The Three Protagonists / What is "the Cloud"? / The Pitfalls and Risks for the Music and HiFi Industries / Bringing it all Together in the Cloud / How the Cloud will Change the Game / Circling the Cloud with a Green Revolution
the Three Protagonists
I’ve owned The Good, The Bad, and The Ugly on VHS, Laserdisk, DVD, Blue Ray, and it’s still sitting in my Amazon queue – to say I’ve paid for my favorite movie too many times is an understatement. This pattern of ownership is wasteful, polluting, and expensive. Just as the movie has three protagonists, my movie-buying predicament also involves three protagonists: the ecologically responsible consumer, the music and movie industry, and my constantly upgraded home theater setup. Ironically, the place where they all converge is in the cloud. This is the story of the Green, the Music Industry and the HiFi.
What is "the Cloud"?
To folks who work in computers, the cloud is old news. To most consumers, it's a new word to describe something they already know by other names. The first time modern consumers, a.k.a. the millenials, were confronted with the cloud, it was using music sharing services like Napster. For all it's legal troubles, Napster was the first widely-adopted cloud service. Many other iterations would follow, and iTunes is probably the one most consumers are familiar with these days. For the purposes of this article, by cloud service, we are talking about a place where music and movies are stored online, that unlike a computer at home, can be accessed from anywhere suing any type of web-based client.
Generally speaking, being green is about inefficiencies, and the cloud promises to make people more efficient. The cloud is also paperless, which is also green (remember the paperless office?). Of course, the cloud isn’t really in the sky but here on earth, in data centers, and while these used to be energy hogs, they have become much more energy efficient today. We also can’t ignore the fact that the cloud is providing millions of new, well-paying jobs all around the world. So generally speaking, the cloud is rather green.
The music and movie industry is not as keen on the whole cloud concept. Truth-be-told, they've been fighting it in more ways than we know. This is because they are still stuck in Napster-scare thinking. To them anything that involves sharing, is bad. As consumers have demanded more online services in their enjoyment of music and movies, the music industry has reluctantly been dragged along, like irritated grumpy old men who really don't know why they should. Their part in this will be explained further below.
The gear that I and many other people use to enjoy music and movies, a.k.a. HiFi, is also linked to the cloud, though most people in HiFi wouldn’t know it. While the cloud is already part of many people’s music and movie experience, HiFi has been a bit slow to adopt the new medium. Most people in HiFi are still focused on ripping music collections from CD to hard drives at home, but that exercise is a dead end because it locks the files down into formats and onto disks that are not accessible outside of the home, and thus far from convenient. In that respect, HiFi can be characterized as inconvenient, and this inconvenience only increases as the HiFi increases in complexity, size, and weight. The cloud will challenge that entire model.
In this article, I will discuss how these three stakeholders will come together in the cloud, but I will also talk about what this will change the way we think of music and movies. By looking at what is already happening all around us, I intend to formulate a picture of what this will become in the very near future. For some of them, this could become a highly disruptive experience, just as it was for the protagonists in The Good, The Bad, and The Ugly. By the way, if you haven’t seen it yet, you really ought to. It’s an excellent film that will make you forget all about the over-acted, over-sensationalized, and over-sexualized adrenalin-load that passes for a movie these days like The Avengers, Transformers, and Furious 8, 9, 15 or whatever sequel number they are drilling into your eyeballs this year….
One more note. While I am a movie buff, I don't want to have to spell out "the movie and music industry" in every other paragraph, so I will henceforth focus on the music industry, although the same arguments can be made about the movie industry.
The Pitfalls and Risks for the HiFi and Music Industries
It has been well covered already that the venerable CD is declining in sales. However, if the music industry can be patient enough to re-build a solid and sustainable business model for High Resolution (Hi-Res) music, and if they refrain from locking this music into proprietary formats, then there is hope for Hi-Res. If, on the other hand, they again attempt to burden it by monetizing too quickly or they try to impose draconian sharing restrictions, they will destroy this higher quality music before it is established. If they do, they will also cripple the fledgling HiFi industry as well, and the latter may not survive.
Let me explain.
It the music industry cripples Hi-Res music before it becomes popular, it will also obviate the need for HiFi equipment. This is because HiFi is how consumers can enjoy the benefits of Hi-Res music - without it, it's just more of the same that consumers already hear in their cars, on table radios, and on CD. The music industry has done this before, so this threat is not without precedent.
Not too long ago there was a great-sounding new CD format called SACD. Most people don’t know about it because it was nearly destroyed by high prices and too many restrictions on sharing. In the process it also undercut the need for the players and higher end equipment that could showcase the wonders of SACD, so much so that now only a small fraction of consumers still listen to it. At its height, almost every manufacturer supported the format, now consumers are hard pressed to find one that does. As one who was an early adopter and proponent of SACD, I saw first-hand how Sony, the inventor of the format, obtusely destroyed its own product with high prices and restrictions. In short order, SACD failed in the marketplace and is now a sad example of greed taking precedence over quality. This is experience and several others like it is why Hi-Res now also stands on the edge of a precipice.
Much of the risk lies in the music industry’s utter lack of understanding about what matters to millenials. This is a generation that was born at the dawn of the digital era and was raised on the idea that music sharing (that is, convenience) and commodity pricing (free, or nearly free) are an expectation, not the exception. Sure they will buy gear and music, but only if it is convenient and affordable. As a result of this expectation, and much to the chagrin of HiFi, electronic equipment continues to become commoditized and miniaturized while economies of scale continue to drive prices down, because this is as close to convenient and free as the consumer can get. This generation will continue to encourage the trend through their tweets, their vlogs, in the options they choose in their cars, and the specs in the headphones they purchase. More permanently, they will promote these values in the friends they share their music with, the families they have, and on down to the children they will have.
The more millenials are alienated from HiFi, the more they will seek out MidFi and maybe even LoFi table-top equipment instead. But here is the kicker, it won't sound that bad because this is also a generation that grew up along side of technology. They may have chosen MP3 at one time, but they know all about every compression nuance and also about better formats like FLAC and ALAC. So even if the equipment isn't HiFi, it will still sound better, or at the very least appreciably good enough. This is what the music and HiFi industries don’t seem to want to understand – millenials have once again figured out a way around high prices and restrictions. They know that the key to decent music is not just the gear, also the Hi-Res. The secret is out.
While LoFi isn't perfect, there is quite a bit of MidFi equipment that millenials are buying, especially if it is small and portable, too. That smaller, more convenient form factor today offers quality that just a few years ago still required a complete sound system to hear. Good examples of this are portable players like the Pono Player and Sony’s newest Walkman. This isn’t the old portable cassette Walkman from the 80’s that audiophiles will be quick to deride, but rather an audiophile player that even Stereophile saw fit to give high praise recently. These players connected to a good pair of powered speakers like the Dynaudio Xeos will give most sound systems that cost far more a run for the money. And the reason for this is the fact that modern consumers are now enjoying Hi-Res music files on these payers. Comparing this sound to HiFi gear spinning records and standard CDs (because that’s is what the aging audiophile community still clings to) is simply not going to convince millenials to spend the big bucks on Hi-Fi gear. Hi-Res on MidFi will win out every time.
Bringing it all together (in the Cloud)
Today, most Hi-Res music is in people’s homes locked up on physical disks (Blue Ray, DVD, SACD, XRCD, etc.) from which it cannot be conveniently ripped at the Hi-Res quality. This is that ongoing self-serving, greedy, and myopic attempt by the music industry to lock up their content so that it cannot be freely enjoyed across all the devices that a person owns. I would wager a guess that this is a big reason why regular CDs still exist at all – because they can be ripped easily. Simply put, Hi-Res formats are locked down in the home and the music industry is perfectly fine with that, just as the HiFi industry is, because that is also where the HiFi equipment is: locked up at home.
More recently, after repeated pleading from consumers, high resolution audio is finally being made available online, but the prices are exorbitant to the millenial's sense of what this should cost. Hence, the millenial consumer is still staying clear and only buying a few files here & there. As is the case with my movie buying, when the millenial buys Hi-Res audio, it is typically the same music that he already owns on CD. While the music industry execs (and by extension also HiFi) may think this is good business, the millenial is deeply resentful of it and buys less music as a result. He may actually have several albums of a favorite band on CD, but when purchasing Hi-Res, he will download only a few select songs. This is not good business, but the industry is too greedy to change anything.
That long-standing disdain about the state of music is not unlike what made MP3s so massively appealing when they appeared on the scene. It wasn't just that the music was free, it was also the fact that individual songs could be had à la carte, one at a time, without having to buy the whole album. Music selection had been freed and this concept a bursting of the dam, a collective Jungian epiphany. It offered choice, and conveninence that the music industry had denied the consumers for so long. Given that very real and recent history that every millenial remebers, it doesn’t take much of a leap from there to see that the modern incarnation of this same revolution has arrived in the form of streamed music: music that no longer resides on hard drives but entirely in the cloud through services like Spotify. For a much more palatable monthly subscription fee, the consumer can once again have his music à la carte, just as he did with MP3s.
This is precisely what the music industry, and also the HiFi industry just can't seem to wrap their heads around. It wasn't that it was free, it was that it gave the consumer choice, convenience, and freedom. Surveys at the time showed that most MP3 downloaders were perfectly willing to pay a subscription fee for this convenience. As a matter of fact many of them did pay for their use of services like Napster, Gnutella, eDonkey and others with donations. Yes, consumers had been disappointed that CDs never came down in price as the music industry had promised, but this was far less of a pain-point than the fact that consumers felt imprisoned by the inability to choose just the hit songs they wanted. It wasn't the money, it was that people wanted choice.
The music and HiFi industries still believe they can fend off the tide with the claim that they still hold the keys to quality. As it turns out, though, that leverage is crumbling because cloud-based music is now also available in Hi-Res. With a laptop, or a simple media streamer like the Bluesound Node, or even piped straight into a modern receiver, Tidal, now offers great sounding Hi-Res. And this comes without the Hi-Fi overhead or the high prices the music industry would have liked to insert. Again the dam burst too soon and another epiphany has spread. The millenial can have music that sounds fantastic even when the hardware is only MidFi. More to the point, Tidal’s library is vast, so millenials also have complete choice.
How the Cloud Will Change the Game
In addition to changing how people consume music, the cloud will also change the whole understanding of music. This is another change that the music industry, and the HiFi industry, are simply not seeing, or if they are, they are choosing to ignore it at their own peril. By changing how music is accessed, the cloud changes the way people think about it.
This is because the cloud changes the way the consumer thinks of ownership. In the past, the consumer had the illusion that with physical disks, he actually owned the music he purchased (he actually didn’t). Today, this notion is fading as the consumer copies his music collection to Amazon, Google, and iCloud, for the convenience of accessing it from anywhere. This is where he starts to accept that the music is not a physical thing. It is actually ironic that people are still selling their CDs and keeping a digital copy of the music on their hard drives at home because they believe they own that. I’m certain that deep inside they know they don’t, but the music industry isn’t exactly going after them for doing so, either. Despite the petulant remonstrations of Lars Ulrich, Dr. Dre, and others, the music industry realized some time ago not to attack consumers with root-kit viruses on music CDs and fining grannies into bankruptcy. This was bad policy because of the enmity it created from the same consumers they needed to buy the music. This was perhaps a battle between the consumer and the music industry that ended in a draw, although the music industry was certainly not content with that. This is why the music industry has found a much more subtle and cunning way to reclaim the music on the consumer’s hard drive.
The music industry is doing this by continuously developing new higher standards for digital music, making old versions noticeably less pleasant to listen to. This forces the consumer to purchase new versions with each new standard (the quagmire I am in with my movies). This is the one way that the music industry is attempting to stay relevant by profiting (or should I say profiteering) from Hi-Res audio by forcing the consumer to buy the same music over and over again. Perhaps, some enterprising individual might actually wake up and say, wait a minute, if I already own the rights to listen to the music, then shouldn’t I own it on every medium and resolution? I’m guessing the music industry hopes that kind of epiphany doesn’t spread….
Interestingly, the HiFi hardware manufacturers are also benefiting by promoting Hi-Res standards in their new products every release cycle. Every time a new standard is announced, the consumer has to make the decision of whether to upgrade his "previous generation" receiver, premap, player, DAC, or other piece of gear. If the consumer doesn't change fast enough (audiophiles then to hold on to old gear), then the industry makes the previous standard obsolete on new equipment it manufactures. Think this doesn't happen? Think again. Remember when the 3-cable Component Video connection allowed resolutions up to 1024p/24, the highest picture standard for DVDs at the time? When HDMI came out, with all it's first generation technical issues, consumers weren't quite so sure about upgrading the whole chain of equipment they had spent their hard earned dollars on. So to nudge the consumers along, the movie industry stepped in with a ridiculous restriction. All equipment with both Component Video connectors and HDMI, would henceforth and the former hobbled down to 480p. Audioholics did a good explanation of this ridiculous restriction, if you want to read more about it, but here is the gist of it:
"The AACS licensing authority, in its "Final Adopter Agreement," plans to enforce a provision that forces consumer electronics companies that make Blu-ray players (and any other AACS devices) to eliminate analog video. This has been referred to as the “Analog Sunset,” where the analog ports on Blu-ray players will be phased out entirely."
To be clear, there was absolutely no technical reason for this since the Component Video standard supports higher resolutions, but the industry needed to sell product and so the consumers were forced to replace their equipment, and the HiFi manufacturers had no problem with that at all. If history is a lesson, there will be more such nonsense in the future as the market continues to evolve.
There is an interesting lesson that actually comes from the computer industry. Not too long ago, Microsoft would help boost PC sales with each new version of Windows. It became so regular that PC manufacturers would plan their whole realease cycle around it and investors would purchase stock in those companies based on it. One could argue that for the HiFi industry to do the same is equally good business, but is it? Can the HiFi industry rely on this model and if so, for how long? Perhaps not.
This has to do with another misunderstanding about consumers and technology. Back then, new versions of Windows did not always require a whole PC replacement – more often than not, a simple memory upgrade would suffice. This is because PCs were highly modular and not a single box. This was a convenience to the consumer that quite possibly boosted PC sales even further. The modular construction of PCs was quite possibly the single most important reason there even was a PC revolution. That said, the PC industry is declining very fast, and this ironically coincides with a move away from modular construction as well. Apple has been leading that charge by soldering everything shut and hard-coding the OS onto the chip. Will HiFi succumb to the same fate?
What is happening with the end of modular construction, lies at the crux of the issues we are addressing here because it is also a move away from convenience and choice. There is a parallel narrative that could very well have the same consequences. In that scenario, nobody wins. Obviously the consumer doesn't because he is locked back into the upgrade treadmill. HiFi, and here I am especially talking about the big, heavy and ostentations gear that garces the cover of magazines, is also not modular. Along with exorbitant pricing, this lack of choice further contributes to the growing enmity of the consumer. That pattern of enmity is certainly not good for business.
There is another factor that will exacerbate the situation for HiFi. Whereas Apple can always fall back on other product lines, and especially product lines that do not involve physical equipment, like software and music, so too can the music industry make a that shift by focusing their efforts on monetizing Hi-Res. Unlike industries that are entirely based on physical product lines, software and music can quickly shift as markets change. But what does the HiFi industry have to fall back on? Aside from embracing technologies like LPs, relying mostly on nostalgia, and the promise of a hardly audible more analog sound, no real transition seems possible. One possibility that is to actually create modular equipment, like NAD is doing with their Modular Design Construction. At the risk of blaring out the obvious: make HiFi more modular! Offer the conveniences that the consumer expects and that have historically proven to boost sales.
Now let’s take this all back to the fact that modern consumers are now consuming Hi-Res in the cloud and that physical disk ownership is less important to them. Physical ownership is being replaced by cloud convenience, or to put it another way, virtual ownership. The fact is millenials are quite open to the idea as we can see in the rise of this idea in other aspects of their lives like car ownership whcih is loosing it's appeal in large cities, with virtual online banks like Paypal, and online services like Airbnb that are all reshaping the whole concept of ownership. Likewise, music ownership is disappearing, and even seen as dated for many millenials. In an ironic twist, this is one way that the consumer can get back at a greedy music industry that he already loathes: refusing to own either the disk or the music that resides on it. What a concept!
As for HiFi, this idea of changing the understanding of ownership should be deeply troubling because what it does for the ownership of music on disk will also coincides with a decline of ownership of large, expensive, and ostentatious physical HiFi gear. As we have seen, that gear is quickly being replaced by viable smaller and more convenient alternatives that in many ways define virtual ownership. While the consumer may have been deluded at one time to believe he owned his music, the illusion of power that the music and HiFi industries believe they still exert over the consumer is even greater - an ironic twist of fate indeed.
Circling the Cloud with A Green Revolution
Coming full circle, the decline of physical ownership and the popularity of sharing in the cloud, are green on a very basic level. They conform to the idea that we need to share precious resources and learn to live in harmony with our environment. In that respect, the decline of music ownership is a big win for the green movement. Of course, the end of physical media is also just as welcome because those CDs and LPs pollute the environment and require carbon fuels to transport, while even the artwork in the CD jewel case is typically printed on glossy paper which is also not sourced from recycled paper or easily recyclable.
As for HiFi, the reduction and miniaturization of technology away from big, heavy and ostentatious equipment, is also a win for the green movement. Obviously it reduces pollution, waste, carbon fuel use, and labor abuses but it also brings about a similar awareness as it does with the decline of music ownership. Diminishing the importance of ownership also reduces the propensity to continually acquire always bigger and flashier gear. It engenders a realization that people can do with less HiFi too. Maybe those $20,000 speakers aren’t so necessary and a $2,000 speaker will bring almost as much enjoyment. That $18,000 saved (not to mention the taxes that won’t go to pay for corporate welfare and war) can be made into a donation to Habitat for Humanity, save lives through Doctors Without Borders, or ease the suffering of animals through the work of the ASPCA. OK, even for those who aren't such tree-huggers, you can give it to a family member who is ill or who has fallen on hard times. Imagine the satisfaction that comes from that instead of the minuscule improvement in sound you think you may have heard in the showroom.
As we mentioned above, the cloud is pretty green. As a matter of fact, being green is hip these days. And yes, just as in the movie, the green walked away with all the gold, left some for the HiFi who almost hanged himself, and the music industry never knew who the real enemy was, tried to shoot both, and ended up lying in an unmarked grave.