It has long been rumored that Apple is working on an Internet-based music-purchasing service. Many companies have tried this, and all have failed. The problem is usually a combination of anemic offerings, bad pricing, and harsh reproduction restrictions, with a lack of cooperation from the entertainment industry as the overall limitation. Apple seems to think that they can overcome this problem, presumably in part by capitalizing on the goodwill of iPod users and Apple-using artists alike. It will take more than that to pull it off, of course, but that’s not my interest.
I believe that Apple can further level the playing field in the music business with regard to the distribution system. Distribution of CDs is a tremendous barrier to success for a small artist. It’s economically infeasible to make CDs available to every market in the U.S. Not only is it bad business for small artists, but it’s increasingly obvious that it’s bad business for major-label artists, too. Printing 100,000 CDs and distributing them evenly — in terms of population density — throughout the U.S. is a costly proposition, and results in a lot of overstock. That’s why many small artists and small labels are selling direct, relying on a few give-away MP3s to provide people with the incentive to cough up $12 for a CD and $3 for shipping, and wait a week or two to get the object of their passing interest. Of course, they can also work with distribution companies like Redeye, but that’s often far more trouble (and cost) than it’s worth.
Digital transfer of songs for a fee is the obvious link between artist and consumer, which would cut out the middlemen. This isn’t to say that the middlemen aren’t useful to the transaction; they often are. But for somebody with nothing but a handful of songs recorded in their basement and a few hundred bucks to blow, paying middlemen simply isn’t an option. Although artists have long been able to provide MP3s in exchange for some cash via PayPal, or MP3.com, this has failed to become a product in the sense that a sufficient number of consumers believe it to be a viable substitute for getting a shiny disc within a colorful plastic housing.
If Apple can properly commoditize the licensing of music via iTunes and the iPod — addressing the problems of reproduction and pricing — then they may be able to make the direct-to-consumer sales of music viable. Ideally, the artist would be able to self-configure their Apple-based sales. They would store the MP3s on their own webserver, and create an XML-based listing of the MP3s and relevant information about each one. This listing would then be published to Apple’s server, which would then become available to anybody browsing the purchase catalog. Upon purchasing, the MP3 would be relayed to the end user via Apple’s server from the artist’s server; an XML-RPC request would update records on the artist’s end to chalk up a purchase. For an additional fee, the artist could have their songs stored on Apple’s site, to avoid the bandwidth fees that could accompany success. Payment could be arranged via direct-deposit, periodic checks, even PayPal.
The long-term success of this system would almost certainly depend on Apple being able to generate revenues from the bigger sales of popular artists, although perhaps they could manage to generate a profit solely through smaller artists. It’s inevitable that some braver, independent-in-spirit artists — Barenaked Ladies, David Gray, Aphex Twin — would be willing to have their music sold via this system regardless of label affiliation, on pure principle.
So, sure, Apple buying Universal would be cool. And selling just about any track released in the past few decades for $1 apiece, that’s cool too. But this pales in comparison to the brighter future that this direct-to-consumer model would offer to independent artists.