Spotify

Is this the end of the CD world as we know it?

The dust settling on my CD cabinets over the last year is thick.  I have been testing a Spotify account in the twelve months before the service launches in the US, and I have heard more new music and more music represented by the CDs in my cabinets than ever before.

What is Spotify?  Some call it “God’s iPod.”  It is an on-demand service that lets you pull up instantaneously any track from their library of 15 million songs, as long as you have an internet connection.  While adding ten thousand songs per day, Spotify can easily satisfy your craving for almost whatever strikes your fancy.  (Although some of the usual suspects are absent: The Beatles, Led Zeppelin, AC/DC, only one Pink Floyd album).  The business model for this streaming service is becoming the new classic: a bit for free, and better service for a subscription. Specifically, $4.99 per month for an ad-free service and $9.99 per month for unlimited use including mobile.

Don’t confuse Spotify with the better known Pandora service. I should say better known in the US, Spotify has been enjoyed by Europeans for a couple years. You probably already know that Pandora is a very cool internet radio service, where you can start to build your personal radio stations based on a song or an artist.  Pandora is great as it allows for discovery, like the FM radio stations of yesteryear.  Spotify is more like a jukebox, you get exactly what you want.  And therein lies the rub.

With all that Spotify freedom of choice, I am put in mind of the Devo lyric which essentially leaves the dog with the bone drop dead silly about which way to turn.  I find Spotify perfect for when I hear or read about a new band to check out.  Type it in and boom there it is.  But what about folks with less of a DJ mentality, who need a bit of guidance?  Spotify has cleverly linked with Facebook, so that you can discover what other folks are listening to, by borrowing playlists and finding the music you did not know you’d like.

Spotify also pushes new releases to the ‘top of the fold,’ so that you see new albums upon logging in.  Building Spotify playlists is easy.  The overall design of Spotify is elegant.  I have just loaded it into my mobile phone, so my iPod to also collecting dust.  What do I miss with Spotify?  I desperately miss all the non-music detail from the original album (lyrics, imagery, band personnel, etc).

What we are witnessing is the steady move to streaming as the model for consuming media.  Looking at it from the perspective of the film studios is instructive.  Back in the day, the studios let you see “Gone With the Wind” at the Bijou on Tuesday at 8pm.  The tickets were counted, the money was split. Life was simple and great.  Then came TV, where the number of viewers was more amorphous.  Then came the dreaded VCR, and the studios went all the way to the Supreme Court to halt that technology.  It seemed untenable to the studios that folks could watch a movie whenever they wanted, as many times as they wanted, with no way for the studios to collect money each time. It is a lawsuit the studios are glad they lost in the early 80s, as it gave rise to the incredibly lucrative home video business.  After the VCR came DVD, which prompted folks to build a library of movies; VHS was mostly a rental business. And now we have Netflix, leading the charge away from fixed formats like the DVD or Blu-Ray, and toward a subscription streaming model. For those consumers willing to wait through a maze of release windows, you can call up an increasingly large number of films and TV shows on a whim. The recent bankruptcy of Blockbuster is also rather indicative of the consumer’s shifting consumption desires.

One thing to observe, however, is that with the shift to streaming subscription comes a decline in quality. Just as recorded music was about to reach its apogee of quality in the form of DVD-Audio (the potential successor to the CD), poorer quality MP3 entered the equation and precipitated the decline of the CD, paving the way for streaming.  Similarly, after the format wars Blu-Ray emerged victorious, only to find people gravitating to the barely VHS quality of streaming from Netflix.  Although storage and bandwidth costs continue to fall (inexorably following Moore’s Law), we can only hope that consumer demand for higher fidelity will soon catch up to the subscription streaming model for both music and movies.

But what does this mean for the makers of music?  The record companies earlier went through a similar cycle, gleefully watching us buy CD versions of all the vinyl we had collected.  But then CD sales fell off a cliff when MP3 reared its head a dozen years ago.  Just as DVD sales are now trending downward, the record companies are grappling with a consumer who wants only the track (hence the attraction of the iTunes model, by which Steve Jobs forever decoupled songs from the album format beloved by everyone). A recent Billboard article opines that it would take 48 streams of a song on Spotify to equal the gross revenue that rights holders get from a 99-cent download. Therefore, there will be less money to go around if consumers decrease their ownership model.  But the clear direction in the marketplace is that people will prefer to subscribe to entertainment (music, movies).  There is evidence that greater exposure via subscription tends to increase purchase of music, which is undoubtedly why the record companies in the US succumbed to the inevitable tides moving through the consumer music business, and struck licensing deals allowing Spotify to launch.

We will undoubtedly struggle to find a way to enjoy the original album experience, with all the graphics and lyrics and song credits and design.  Indeed, it is entirely ironic that the recent death of Alex Steinweiss went mostly unnoticed.  He designed the music industry’s first artistic album covers and developed the original packaging for the long-playing record. He was 94.

So it probably is the end of the CD world as we know it, but I feel fine.  I can now try more music than I could before, and I can buy the CD if I need to have it for my unconnected listening pleasure. Although I don’t know where to go to buy the CD if not online, that inevitably means fewer golden hours trolling the record racks.  There are various other legitimate online music services that will hopefully stem the tide of music piracy, and in future installments we will explore MOG, Rdio and other services.

Spotify is one more reason that more people are listening to more music than ever before.