I asked AnywhereCD founder Michael Robertson why the MP3-only option in the MP3+CD store was terminated right after the new service had launched.
After reading his response, I am amazed by the labels' objection to the AnywhereCD's MP3-only option. They were being compensated for the CDs and the MP3s, even when customers only bought the MP3s. In fact, AnywhereCD's plan was to destroy CDs that customers didn't want shipped.
Here's what happened, according to Michael Robertson:
"First let me overview what we're offering which makes AnywhereCD a great new service:
Every album you purchase at AnywhereCD you get:
- Listen from any computer in your web locker. See: MP3Tunes.com
- Listen from any PDA and many phones: See: MP3tunes.com/m
- A one time download with one click loading the album into iTunes by
clicking link in email receipt.
- Listen to your music on growing list of non-PC devices (Tivo, Nokia
internet tablet, music appliances like Squeezebox, etc) all with no
actions required on your part after the purchase.
- Have files permanently in your locker so you own them forever in 192k
MP3 so they'll work on every music device.Let me explain what happened. We launched a store and gave consumers two
options. In both options we are selling a CD and digital files to
consumers. But with the cheaper option the consumer is electing to not
get delivery of the CD only the digital file. If they want to pay more
then they get delivery of the physical CD. In both instances a physical
CD is being purchased. Royalties are paid for the CD plus we offered to
compensate participating labels for the digital files. The monies are
better than traditional album sales. Let me repeat - every transaction
involves the sale of a physical CD plus additional royalties. No
exceptions. Those CDs not elected for delivery are kept for an audit
period and then destroyed.The first hours we had big box retailers contact us asking us to do MP3
fulfillment for them. We had a network of small retailers asking for the
same thing. We had labels contacting us asking us to include their
titles. (We already have a backlog of titles from other labels to be
added to the system so we'll do this, but not an overnight thing.)Not everyone was excited though. Specifically, buying an album and then
electing not to pay for the delivery of the CD raised some eyebrows. I
immediately turned that feature off. I don't want to fight on day one with people who I
consider the open minded music people. I'm just trying to selling
albums.Now the irony of this situation is that it's better for the industry if
the user doesn't take delivery. This is because the used CD market place
has exploded. You have Amazon - the biggest used CD facilitator in the
world. You have new sites like LaLa ("Trade any CD for $1). And most
music retailers have a rapidly growing used CD section in their stores.
Many people buy used, rip it and then sell it back. (The Forbes reporter
I talked to yesterday says he never buys new CDs anymore - just used
ones.)If the consumer doesn't take possession of the physical CD, then it
can't end up in the used CD channel where it can poach a new CD
purchase.Quick math on new/used CDs. If 15% of news CDs end up in the used CD
channel and each gets sold once then the industry loses $1.50 per CD
sale in lost future sales. Ouch!We've all seen the numbers - 19% fewer albums sold in Q1. I'm convinced
album deliveries are flat or even up, it's only sales that are down. In
"deliveries" I include all the non-royalty paying transactions:- Used CD sales
- CD swappers
- P2P
- Bittorrent, wget and other tools which now make it possible to
download perfect digital copies of CDs with lossless audio files and
complete liner notes scanned - better than anyone commercially
available. Many people set this software up at night and wake up in the
AM with complete albums.AnywhereCD is trying to sell albums. Not sure we'll be successful
because competition is fierce from non-royalty guys (see above list). If
we don't get support of labels then I don't see how we can be
successful. But I'm confident that they'll realize we're on the same
side of this issue."
