Resnikoff’s Parting Shot: CD Survival

  • Save

The death of one technology is rarely followed by the birth of another.

In almost every case, once-dominant technologies coexist with emerging replacements, and the balance tilts over time.  It was true with typewriters and PCs, digital and conventional cameras, and even horses and automobiles.  The reason is that consumers are too varied and complicated to support a clean, overnight transition, and many incorporate multiple technologies into their lifestyles.

The same is true for the CD.  Sure, sales of discs are dropping precipitously in the United States, and globally, sales have been sliding for years.  But until recently, the transition has been mostly gradual.  And there may be more life in this format than many think.

Dissecting the downfall produces some interesting discoveries.  First, the shift away from the CD is only party due to the technology itself.  The decrease is better viewed in a much larger context, one that includes pricing, retail environments, product packaging, and an alienated younger buyer.  Meanwhile, non-traditional markets, and those tied to older demographics, are generally holding their own, evidence that the format is more resilient than the larger sales story indicates.

Of course, there are format-specific reasons for the current sales decline.  CDs don’t hold as much as an iPod, and they don’t support constant updating, playlisting, and rigorous exercise routines.  And if Apple has taught the industry anything, it’s that the iPod is tightly tied to iTunes, an ecosystem of thousands of songs, instant recommendations, and shared playlists.  It’s not a world the CD was born into.

Yet the CD still has a place in a larger ecosystem.  Few cars lack in-dash CD players, computers universally support their playback, and many fans still buys discs despite harboring immense digital collections.  Somehow, a coexistence makes sense for many music fans.

But what doesn’t make sense anymore are the strings attached to the CD.  These are aspects that are not necessarily inherent to the CD format, though they are intricately part of the consumer buying decision.

Take pricing.  Why does a CD carry a price tag of $16.98, $15.98, $11.98, or anything else in that range?  The price tag is based on a complicated interplay of rights holders, distributors, retailers, executive salaries, and profit maximization calculations.  These aspects represent decades of industry evolution, a process that gets baked into the suggested list retail price.  But tapes and vinyl carried the same baggage, and industry economics until recently supported discrete, bundled releases at price points that now seem impractical.  Ultimately, pricing and bundling structures are bigger than the CD.

Another example lies in product packaging.  Why don’t CDs carry lyrics files, images, and videos?  And why do they carry a relatively limited number of tracks?  The typical CD seems a bit bare bones, but the technology itself can support all of these extras and more.

But toss that baggage aside and place a CD in the hands of the consumer, and everything works perfectly.  Interoperability is guaranteed, and buyers can easily shift between different environments.  One executive astutely pointed out that the CD, for all of its outmoded and old-fashioned criticisms, actually offers far better universality than most paid download services.

The point is, there’s nothing horribly wrong with this format, and large sections of the consumer population are incredibly comfortable with the experience.  Does a 45-year old necessarily need an iPod?  Maybe yes, perhaps not.  It really depends on the individual.  If CDs started melting their players tomorrow, the story would be different.  But consumers understand CD technology, and rarely have a problem with it.

Is iTunes+iPod superior?  For most younger people, the answer is undeniably yes.  But this isn’t an exodus from the CD, it’s an embrace of a newer, more convenient method for obtaining, storing, organizing, and listening to music.  But some older people just don’t care.

That could explain some interesting trends.  Take non-traditional sales outlets like Starbucks.  Or boutique sellers in airports.  It isn’t f.y.e., it’s an entirely different proposition.  And these plays exist in environments where the consumer relationship is otherwise healthy.  So how are non-traditional outlets doing?  According to Nielsen Soundscan, non-traditional retailers now claim 17 percent of the retail pie, up from just 2 percent in 2002.

Meanwhile, internet-based sales are soaring.  Online sales of discs increased 19 percent last year to 12.9 million units, also according to Soundscan.  And that includes a number of super-targeted plays.  “Contrary to what appears to be the imminent demise of the physical disc in the world of popular music, we have found … that the physical CD in the classical music world is still the overwhelmingly preferred medium for purchase,” said Eric Feidner, president of ArkivMusic, a genre-targeted company.  Feidner is now licensing out-of-print classical catalogs from major labels, and only pressing copies as specific orders come in.  Long Tail defined, and powered by the CD.

Eventually, the shift from physical to digital will marginalize the CD.  Teenagers will become twenty-somethings, thirty-somethings, and forty-somethings, and their consumer power will be directed towards tenth-generation iPhones, not traditional CDs.  Carmakers will prioritize iPod integrations above in-dash CD players, and the format will eventually garner nostalgia like its now-quaint grandfather, the vinyl platter.

But in the current market, the format still has considerable steam, despite the recent implosion in traditional sales.  Labels will suffer, as will traditional retailers, though the trusty CD will enjoy an extended sunset.  The playback infrastructure is too strong, and demographics shift too slowly for an overnight exit.  And less traditional plays will continue to capitalize on the remaining strength of the format.   Like most transitions, that means accelerated evolution, not revolution, and a lot more blood from the stone.

Paul Resnikoff, Editor