Page last updated at 19:12 GMT, Tuesday, 24 January 2006

Digital music: Industry answers

Some of the top executives in the music industry have answered your questions about digital music.

The BBC News website asked for your queries and gripes about the way new technology is being used - and the eight sharpest, most frequent and most important questions were put to the virtual panel.

Click on each question to read the answers.







QUESTION 1

Will the price of tracks or albums be reduced with the more cost-effective digital distribution method? You don't have to manufacture the CD, package it, send it to the distributor/wholesaler, and finally the shops. Rowan Smith, Exmouth

  • John Kennedy, chairman and chief executive of the International Federation of the Phonographic Industry (IFPI):

    I think digital is already fantastic value - a track for less than a pound is a great deal for the music fan.

    Digital is a great way to enjoy music, but most of the costs of the physical world remain.

    It's a common misconception that the costs involved in making a record equates to the cost of the packaging. The majority of costs incurred by our record companies are for making and marketing the music itself - and these remain the same regardless of how it's delivered. Artists, composers and all those involved in recording and marketing a track all still need to get paid. Same as when you pay 8 for a cinema ticket, you're not paying the price of the paper the cinema ticket is printed on.

  • Peter Jamieson, executive chairman of the British Phonographic Industry (BPI):

    The costs you lose in manufacturing, packaging and distribution are insignificant in comparison to the major costs in bringing an album to market - namely A&R, business affairs, recording, touring support, radio & TV plugging, marketing, promotion, taxes and all the other business overheads.

    There are also new digital costs such as aggregators, the creation, storage and delivery of metadata, payments to credit card companies and additional online marketing and website costs. That said, at around 85p, downloads are still considerably cheaper than CD singles and fantastic value for money.

  • Steve Knott, managing director of HMV UK & Ireland:

    Pricing - whether for physical or digital product - to a large extent depends on the wholesale price charged by record companies and distributors to retailers.

    While the cost of manufacturing the CD is not that great, this represents only a smaller portion of the overall costs of releasing an album - the main cost of a CD is the investment of the record labels in their artists, recording, marketing and distribution. Hence, even when a song or album is being sold as a download, and thus incurring fewer production overheads, the label still needs to make a reasonable return.

  • Brad Duea, president of Napster:

    First, you are correct that with digital distribution the labels have eliminated some of their previous costs associated with physical distribution. However, the labels have incurred some new costs. For example, the costs of encoding the tracks in the various bit rates in which they distribute the songs. Less obvious, however, are the costs the labels have incurred with regard to clearing the online rights for various artists and albums.

    Second, in addition to the actual costs associated with the content, Napster also incurs bandwidth costs, storage and other hardware costs, customer service costs, marketing costs and other related costs.


  • SEE ALSO
    Digital music: Ask the industry
    13 Jan 06 |  Entertainment
    Set the entertainment news agenda
    14 Nov 05 |  Entertainment

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