Yeah, you already know all about the record industry suing everyone in sight. And you probably agree with me that this is pretty much the dumbest thing to come out of corporate America in quite some time (and, if you don’t, other people have written cogent arguments that I would only be duplicating). The bottom line here is that people want easier access to music. Rather than head down to the local TowerVirginWarehouse Megastore (and, let’s face it, it’s easier to find them than small, independent merchants) and wade through aisle upon floor upon structure of music, most of which is pure crap, many of us would rather type a few words into a search engine and have our choices available at our fingertips. And why not? It’s certainly a convenience for us and, in the end, much cheaper for the music producers – there’s no need to master a CD and duplicate it ad infinitum, produce packaging or pay for shelf space.

All of this, of course, assumes that we should actually *pay* for the music. Quite honestly, I agree with this. While I believe (and the numbers show) that freely downloadable music has actually helped the music industry by allowing consumers to try it before they buy it, there does come a time when we should pay a fair price for the music we download. In the past, that fair price for me came when, having downloaded most of a band’s CD, I just went out and bought a copy so that I could have the best quality recording available. Sure, I have quite a bit of music from the Napster days sitting on some dusty hard drive somewhere, but the fact is that I very rarely listen to any of those songs. I downloaded them, decided they weren’t worth purchasing the whole CD and, being the digital packrat that I am, simply didn’t delete them.

Rather than being the rare exception, up until recently I found myself in the majority amongst my peers. Most of the folks I know ran out to Napster or Kazaa when a new album came out, gave it a listen, then decided whether or not they’d buy it, dumping the songs into the digital dustbin when they didn’t. Granted, they only deleted the songs to make room for more downloads, but they still got rid of most of them. And they purchased the CDs for the music they liked, which was the whole point anyway. While no direct cause and effect has been shown, it’s more than a little suspicious that the RIAA recently announced a 15.8 percent drop in CD sales while file trading dropped by 22 percent, due in part to the RIAA’s crackdown.

Well, thanks to enterprising young go-getters like Steve Jobs, we now have a few online merchants who are selling the people what they want: downloadable music. Apple announced today that iTunes has sold its 10 millionth song within the short four months that it’s been live. For a service catering only to Apple users (yeah, it sucks to be on the other side of the fence for a change) that’s pretty damned amazing. Especially when you consider that iTunes charges no less than $0.99 per song. With many CDs featuring 10 or more songs, you’re looking at an easy $10 or more per CD. Does this make sense?

(Interesting side note: In the process of writing this, I thought iTunes’ competitors Roxio and EMusic also charged about $1 a song. After visiting their sites, though, I found that they actually charge about $10/month for unlimited downloads. Their catalogs are not as big as Apple’s, but that’s still pretty damned impressive to me.)

What goes into producing a CD? You need to pay for the studio time, the talent, the agents, the music execs, the marketing team, the distribution, the packaging, graphic artists, shelf fees, warehouse space, shipping costs and the media itself. If you switch to a downloadable format, your warehousing space drops to the cost of a large hard drive, your distribution is the cost of a couple of solid servers plus the bandwidth to support the traffic. Your packaging costs drop to nothing as does shipping, shelf fees and the cost of media, all of which is essentially absorbed by the customer. Since you no longer have in-store displays, your marketing costs take a dive as well. Since you no longer need to get the CDs onto shelves, you can get rid of a number of salespeople (there are actually many jobs lost, which I’ll get to in a minute). You’ll still want graphic artists to make sure your site is clean and attractive, but now they can do double duty as web designers. When all is said and done, downloadable music saves the music companies a fair share of money. Why not pass that on to the consumers?

This is not a new rant, but it still bugs the hell out of me. This short sightedness is not just prevalent in the music industry, but also amongst folks I would think should know better: the software industry. Let’s take, for example, my alma mater Intuit. I recently decided to get my financial life in some semblance of order so I decided to get the latest version of Quicken. I didn’t expect to be able to purchase it direct from Intuit but, sure enough, there it was on the store page. I was even more surprised to find that I had two choices: either get the CD or download the program now. What amazed me even more was that the prices were exactly the same. Sure, I may save in shipping costs by downloading it, but I won’t get a hardcopy of the program. Even more galling, I sincerely doubt the CD comes in full packaging – when I worked for Intuit and ordered software through the company store, it usually came to me in the CD sleeve and little else. In neither case am I paying to shelving fees, but the CDs need to be housed somewhere. And someone needs to be paid to create the CDs. And someone else needs to be paid to take the order, pop it in an envelope and physically ship it to me. So, if I choose to download the program, thereby saving the company from paying these costs, why am I paying the same price as I would if they sent me a CD? Even if the savings is a mere $2.00 per order, they should reflect that in the price.

The price of software gives me the jibblies. As a developer, I know I’m paying for slipped dates, bloated code, poorly managed projects and consistent bug fixes due to the pressure managers put on most software developers to rush the product to market. If software companies could get their acts together, we’d see the cost of software development drop dramatically. And, with further competition from the Open Source movement, I genuinely hope the big boys are motivated enough to get crackin’. Combine an efficient workflow with digital downloads and you could see software prices drop dramatically. This has already been proven to work by small companies like PopCap Games and hundreds of independent developers. An online distribution model speeds distribution, dramatically reduces overhead and levels the playing field.

As digital distribution grows, many of the folks who previously handled the warehousing, packaging and sales to distributors may find themselves out of work. They know the business well and are vital assets to any successful company. They should, therefore, be retrained to help maintain the servers that drive the new model and help direct marketing efforts to the online population. It would be a bit Pollyannaish of me to think that no one would go jobless, but I also believe that we can’t impede progress simply to keep folks employed. The answer in my mind is corporate-sponsored retraining, which builds loyalty to the company and ensures that its greatest asset – the people who work for it – are able to continue generating value even as the market changes.

The wisest move for the RIAA would be to drop the lawsuits. Write the file trading off as a business loss, if they can quantify it (which may very well be their motivation for gunning so hard against the illegal trading – there are no solid numbers to correlate to the perceived loss). Start working toward a model where music can be downloaded legally and for a profit, possibly by licensing to more companies like iTunes. Sell the music for its fair price – which should not include packaging, physical distribution or in-store marketing. Build up some positive PR by taking a bold step into the future and, if need be, let the commercial CD die off gracefully. As digital music players (i.e. MP3 players) flourish, those skipping, scratchable, early-90s dinosaurs will appear more and more aged. Embrace the technology that can open up entirely new streams of revenue. Does it also open up new ways for people to pirate? Of course, just as recordable tapes and CDs did in the past. But, in the end, people want the genuine article. They want to know that what they have is authentic, straight from the source and undoctored in any way. They want the most affordable, quality recordings they can possibly buy, which can only be guaranteed by buying it from a licensed retailer.

The RIAA also has a chance to do something that no one else has been able to do at this point: beat the software manufacturers at their own game. If they take the time, effort and cost to develop streams of online distribution, they can license that technology to all comers. That’s an entirely new revenue stream that could tip the bank account back into the positive region, especially as consumer demand for the digital model grows. Much of the R&D has already been done, the music industry just needs to buy it up, nurture it to commercial viability and embrace it. Cracking down on illegal file traders doesn’t just scare the traders, it embitters the honest folks who feel they’re being watched. Right now the message from the RIAA is clear: downloadable music is bad. This is not the message I think they want to get across, but, unfortunately, that’s the one that many people hear. 10 million songs legally purchased and downloaded at iTunes does a lot to allay those fears, but that’s just the tip of the iceberg.

I for one will not purchase a commercially produced CD, DVD or go see a movie until the RIAA and the MPAA wise up and turn their efforts to listening to the desires of their customers rather than punishing them. To some degree, this does punish me – there are a few CDs I’ve had my eye on for a while and I am kind of a big movie collector – but I’ll feel better knowing the money in my pocket is not going to help further the abuses showered on a few digital traders and an entire market. If the commercial artists I enjoy choose to split away from the major labels and release CDs or sell music for download on their websites, they’ll most certainly get my business. In the mean time, I’ll be keeping my eyes open for some good indie bands to patronize. Living in the Bay Area, I’m surrounded by some amazingly talented folk. It’s time to give them my full attention. I encourage all of you to do the same. If the music industrial complex can’t adapt, then it should surely die. And I, for one, won’t miss it.