Sales of music CDs have been experiencing a year-on-year decline since the turn of the century. This has happened in line with the spread of MP3s through the internet, through services like Napster, Kazaa and so on. The choice of downloading songs from the internet, with ‘just’ an internet connection (or even through a friend who as an internet connection), appeared to have impact to the previous habit of buying CDs, at the CD producer’s expense. These recording companies then targeted these services as pirates, and asked them to take on the burden of lost sales by facilitating the unauthorized spread of songs.
Decreasing CD sales did not just impact the recording companies. The economies of scale of CD production, previously produced in large numbers, decreased to the point that the production cost per CD rises because of the smaller production amount, even when the retail price of CDs are dropping, following the decrease of demand. Distribution channels for CDs, through agents and retailers, have been impacted too – a number of large distribution agents have closed down between 2003-2010, when I was still in the music industry. The number of CD stores have also decreased due to low demand, while rental fees for retail space has only increased.
The problems in CD distribution have actually worsened the overall condition of music distribution, especially those considered legal by the recording companies. Decreasing demand for CDs in the market drives up production cost and decreases the amount of distribution channels, hence lowering the amount of available CDs for sale in the market. When there are fewer CDs available for sale, even the customer who still wants to buy a CD will have difficulty, and will be ‘forced’ to find other alternatives. Many go to the internet, regardless of legality.
Availability of services like iTunes, Spotify, Deezer or Melon in Indonesia is certainly one solution for music listeners, if file sharing services are not enough (and are certainly a solution for the recording companies). Of course, these various services and business models for digital music through the internet will need time to grow, especially due to problems like market education, and credit card usage penetration required by these services. Payment using phone credits is a great alternative compared to credit cards, but the deployment is not as simple, as there is a difference in required infrastructure.
Meanwhile, the market for CDs, although not as significant as in the past, still exists, and they have difficulty in buying CDs. Not all music listeners want to download ‘just’ and MP3 file; many still cherish the experience a CD can give. This emerges in line with the widening of ways music can be listened to, to the point that interest in music products will differ also. Example: fans of Kangen Band might be happy enough with a ringbacktone (as seen by the proportion of ringbacktone sales compared to other products), but a band like Seringai will have fans who are more interested in CDs or merchandise.
Online CD stores like Helmedroom and Disc Tarra Online should be a logical solution to keep providing CDs to music fans, but it seems that there are not many stores around yet. Helmedroom, for example, has served customers from all corners of Indonesia, especially from areas untouched by traditional CD distribution. My opinion is, these online CD stores are a solution that have not yet taken advantage of today’s technology.
One idea that has always kept me intrigued is an online CD store that sells on-demand. It is a combination between ordering deadlines, minimum ordering and automatic price adjustment that may revive sales of old album titles, because if you’re really a fan, you’d be willing to spend on top of market price. For instance – if there are only 10 people interested to buy the 1st album by Godbless reprinted through this service, the price becomes, say, Rp 100 thousand. If 20 people, Rp 75 thousand and so on. Mass production of CDs, as it has been done previously, retains the risk of not being able to sell the whole batch; but this method decreases the sales risk. The question is, would the recording companies be willing to do this?
Ario is a co-founder of Ohdio, an Indonesian music streaming service. He worked in the digital music industry in Indonesia from 2003 to 2010, and recently worked in the movie and TV industry in Vietnam. Keep up with him on Twitter at @barijoe or his blog at http://barijoe.wordpress.com.
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