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the mp3 way: DAM CDs & Sophie
By Jon Newton, p2pnet.net
(more articles from this author)
2001-05-03
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"We've made mistakes, but we've also, with you the artist, changed the world..."
Sophie - mp3.com

mp3.com and eBay have a lot in common. Both identified online punters as a way to get rich, and both grossly overcharge for minimal services sold to what are effectively, captive audiences.

eBay - the world's largest online auction house - started off as a Net community effort but grew into a vast, multi-national corporation. There are lots of very happy punters making lots of dollars from eBay's online auctions. There's also a growing legion of extremely unhappy eBayers (members, as eBay calls them) who'd dearly love to go somewhere else. But eBay is, to all intents and purposes, a monopoly. So like it or not, anyone who relies on it for income must swallow whatever eBay cares to dish out.

The same applies to mp3.com, which describes itself as, "the premier Music Service Provider (MSP) allowing consumers to instantly discover, purchase, listen to, store and organize their music collection from anywhere, at any time, using any Internet device." Actually, it's a Money Machine which uses an ever-changing host of financial tricks and gimmicks to part amateur and professional musicians - many of them naive kids - from their money. And it does this brilliantly. Most people sign up because they're musicians looking for a jump-off point. A hand-full have indeed launched careers from mp3.com. But not many - not compared to the 'millions' of artists and performers mp3.com boasts as customers.

However, although eBay and mp3.com have marked similarities, they also have equally marked differences, the most important being the compositions of their respective client bases; and, their offerings.

eBay is what it is - a singular (and entirely cynical) entity with lots of wannabe's in the wings, but with no serious competition, potential or otherwise. The vast majority of its 'members' are adults looking to make money. And most do, eBay's heavily inflated fees and 'services' notwithstanding.

mp3.com, on the other hand, is selling prayers and dreams - and little else. I couldn't find any break-downs of the age groups of mp3.com clients, but they're probably mostly youngsters. Be that as it may, mp3.com relies on the gullibility of its customers. In other words, its approach, too, is entirely cynical. But where significant numbers of eBay punters are probably mostly adults who see actual returns for their investments, from the message boards, I'd guess an impressive number of mp3.com clients are kids with little chance of seeing a return for their money.

And there's one more important difference between eBay and mp3.com customers:

Most eBayers have nowhere else to go.

But viable, and often more efficient, mp3.com-like pages are appearing online almost every day and it's only a matter of time before mp3.com's position in the market is seriously eroded.

DAM!

As things stand, DAM (Digital Automatic Music) CD's and P4P (pay-for-play) are mp3.com's main selling points.

Under the DAM CD program, mp3.com punters do all the work and mp3.com makes all the money. Musicians create CD's which mp3.com & partners then produce. They get paid at the front end and it's left to the musician to promote/sell his or her by now over-priced DAM CD's to who ever will buy them. Still, when all's said and done, the musician still has a CD of sorts. And for many, especially amateurs, that's enough. "HEY! I have a CD of my music!!!!!".

With P4P, if a song attracts X number of unique downloads, the musician who wrote it gets X dollars - Pay for Play. This was a free service. But on April 1, mp3.com announced that only people prepared to pay $240 a year could get P4P payments via its so-called Premium Artist Service.

Now, said the email, "we're making some changes to the D.A.M. CD pricing guidelines. Currently you, the Artist, set the selling price of D.A.M. CDs at a range of $6.99 to $30. Effective Wednesday, May 4, 2001, you can set the selling price of netCDs at a range of $3.99 to $30. The selling price for the D.A.M. CD version will bear an additional production fee of $3.99. We will pay you fifty percent (50%) of the net revenue we receive from sales of your D.A.M. CDs and netCDs. The $3.99 D.A.M. CD production fee will not be considered as part of net revenue."

NetCD's are, according to mp3.com, "an exciting new product we'll be launching in the next couple of weeks" - online versions of DAM CDs.

Are mp3.com customers falling over themselves in gratitude? On May 1, an anonymous mp3.com customer posted this on the DAM CD's message board:

"Ya know...all these MP3.com changes really suck. They are catering less and less to the little guy trying to make a few cents off his music. First they hit us with the 19.99 premium artist crap..okay fair enough. Then they say 'Oh you have to have direct deposit to get your quarterly artist cash from us.' They shaft us because they give us like two weeks to sign up for it..and if we don't we miss the cash for this quarter. Hmmm...were they short on cash and timed it this way to buy them a little time? Who knows.

"Now comes the biggest gip, the DAM CD pricing changes. Before, if I sold a CD for 8 bucks I got 4 of that. Now if I want the cost of the CD to work out to be 8 bucks, they get 6 and I get 2. It totally sucks! They're not thinking of the artists anymore, they're taking a bigger chunk to cover their court costs for their stupid my.mp3.com idea (morons).

"I think I'm going to save a little cash and press my own CD's for $1.50 a piece and even if it takes 20 years to sell them all, I'll be a lot more money ahead. They're ripping us off. Their cost is definitely not 3.99 a CD. Now if we want to make any money at all on our stuff we have to jack the price of the CD which sucks for the buyer who has to pay an outrageous $2.50 shipping charge if they buy a CD. Screw this!! - a disgruntled artist'

Survivor J replied:
"Your feelings are definitely shared in this community. The worst thing is that mp3 is keeping quiet on everything. I can only hope that the outcry that is coming out of these groups will spread outside the virtual walls of mp3.com and into other high profile sites (the ones that are doing write-ups on mp3.com would be a nice start). Funny, I used to promote mp3.com to fellow musicians. I am regretting this now."

Aaron Z said:
"I had considered going the D.A.M. CD route, but changed my mind, largely because of the considerations you mention. Here's how we handle the production of CDs for Wojo. I buy a spindle of 100 blanks at a time (about $55). I have a friend in graphic design who prints up full color 70 lb. paper sleeves for us at 10 cents/sheet ($10 for 100). We use paper labels for the CD itself (100 are about $15 or so). I have an 8X burner on my computer, which I usually run at 2X to avoid errors. So for basically $0.80 per CD, and 20 minutes burn time per CD, I can sell them for $10, making a net profit of $9.20. Plus, I have complete artistic control over the design (no "MP3.com-this or that" all over the disc and back cover). Get a web site, advertise the hell out of that, sell them at shows (which, one hopes, occur frequently), and get real press in your town for free, instead of spending $2,000 for a space 200 X 100 pixels on the mp3 web site for one lousy week. Blah."

DailyD stated:
"The artists of mp3.com have been the unfortunate victim of very bad, illegal activities with the my.mp3.com fiasco. As a community we always backed mp3.com and we would have continued to back mp3.com if they hadn't started treating us like a cash cow. Some things I can tolerate, maybe paying for PAS subscriptions, okay, but, shouldn't they give us something of value for that? Instead, we get less service, we never are informed of troubles, and has anyone ever gotten help from a customer service type thing on mp3.com? Unfortunately, we wear many hats at mp3.com, we are the prime promoter of this site, we are the content providers, and now we are the customers of mp3.com. The problem is, mp3.com still treats us like we're nothing to them...maybe we are, or maybe we let ourselves get this type of abuse. I'm sick of it, I deleted my dam cd's I urge others to do the same...and started a thread stating just that...seems they don't let me boink it back to the top now, hmm, sort of odd don't ya think?"

A, "disgruntled customer and concerned stockholder," said:
"Those pricing changes will have to be revised if no-one is willing to pay the new price. I know I won't. $11 for a $7 CD - they will sell ZERO. $4 for a net CD (huh) What are they smoking. NO ONE will buy net-cds for $4. A net-cd is maybe worth a buck or at most two. And I've bought about 100 DAM CDs since I started using mp3.com."

whawk1 declared:
"This is TERRIBLE! If mp3 isn't making enough on CDs, I could see a modest charge - but $3.99?? Most CDs were priced at $6.99. Now to make even $3 on a cd, we have to price it at $9.99. Add the shipping cost and no one will buy. The whole idea of making a reasonably priced CD available for unknown artists just evaporated. There's now much less reason to be here.'

ClosetMusician thought:
"I think they're trying to phase out the DAM CD's which cost them something (probably around fifty cents), and replace them with net CD's which cost them nothing and make them 50%! Brilliant bastards!'

Sophie's Corner Forum

Of course, mp3.com can't afford to let dissension in the ranks threaten its bottom line. So on May 2 it introduced the incredible Sophie to assuage customer concerns. Go here for the full-flavoured version.

For now, "Will we always like what we hear from you, SOPHIE?" asks one of the headers on this page.
"I wish that were the case, but with so many Artists on our site, it's impossible to make changes that everyone likes," says the scrupulously honest Sophie, answering herself. "That's pretty much true with change in general. There are those who will like and embrace the change and those who will perhaps be negatively impacted by the change. A lot of variables go into the decisions made here (Artists, fans, employees, stockholders, and so on.)"

No kidding. heh

"Can we verbally abuse you?" - asks another.
"Sure," Sophie answers. "I'm pretty much impervious to abuse. (I'm a bit like DATA on "Star Trek" when he doesn't have his emotion chip in :-) I'll always just try to be rational and help those who I can. My job is not to debate, challenge or `mix it up,` but to simply convey accurate information so you can make decisions based on sound input."

"But SOPHIE, won't you have to run everything by Legal before responding? Won't that slow down your responses?" - asks another, to which the reply is:
"Great question! (Of course it is--I came up with it. :-) Fortunately, you'll get your chance to ask questions next.) The key here is that I'll keep this informal so I can respond quickly. But please understand that when programs launch with more complete information, you should use that information when making decisions about how a particular program may impact your interaction at MP3.com. In other words, if you'll cut me a little bit of slack and try to be respectful, I'll always return that respect and hopefully reward it with some useful information. My job is to try and keep you 'in the know.' Also, I can give some great feedback to everyone here at MP3.com based on the questions and concerns you express to me."

Later, we get to the crunch with respect to the CD announcement, namely: "Why the price change? Isn't MP3.com just being greedy?"
Answers Sophie, "If you only read one question and answer in this thread, I hope you read this one. Because artists couldn't purchase their own CDs before at a discounted rate, it was a common practice to change pricing to the lowest ($6.99) level, buy your own CDs, then leave the pricing there. Overtime, many artists started selling CDs to everyone at those lower price points (well below the price point fans were willing to pay.) Since MP3.com's share of a $6.99 was $3.50 (almost exactly our production cost) we had very little or no margins in D.A.M. CDs. We could hardly justify investing in the promotion or enhancement of the D.A.M. CD program. Knowing that the consumer would bear a higher price, we opted to pass the production cost on to the consumer, which now does in fact leave MP3.com a margin in the product. Does this make MP3.com 'greedy?' No, but we are a business, and need some reasonable profit margin in the products we carry or we need to drop them."

Next, Sophie asks herself, "Now wait a minute SOPHIE, who are you trying to fool by saying it costs that much to press a CD? I know a guy who will do it for me for around $1.50."
And she answers, "You're right, that may be true when you're pressing several hundreds or thousands of the same CD at one time. But keep in mind we are pressing hundreds of DIFFERENT CDs, and that's expensive. Every CD has it's own artwork to be printed for the sleeve, on the face of the CD, and unique music on the disk. Pressing individual 'one-off' CDs is very equipment, material and labor intensive."

Then she asks herself a Killer Question - "What are you going to do if everyone, in protest, pulls their CDs from MP3.com?"
Nothing daunted, she replies to herself, "I'm not being a wise SOPHIE-acker here, but being perfectly honest, we'd financially be in the same place as before, maybe even a little better off. We made basically nothing on D.A.M. CDs before, so if they went away we'd be no worse off from a financial perspective. HOWEVER, that being said, we hardly think that will happen. In fact, we're planning on exactly the OPPOSITE happening. We plan on selling a lot MORE CDs than ever before."

Then, in a May 2 response to a DailyD post, she says:
"It's almost like MP3.com and Artists are like a marriage gone bad. They started out doing a little dating, fell in love, got married, had the honey moon, and now, years later...it's like they are strangers, never talking anymore, always fighting and arguing. Just like that is always a shame when it happens in a marriage, it's a shame here as well.

"Things are more complicated than they seem sometimes. Perhaps like a marriage counselor, I hope to get MP3.com and the artists on the same team here. We not only want your help, WE NEED IT! And I also believe the artists need MP3.com. We need each other.

"This company didn't exist a few short years ago. We're like a toddler, still growing and learning. We've made mistakes, but we've also, with you the artist, changed the world and put the music industry on it's ear at times (and us on our behinds at others!)

"I promise we're trying. We all work really hard here. We honestly do value our artists. But this 'marriage' can be better. We'll admit we can do better and have made mistakes. That's why I'm here.

"Thanks for the, what I feel, has been very healthy dialog. Not bad for our first day together."

There's no denying that dreaming up SOPHIE was a smart move. mp3.com has had, and is still having, serious communications problems wrought by its many and various changes (not to speak of its venality ; ) and many of the positive responses to SOPHIE's introduction reflect this.

Moreover, judging by the number of "Gosh Golly Gee Thanks" postings, a lot of people take 'her' seriously, albeit that SOPHIE is no more than just another tasteless mp3.com ploy designed to keep the punters punting, and the dollars rolling in.

DailyD seemed to have mellowed out by May 2 with:
"Welcome Sophie. We promise to go easy on you for the first week, haha, after that I can't promise anything. I'm glad mp3.com has put someone here though, doesn't make us feel so voiceless, sort of reminds me of the ask the lawyer board they used to have here. Well, welcome a board."

And Penido posted on May 3:
"Welcome to the boards, and thank you for trying to help. Wish you all the best."


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