The Extended Extinction of CDs

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As former leader of the rock band Talking Heads, as well as a successful solo artist, David Byrne obviously has a vested interest in seeing music sell in some form. But he predicts that one day, perhaps soon, this form will no longer be tangible. In a May 2006 blog entry, he wrote that packaged albums will become “a thing of the past, as most music is purchased or listened to online and stored on an iPod or a computer.”

Most musicians and musicologists would view this outcome with displeasure. But Byrne is philosophical about it, making an interesting point about how this migration fits into the overall history of music.

“Music didn’t always come in packages,” Byrne said. “The era of packaged music may have had about a 50-year run.”

The question is when exactly that run will end — and why.

Since CD sales have plummeted with the introduction of music downloading, and since downloaded music acts as a logical replacement for a purchased CD, it seems pretty basic to conclude that CD sales are in decline because of downloading.

“But there are economists who claim that they have demonstrated the opposite of that,” said Stan Liebowitz, a professor of economics at the University of Texas at Dallas who is conducting research into the link between declining CD sales and downloading. “My research actually indicated it’s entirely responsible for the decline, but that’s not necessarily the general perception in the profession.”

Economists point to other factors such as increasing DVD sales, decline in quality of music, decreases in CD inventory at retail, increased cell phone use and other competition for the entertainment dollar, such as video games.

These potential alternate explanations can be knocked down one by one, but such debate is merely academic. CDs are clearly on the way out, and downloading is on the way in. Since the year 2000, CD sales have fallen by significant percentages year after year — according to Nielsen SoundScan, CD sales were down 16 percent for the year as of June.

Meanwhile, selling music via download has proven to be a growth industry; this year, iTunes surpassed Wal-Mart to become the No. 1 music retailer in the U.S., according to marketing research firm NPD Group’s MusicWatch survey.

Will CDs disappear altogether? “I view them as disappearing, but that’s a long-run thing,” Liebowitz said. “The reason why downloads won’t replace CDs in the immediate future is there are still a lot of people who don’t have computers, and so as long as that impediment’s there, downloads can never replace CDs. If everyone had a computer and everyone had Internet access, we would see the end of the CD.”

Liebowitz doesn’t think it’s important for music to continue to exist in a tangible format, at least not in terms dictated by the market. “I have always thought that digital made a lot more economic sense,” he said. “It’s more efficient to download [music] because you don’t have to have trucks carrying those CDs, and you don’t have to have them taking space in warehouses and in retailers. So there’s a big savings there, and you get it immediately. That has always seemed like a more efficient mechanism.”

While Liebowitz doesn’t see CDs disappearing before 2020, he does call that date a good bet for when the format will meet its demise in terms of market share. To make and understand such predictions, it helps to take a look at the history of past formats. Vinyl LPs came out in the 1950s and remained the dominant format for music sales until being displaced by other formats in the 1980s, having approximately a 30-year run on top. Audio cassettes were one of the most common music formats between the early 1970s and late 1990s, but are now all but extinct.

“When cassettes first hit, it took them awhile to replace LPs,” Liebowitz said. “CDs took over more quickly from the cassettes because the cassettes had never gotten that established. They’d gotten almost 100 percent of the market, but they didn’t have it long before the CD came. If it follows the same pattern, it should take another 10 to 15 years from the start of downloading before CDs are gone. My guess is that it’ll be a little faster.” Liebowitz pegs the “real” start of downloading to the introduction of iTunes in January 2001.

Once CDs are gone, music distribution likely will move entirely over to digital downloads. It’s unlikely that another physical format will be introduced. “I don’t see another physical format taking over because I think the record industry sort of missed that window,” Liebowitz said. “If the record industry were smart, it would have gotten rid of the CD 10 years ago and had something new, the way the DVD people have.”

What is likely is that music downloading as a format will continue to mature, with users becoming better educated about how they can get downloads of the best possible sound quality, which has been an issue with downloading thus far. iTunes generally sells music files that have a bit rate of 128 kbps, far below the 192 kbps needed to match CD quality audio (some would place this requirement at 256 kbps).

“That’s easily overcome; they can sell them at higher bit rates if they want,” Liebowitz said. “There’s no real limitation.”

Byrne agrees. On his blog, he points out that while the era of packaged music may be over, “the era of music bundled with multimedia may have just begun.” Byrne sees music becoming merely one component of what buyers would be getting in purchasing an album, a teaser that draws them into an entire multimedia experience.

“Now maybe free, recorded music will be the thing that hooks you into the universe of Britney, Ashley or the Ying Yang Twins,” Byrne said. “The music will be your introduction into a universe of merch, relationships, video clips, links [and] on and on.”

This is certainly something the record industry has experimented with, bundling CDs with free DVDs and ringtone menus, building enhanced video content into the discs themselves and having albums unlock further content online. Once the recording industry fully fleshes out this package, declining CD sales may not seem to be such a death knell.

– Daniel Margolis, dmargolis@certmag.com

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