastered again and re-released. Because I had purchased "Meddle" on disc earlier, Amazon said that I was entitled to download the MP3s of the album. However, the edition that I was permitted to download was the 2011 remaster. I have no idea whether the 2011 remaster of "Meddle" is superior to the 1994 remaster, but technically, they are two separate products. If a remastered version of an album is essentially given away to people who had purchased an old version, then doesn't that take away the incentive to remaster the album at all? After all, mastering does cost money, not as much money as recording, but still some. Record companies wouldn't remaster albums if they thought that it wouldn't lead to new sales. Is Amazon's system fair to whoever put forward the money to fund the 2011 remaster? Probably not, and maybe no one cares, but I think it would be unwise to ignore the issue completely.

These problems present themselves rather oddly come holiday season. If one were to give music CDs as gifts, under Amazon's system, the purchaser can download the MP3s, and the recipient of the gift can get the disc. (They always said it's more fun to give than to receive, and now Amazon is making that a reality!)

Of course, these problems have presented themselves before, but in slightly less extreme forms. In the past there has been nothing stopping people from giving CDs as gift, and then ripping them onto their own computers. (I imagine this is a common Christmas morning tradition in some families). Similarly, there has been nothing stopping people from buying a CD online, ripping the music to their computers, and then reselling it in "like new" condition on Ebay or Amazon Marketplace. And aren't the CD sections in public libraries really just functioning as government-sponsored file swapping?

I am not proposing that we crack down on friends ripping each other's CDs, but I do think that Amazon is perhaps making things a little too easy. Even today, it is still tacky to say "Hey, can I rip that CD I just bought for you?" Likewise, for people reselling music, they're going to get more for it if the product is "new" and shrink-wrapped than they will if it is "like new," even if it doesn't have a scratch on it. I'm not quite sure why Amazon thought it would be good idea to create such large loopholes, since I find it very hard to believe this problem did not occur to anyone in their corporate offices. It could be that Amazon did a cost/benefit analysis, and determined that they would make more money doing things this way, even if it did result in knowingly giving away some music. If so, what recourse do artists have? It is unclear. Some stores, most notably iTunes, have dispensed with discs altogether. Amazon clearly does not want to go down that road, nor should they if they don't want to, but if they're going to sell both discs and digital content, they should really keep them separate so as to avoid confusion and unintended consequences.

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