Is The Format Replacement Cycle Over?
When the CD format came out, fans upgraded their LP collections, igniting a boom in sales that lasted from 1984 to 2000. When the MP3 format trickled up from the tech-geek community, fans ripped their CDs to their computers and downloaded free digital files of the web, causing a decline in sales that has lasted from 2000 until present day. Oops. Some fans have re-bought their music collections several times now.
The Beatles are a great example of this.
Most fans have owned their music on every single format – aside from maybe the phonograph – and yet upon being released to iTunes, over two million MP3s sold.
No one who is a Beatles fan needed to buy their music in the new format, as they likely had found ways to get the fab-four on their iPod, but they did anyways.
New Cycles
En masse though, as Forrester analyst Mark Mulligan suggests, the MP3 has failed to generate a format replacement cycle. Fans didn't race to upgrade their music collections as they have in the past. And they may never do so again.
This is problematic, as a substantial portion of revenues and resurgences in the music industry have been caused by fans replacing their music collections.
As interest in digital music wanes, it's worth asking if we'll see another format replacement cycle generated anytime soon. And if so, what format will it be?
It appears as though the days of a singular format are numbered.
By my count, there are six music formats right now that seek to challenge the rein of the MP3. A few of them aren't as much of a format as much as they are a delivery tool, but I'm counting them. For example, a flash drive is just a storage device that holds music, but in recent years, many groups have sold them.
MP3 Competitors
Here is a look through the MP3 competitors:
- High-Quality Download. As music becomes cheaper to transfer over the web, it's inevitable that higher quality downloads will be offered. Some places sell them, but iTunes doesn't yet. One of the main gripes about the MP3 has always been the quality of its sound. One day, this will be fixed.
- Dynamic Music Download. Recently, MusicDNA and others have sought to amend the poor consumer experience of the MP3 by bundling it with lots of interactive content like lyrics and video. These MP3s will be able to update themselves and keep fans in the loop long after the initial purchase. This could be the biggest marketing advance in music – ever – but only if it catches on and fans perceive it to be worth the extra money.
- Music URL. Between Viinyl, Spotify, and TinySong the URL may very well become the universal music format. Rather than buying a download and playing it on your digital device, you will just click a URL and it will play. Unfortunately, this format is funded by ads, not hard cash. And that's to say nothing about the fact that fans bookmark, not collect music URLs.
- USB Drives. In 2008, Bullet For My Valentine released their album on a bullet shaped USB drive. They weren't the first to do this, but the example sticks out. This summer, Killola took this concept a step further by offering a USB dogtag that contained all of their music and exclusive updates once it was plugged into a computer. The rock group Killola also made it so that their new songs could be distributed out to fans that bought the dogtags.
- Music Apps. "Apps are the future of music," writes Eliot Van Buskirk of Evolver.fm. He deemed them "the second major development in the digital music revolution." Apps hold the same promise of the dynamic download in terms of their capacity to be updated and contain extra media content.
- Video Albums. Alan Lastufka & Luke Conard, the founders of DFTBA Records, have released a great Video LP titled Erase This. Both of them are long-time and active YouTube contributors, so it only makes sense for them to release their album in a video format. The album has a short intro and from that point; any song can be skipped to within the in-video menu.
None of these formats have generated a format cycle of their own. But you could argue that each meets the demands of a broader spectrum of audience.
Rather than a single format being available to every fan, in the exact same packaging, several formats can now be experimented with at once.
Lacking SPARC
From the perspective of Mulligan, future music products need SPARC:
- Social: put the crowd in the cloud.
- Participative: make them interactive and immersive.
- Accessible: ownership still matters but access matters more.
- Relevant: co-exist and joint the dots in the digital environment.
- Connected: fans expect their music experiences to be also.
A few of these formats have these characteristics, but not all of them. As we're learning, the young and the digital have different needs than their older peers.
Solely offering them MP3s, CDs, vinyl, or tapes for sale isn't enough.
Unlike their parents, the young and the digital may not buy an LP and turn around and buy a CD with the exact same music a few years later. They are only willing to purchase the same music if the right experience – like a video performance or a fan remix – is tied in. They may buy the digipak and app, but not just to update.
The CD boom lasted roughly sixteen years. iTunes has been selling digital music for eight years and is already showing signs of cooling off. If the MP3 has failed to produce a format replacement cycle, will any of these new formats do any better?
The CD saved the music industry from itself. This time around though, it appears as though it will take more than one music format replacement cycle to do so.
“One of the main gripes about the MP3 has always been the quality of its sound.”
According to who? 99% of people would NEVER be able to tell between a 320kbs mp3 file and a FLAC file. Hell, most people don’t even know that their itunes files would be considered low quality.
I know. But it needed to be added to the list.
Something tells me mp3 will be around for quite some time, and might even become more ubiquitous once the patent runs out.
So, a hybrid of the formats won’t work. The selling of vinyl/CD package with a a digital code used to download songs for free or even stream them for free won’t work for the youth AND older generations? Or maybe it’s just that the MUSIC and lack of PERFORMANCE from BULLSHIT ARTISTS is the reason why we are the position we are in now? Why is it that no one gets that yet? They probably do but somehow ignoring it. I do believe that ownership/accessibility are on the same page together and in my opinion, THAT’S THE FUTURE, not just accessibility. I hope that there’s a way to combine the elements of “SPARC” with tangible products, including digital products. Or will that be too many options for the consumers?
There is a standards body working on something with SPARC. It’s growing, and based on who is in and what they’re trying to do, it may have a chance. http://Www.connectedmediaexperience.com. I hear the web site is out of date, though.
The majors have wasted huge amounts of money on the introduction of new formats in the last decade in an attempt to compete with “free” mp3s: copyprotected CDs, DualDisc, SA-CD, DVD-Audio, various download stores with file formats only compatible to them, different hi-res downloads, etc.
They came out at such a rapid pace that nobody (who would have thought twice anyway) would have even considered replacing their entire collection. The only thing able to compete with “free” mp3s seem to have been “free” streams.
But why would young people replace their entire music collection and pay for it when it was “free” in the first place? These people have never been customers, at least not in the same degree by far as the pre-Napster music fans. So you should get away from the thought that you could sell them the same thing again. Buying the same thing again is silly anyway. These people are not stupid, they are not buying product and neither are they buying the business model of format replacement. Other demographics, though, are still buying music, but not in new formats unknown to them. They stick to the CD, to a physical product. The only physical product that the younger demographic would be willing to replace in a format replacement cycle are iPods to iPhones, isn’t it? Are you really expecting teenagers or twens to buy the same music again that they bought maybe 5 years ago? Most likely, they won’t because they are bored by it.
Files don’t have the allure of a digital product. That’s why I don’t buy them. Sometimes I take the time to write an artist a lengthy email asking for the possibility to buy a CD-R directly from them because I want a good sounding physical product with album credits. If that’s the direct artist-to-fan relations that you have been talking about in the past, it would be nice if things were easier and the preferred physical product were readily available.
By the way, even Microsoft has got problems in trying to replace Windows XP. They have already failed twice trying to do so. So maybe, format replacement is a thing of the past since whenever a copyright owner tries it, a certain number of customers will convert to open source (or “free” source for that matter).
What I think is interesting is that when mp3’s starting going mainstream everyone was saying that is was the death of the album. What they meant was that now singles would be king and what was the point of buying a whole album with songs that you may not like when you could just download specific ones. In reality, what killed the album was “free”. I don’t care HOW many times people want to try and justify what happened to the system of making money from selling music, but when ANYTHING is able to be easily gotten for free, then OF COURSE no other paid for medium can stand up to it.
What’s interesting is that people still do care about the package their music comes in… or should I say is “stored” in. People bought and re-bought music on cd because the medium holding that material lasted a hell of a lot longer than any previous and the quality of sound was superior (but I think people cared less about he second part). People gravitated towards the iPod because they could fit the same music they always loved, but SO much more of it, in a medium that also lasted a long time and sounded good (or good enough). So as long as the Apple can keep coming out with better and better music listening devices, people will replace them… filling the with free music!
With that said, musicians are going to have to get by making money from performing live, selling t-shirts or other mediums that are physical and can’t be made or replaced easily, and through licensing.
a few people get that, I certainly do. instead of discussing childish acronyms about music formats i spend my time trying to make better music. music that is worth owning. of course, it’s hard to do when most people have the mindset that protools, autotune, and an mp3-eared public are musts. But I believe it can be done, and when the music is better the business will be better.
This is very interesting and the comments are very thought provoking. But when reading this (and the comments) one thing keeps bothering me. Only one item on this list is something you can actually buy. I don’t understand why everyone keeps thinking that anything in digital form can possibly be a “product”. It’s not. It’s (at best) a service. Trying to figure out how we are going to “sell” digital “items” is, in the end, pointless. Sure, you can “sell” downloads… but you aren’t really selling anything. You are providing the service of downloading (copying) a single file at a single charge. iTunes isn’t moving any product. They are moving information. It’s a service made to look and feel (and monetize) like a store.
If we are going to get anywhere towards building a sustainable music business, we need to grasp this truth.
This is purely anecdotal, but I believe the “Format Replacement Cycle” is overrated. I doubt that I rebought as many as 10% of my vinyl LPs in CD format. Yes, I bought the Beatles (complete) and a few classic rock bands on CD, but there was too much new music to keep up with to keep re-buying the old stuff. And I never saw any friends who did a complete replacement of a collection — it was only the emotional favorites that got rebought.
What I did see was copies of classic rock CDs like Led Zep, Janis Joplin and the Doors in the hands of teenagers and young adults who were too young to have bought the music on LP the first time around. The classic rock stuff was perceived as having enough lasting value that kids from the next generation wanted to buy it.
I do not get the sense that there is much popular music beyond 1990 that has a durable hold on subsequent generations. (We could debate the cutoff date.) But I also admit that I am now old. 🙂
Kyle wrote in the original post: “When the CD format came out, fans upgraded their LP collections, igniting a boom in sales that lasted from 1984 to 2000.” There’s an assertion of causality there which I’m not sure is merited.
1984-2000 roughly marks out a long economic boom. In 1984 the “Reagan Recovery” was well underway, and the economy was emerging from the wrenching downturn of the oil shocks and inflation-killing credit crunch. That boom fed into the PC boom and then the Internet boom — economically it was growth, growth, growth until 2000. The peak in CD sales matches the peak in the stock market remarkably well.
(It is a difficult problem to disentangle the interrelation of Napster, the economy and CD sales: 2000 was a very busy time.)
Also, the CD itself was a very satisfying product. It was fuss-free if you handled it with approximately the same care given to a cassette, it was portable, and it sounded better than LP & cassette on most consumer audio gear.
Given a product that made consumers happy, introduced near the beginning of a 16-year bull economy, I don’t think one needs a “format replacement cycle” to explain the sales growth.
I forgot — also goosing sales through that period was the new promotional concept, the Music Video. MTV started in 1981 and took a few years to spread throughout the country.
I agree with you on that.