iTunes Plus is making the transition in the iTunes Store, and I thought I’d get you prepared with a primer about what this distinction really means.  The breakdown is as follows:

There will soon be 3 different price points at which to purchase online songs—the .69 song, the .99 song and the $1.29 song.  The latter will not only be DRM-free, but also have a higher sound quality of 256 kbps AAC.  This agreement was reached with the 4 major music labels and independent labels.

So… better sound quality and unlimited sharing of the songs you love. Is it worth the price? And what is DRM and why should you care? I’ll go over all this industry jargon in the following two-part segment over the next few days.

Part One: The History of DRM (Digital Rights Management)

DRM was created in to attempt to control use and distribution of digital media by preventing access, copying or conversion to other formats by the end users.  The internet forced the recording industry not only recognize its impact on consumers, but to also revise the method of distribution of their main product—music.  Let us not forget that music consists not only of what’s on a CD, but also represents the songwriter and the performer who made the songs what they are.

An artist is paid in several ways when they sign a recording contract. First, the songwriter (lyrics and music) signs to a music publishing company, which is not necessarily the same label that will manufacture and distribute the finished product. There also can be a distinct difference between a performer and the songwriter, since the performer may or may not be the one who pen the lyrics and/or music, but simply the interpreter.

The songwriter then signs to a publishing company. Royalties are paid out to the songwriter every time a song is played via the radio, DJ, commercials, concerts, etc.  Payment is literally pennies on the dollar, and there are only a limited few non-performing songwriters who can negotiate higher revenue. (They’re called hit-makers!)

So, as sales of CDs diminished, record labels scrambled to find ways to recoup the loss revenue. Artists then turned to the record labels that they entrusted their music (and name) to, demanding to be paid for music freely downloaded on the internet.

Remember the song “I Will Always Love You”  that Whitney Houston sang from The Bodyguard? Dolly Parton was the one who originally wrote the song—first released in 1974 as a 45 single.  It had some initial success, but was nothing compared to Whitney’s version. However, Dolly makes out well as the songwriter and receives royalties every time any version of the song is played.

As the performer, Whitney Houston is only paid when the actual CD/cassette is sold, not when the song is played on the radio. She’s one with superstar status, though, who has been able to negotiate exceptional contracts. The average revenue from CD sales is not exceptionally high unless you have a mega hit (nice work, Whitney). Best case scenario: Write the song, perform the song, and then take it on the road (the best money is made by touring and merchandising).

Given that performers (who are not said songwriters) only are paid when a physical product is sold, where does that leave them in the age of mp3s?

I’ll post more tomorrow on how Apple interpreted this changing musical landscape…

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