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The Digital Lowdown - Digital Only Releases: Pros and Cons
"When does your CD come out?"
by Steven Corn (BFM Digital), 
More often than not, a typical response from an artist is that they are planning a digital only release and then they'll see how it goes. The decision to press CDs is usually postponed until it is determined if the album sells online or not. Practically every week, there is another digital-only label popping up while all the pundits proclaim the impending death of the CD-format.
Right now, there are probably more albums online than there are currently available as CDs. There may not be hard statistics to substantiate this observation. Yet, it certainly makes sense when you consider all the virtual compilations, back-catalog, homemade albums and other re-purposed material showing up in the digital music stores. It is easy imagine that the total tracks online will soon exceed all of the tracks that were ever released on a physical format.
So what are the benefits and flaws of doing releases for online distribution only?
The benefits are obvious:
* No CD replication costs
* No need to design a full booklet
* No expensive printing costs for the booklet
* Easy, worldwide distribution
* Digital sales count towards soundscan and other retail charts
* No marketing costs (after all, what does a link cost?)
* Instant Fame ("hey guys, my album is on iTunes!)
* No need for fancy mastering studios
* A variety of formats (e.g., singles, EPs, special editions, remixes, etc.)
...and on and on...
The flaws are numerous (and obvious, as well):
* Physical sales still are significant (how many downloads can you sell by the exit doors of your next concert?)
* CDs support digital sales and vice versa
* Booklets help build fan loyalty
* CDs sound better
* Financial investments create a commitment to the product (more on this later)
* CDs are an universal format (e.g., computers, cars, bedroom stereos, boom boxes owned by A&R execs, etc.)
* CDs last practically forever (i.e., CDs don't crash and lose files)
My company specializes in digital-only compilations. Yet, even our best efforts can be seen as throwing a large amount of darts at a tiny board. Consider, then, an individual artist who puts out 1-2 digital albums in a year or a small label that releases 10-20. It might seem that this strategy must be working if so many people are doing it.
The reality is that most artists wind up lamenting about the lack of revenue from their digital-only albums. They all hope to have the next "Crazy" and have a track from their new album becomes the next viral hit. The reality is that there are approximately 100,000 new tracks added to the online services each month. Unfortunately, there are very tracks that ever exceed 100,000 downloads...ever. Of these, practically all of them are owned, distributed or promoted by a well-established record company. (Even "Crazy", the first number, digital-only single, was backed by a major marketing campaign budget from their label and also leveraged support from previous CD releases.)
Putting an album online in the hopes of generating enough sales to justify a physical release is merely wishful thinking. That is not to say that every artist should press up 10,000 units. But, there is an old joke about a man who prays to God every week to win the lottery. After years of this, the man shouts out to God: "Why won't you let me win the lottery?!" God calmly replies, "Meet me halfway...buy a ticket."
Translation (for those of you who don't get my odd metaphors): Don't expect to become a hit sensation without covering all the bases. In a world where the barrier of entry for releasing albums is ridiculously low, a successful artist or label needs to take advantage of every possible revenue source. This means that it would be foolish to ignore the role that physical goods have on overall sales of your music. It would be like having a website but no email address. (Another odd metaphor, perhaps.)
If an artist presses only 500 CDs (a reasonably small quantity) at a cost of $1.25 each and then sells them at only $10 each (also a very reasonable price point), their breakeven point is only 63 CDs. That means that the remaining 300 CDs (after you deduct the 137 freebies to family and friends) are pure profit. Selling 300 CDs is not incredibly difficult and it would net you $3000 in revenue. (Every ready should note that most of the labels that my company represents would be very, very happy to earn $3000 in digital sales.)
If everyone is able to release an album online, then it is critical to ask yourself: how do I differentiate my releases from all the rest? The more creative the answer is, the more likely that you will be able generate the sales that everyone wants, and expects, from online services.
