Saving Audiophila Part 2: The Role of the Major Record Labels

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Somehow I can't erase the memory of the sequence of events that went down during the mindless SACD versus DVD-Audio format war. Roll the tape back a good five or six years ago and everyone in the audio and more importantly in the music business knew the lifespan of the Compact Disc was over. DVD-Video discs were selling like mad and had 85 percent market penetration yet music stores were folding one after another. Napster violently showed everyone the effect, power and potential of downloadable music thus leaving record company executives paralyzed with fear. To be polite, it was a mess.

While the major record labels knew they needed to do something to save their business model, they simply couldn't get past two major issues. The first was the fear of selling music without some form of copy protection, which is understandable in that they as an industry just witnessed Napster show the world that you can steal the music that they had been selling for $18 a disc. Consumers were being asked to spend $1,000 on a player, a few hundred dollars on cables and likely another $1,000 on a receiver that had "5.1 analog inputs" yet the labels weren't releasing any volume of music. While blockbuster titles like Pink Floyd's Dark Side of the Moon on 5.1 SACD was compelling - where were albums from the artist such as Animals, The Wall and Wish You Were Here? Metallica's Black Album spoke to an important demographic through the DVD-Audio format but WEA never released ...And Justice For All, Master of Puppets, Ride The Lightening and or Kill 'em All on the HD disc format. Why should consumers invest thousands in equipment when there was no meaningful volume of software to buy? The answer is that they didn't and both formats died and ugly death thus reinforcing with mainstream consumers to not do anything in an AV format war.

The second major issue facing the labels was the issue of anti-trust. The ponytailed, ex-hippie record executives who knew all the answers in reality didn't know how to talk with each other when it came to sitting in a board room with their collective futures on the line. We all now remember "Blu-Friday" two CES trade shows ago where Warner Brothers Pictures pushed Blu-ray over the top as a high definition AV format when consumers made it clear that they would stick with DVD-Video if the electronics companies and studios didn't end the format war. In the HD music format war, nobody ever had enough moxie to speak up, as they were all scared to death that their parent companies would be sued. They should have been scared more of the idea that their consumers would spend their money on movies, downloads and video games. They should have been scared that their distribution chain would lose so many of the independent stores plus regional chains like Tower Records and beyond. In retrospect it would have been better to get sued for anti-trust (which wouldn't have gone anywhere if it happened at all) than let the business of selling profitable back catalog albums literally disappear.

The good news for any record company paying attention is that it is not too late to make right on what went wrong with DVD-Audio and SACD, as there are tens of billions of dollars of sales waiting to happen for music on Blu-ray. Let me be clear: HD downloads are the way of the future but true HD downloads are still three to five years away from mainstream market dominance and millions of people still love the concept of actually owning a physical disc. And that likely will not change for decades to come. Ask anyone who has lost a hard drive full of media if they are glad they still have the CDs and DVDs to re-rip the material onto another drive and they will tell you enthusiastically YES.

Right now Blu-ray, with about 20 percent market penetration, does everything right that SACD and DVD-Audio did wrong as a disc format. SACD had no video. SACD was mostly a stereo format. SACD wasn't very backwards compatible. SACD only appealed to the audiophile geeks and they can't sustain any disc format. DVD-Audio was just as bad as SACD as it needed expensive players, up to nine cables and was limited in space. Blu-ray as a format is better than SACD and DVD-Audio on all levels. Players are less than $200. They connect with one, copy protected HDMI cable and provide 24 bit 192 audio with ease as well as 7.1 surround via DTS Master Audio and or Dolby True HD. Unlike SACD, Blu-ray can provide video supplementals with the video being 1080p. Blu-ray discs have tremendous distribution online, in brick and mortar, via rentals and beyond. Blu-ray discs are made in volume thus the mastering and pressing costs are low. Blu-ray players are connected to the Internet and can be used to sell downloads and other add-ons to build new revenue streams. Right now in 2009, Blu-ray represents a format that the four major labels can use to make money selling music. Selling their back catalog. The same back catalog that made them so wealthy during the heyday of the Compact Disc.

With lawyers in tow, the four majors need to have a sit down and decide to remaster and re-release their top 1000 titles on Blu-ray in (at a minimum) 24 bit 192 kHz stereo along with meaningful supplementals to offer an HD product that tens of millions of consumers can buy. If the studios can decided on Blu-ray and drive the production costs down then why can't the labels ride on their coattails? Back in Black and or Magical Mystery Tour doesn't cost anything to make - just to remaster and repackage. Dark Side of the Moon sold over 1,000,000 copies on SACD. Do you think The Eagles Greatest Hits could do the same? Ditto with Led Zeppelin 4 and so on.

Then much like the computer business and Hollywood movie studios - going forward the labels can re-release these same titles on other HD formats with other goodies like a surround sound mix, HD interviews, music videos, concert footage etc. It's not rocket science as how to make money on the same material over and over again. Ask Microsoft if it is profitable to sell Word and Excel to us over and over again. I know I would re-buy my entire music collection and I know tens of thousands of others who would too. Factor in the 173,000,000 iPod users who might want a high definition audio experience next and you have the best new market in recorded music history - but will the majors step up?

The ripple effect of this dream scenario that I am speaking of would be incredible for the world of specialty audio, HD music downloads and media servers. Every audiophile would need to buy a new disc player and/or a media server to get the most from their system. They would need audiophile preamps or receivers with HDMI inputs and the latest surround sound modes. With greater dynamics and drastically improved resolutions of music on Blu-ray- new speakers, new cables, acoustical treatments and every single category of specialty audio would boom. Record sales would boom too. Downloads would sell even better than they do today and back catalog files could get more money for better resolution thus paving the way for their HD future. Additionally, the labels would stop the cycle of music piracy because they would have moved into the world of HD - HD content that is copy protected. If you want SD music you can buy it for $1 a song or steal it - but if you want HD like everything else in your life, then you have to pay for it. It's the same business model that movie studios are making billions with. Could the majors see the possibilities? If I were betting - I would bet strong that fear, lack of vision and ignorance will win out over copy protection, the largest audience of people to buy music ever and the chance to make billions. I would love to be wrong on this one.


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