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New Format ... Same Ol’ Song

Digital Music Downloads

As sales of digital music files get closer to surpassing those of compact discs, the record industry is trying to cash in with new methods of distributing audio. The latest choices offer bonus tracks, the opportunity to design your playlist and the chance to walk around with apps of your favorite band on your smartphone.

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The music industry loves to have you upgrade your music collection to the latest format. Record labels and publishers made a mint when you switched from vinyl to cassette, cassette to CD and CD to MP3—and repurchased music that you already owned on the previous format. Don’t look now, but they’re at it again.

Digital versions of individual songs that you purchase and then download to your computer or electronic device are standard fare. But in the past year, the industry has opened the floodgates to a river of new formats (full-album formats, streaming subscriptions and mobile apps) that are aimed at our hard drives, smartphones and personal media players.

In 2012, online music sales in the United States are expected by Nielsen SoundScan to surpass CD sales for the first time, and the record industry wants to stay relevant by targeting as many new modes of distribution as possible. The explosion of options is rapidly changing digital audio and, in the case of everything but the full-album formats, allowing portable music to be sold more cheaply than ever before. But the byproduct is a confusing quagmire of choices.

How can you be sure that you’re not about to buy the digital equivalent of an eight-track tape? Understanding what’s on the market will help you to navigate the choppy waters of audio formats and could save you some cash.

FULL ALBUMS. In the fall of 2009, Apple introduced the full-album format—a single file that includes exclusive tracks that you can’t get anywhere else, animated lyrics and liner notes, and live-performance videos that bring a band to life better than any cardboard album cover ever could.

Known as iTunes LPs (.ITLP files), Apple’s format typically consumes about 500MB of disk space per album, so the door is open for artists and labels to include as much deluxe content as they see fit. Only a sliver of the iTunes music catalog is available as iTunes LP files, but we expect that the selection will improve considerably this year.

An iTunes LP of average length typically costs around $14. A good rule of thumb is that an iTunes LP generally costs $3 more than the MP3 version of the album. But there’s another catch: So far, they play only on computers that run iTunes software. And only the tracks and not the bonuses run on Apple’s own iPod or iPhone models. Today’s portable devices can’t display those high-definition extras. So, don’t bother buying iTunes LPs if you listen to music only on your PMP or cellphone.

Meanwhile, four major record labels—EMI, Sony, Universal and Warner Music Group—are developing their own full-album format, which is dubbed Connected Music Experience (CMX), to compete with iTunes. At this time, there’s been little progress. The labels are waiting to see whether the full-album format proves attractive to consumers.

“iTunes LP itself was a small incremental improvement, and at this point, if a competing full-album format comes to market, it’s not likely to make a huge splash,” says IDC consumer audio analyst Susan Kevorkian.

CROSSING THE STREAM. The full-album format provides great bonuses if you’re an obsessive fan of a particular band, but they cost more than regular music files and require special hardware considerations. We believe that the appeal of services that allow you to buy, build and listen to your own streaming library will continue to increase, because you can access streaming libraries from a wider variety of hardware.

These subscriptions typically cost from $5 to $15 per month for unlimited downloads and are different from free Internet radio, in which you don’t get to choose what songs get played. On a per-album basis, there’s no question that they are a much better deal than buying songs individually or as iTunes LPs.

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