CDs as Fluid as Water

There are very few things in this world people are willing to pay a premium for when it is available for free. Apart from the bottled water industry that seemingly cornered the market for over-pricing an otherwise free offering with a litany of marketing ploys, there are very few other commodities worth spending discretionary income on.

Commitization

The bewildered music industry is facing the commoditization of its product and the deficiency by the consumer in purchasing it, never mind the consumers complete disinterest in paying a premium for the privilege of music. Insiders argue vehemently about the how to combat the downtrend in sales and profits from any number of points of views and platforms. Ultimately, the only right answer will be the one that effectively translates the heightened consumer interest into music into a revitalization of the industry as a whole.

Average consumers have little-to-no comprehension of how the record business functions. However, unlike other industries that can exist in a void of consumer ignorance, the entertainment industry is constantly criticized and scrutinized by its customer base for its practices, yet it does little to educate the masses. Issues complicating the cost matrix include advances versus recoupment and how recording, promotional and touring advances interplay with budgeting as well as how elements beyond manufacturing (including production, distribution, marketing, retailer markup, etc.) are calculated into the MSPR.

The answer probably does not lie in bundling a copy of the Donald Passman book with each song or album purchase. It lies more in providing a better low-cost, high-benefit product to entice the masses back to the retailer and continue purchasing music rather than “pirating” it, for lack of a better explanation.

Potential Savior

The third quarter is well underway and with EMI, WMG and a number of indies filtering updated first half numbers and early Q3 projections it is not difficult to imagine the balance of 2007 look no less grim than the first seven months served, especially for CD sales. Interestingly enough however, some companies such as Disney are not yet willing to let the former format die sooner than the public is ready to completely let it go.

The introduction of the CDVU+ format is an interesting move by the media giant to bolster the remaining CD sales, which still dominate the overall music marketplace despite the consistant year-over-year slides. The format will take the extra space on a regular CD and fill it with videos, photos, Internet links and a digital magazine designed to replace liner notes and lyric sheets of regular albums, similar to the way the enhancements function on DVDs.

The novelty of this idea seems to be to leverage the additional content to encourage users to make the initial purchase investment. The reality however is enhanced content on CDs is nothing new and the additional content, although presented with a fresh perspective, is nothing more than a recycled concept. For nearly a decade record labels have attempted to bundle DVDs with CDs (including the infamous Sony DualDisc), include bonus audio, CD-ROM features and computer unlocked content such as photo galleries. The practice fairs nominally as it tends to only draw the attention of the existing fan base and is rarely effective at encouraging the more passive user.

Critiquing the “Future”
The CDVU+ concept seeks to impress upon the consumer the benefits of the compact disc format in the face of competing ideas already adapted by the masses. A major component of making CDs stick the way vinyl did exists in appealing to the senses. Vinyl has its continued fans, even in the wake of technology, because of its perceived superior qualities, not just sonically, but also tactically and psychologically. In a generation of “on the go” consumers, treating the CD as a collectors item of necessity is going to take more than its superior sonic quality to that of the compressed audio file. It is going to take a grand re-design of the marketing and a pitch to the aware consumer.

CDVU+ brings a depth of content beyond that of traditional CDs but is the pitch of additional content enough? Much of the content being offered can be obtained either the same or in similar variations via other means by an investigative consumer which probably devalues the extra content. The bigger question is if the content being offered as extras is truly what the consumer wants in their purchase. Thus far bonus discs, video discs and added-value content have done little to stem the tide of diminished physical CD sales and although it is too early to grade the new variation, if history speaks to success, it is unlikely this will play out as a savior to the format.

Increasing the Palatability
Unlocking digital formats can open a number of possibilities in integrating content to more traditional media. If physical CDs are to remain a fashionable format for sales it may mean integrating their purchase with that of the digital world. The trick is going to be understanding what the consumer will covet as added-value and what is a waste of effort as well as balancing increasing palatability without unlocking a Pandora’s Box of how content will be filtered once it is released. Determining these characteristics and effectively marketing them will be a key resource for the industry

Although much of the technology is currently being leveraged in the online world, unlocking that content through physical CDs and bringing even greater interactivity to the experience. There are probably no correct answers at this point, however, elements like special web links to exclusive material (be it downloadable or streamed), personalized downloadable “greetings,” ring tones and community elements might be some ways to broaden the appeal but also customizing other elements of the offering to the user will be the defining expansion of a format that otherwise remains fairly one-dimensional in usability.

Whether this is enough to revitalize the physical CD, at least temporarily, remains to be seen. Even though the CD still makes up the vast majority of sales, the continued downward slope of sales warrents not only a revisioning of the format but a smoother transition from it to the still struggling to fully gain traction digital sales medium.