Digital Audio Insider -- the economics of music and other digital content


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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from the perspective of a musican who has self-released four albums with the indie rock band the Layaways.

My personal website has links to my LinkedIn and Google+ pages and you can send e-mail to david [at] thelayaways [dot] com.

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If you enjoy this site, please consider downloading a Layaways track or album from iTunes, Amazon MP3, Bandcamp, or eMusic. CDs are available from CD Baby and Amazon.

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October 31, 2006

A Price Increase for eMusic
by David Harrell
Not for current subscribers, but new subscribers will be paying a bit more for each download. From the e-mail to subscribers:
On November 21st, 2006, eMusic will begin offering new plan options to new members. While the price of our eMusic Basic, Plus, and Premium subscription plans will remain the same, the number of downloads in each plan will change:

new eMusic prices

If you are happy with your current monthly or annual rollover plan, simply do nothing. Your selected plan will be guaranteed as long as you keep your account active and in good standing. However, if you wish to lock in a new rollover plan, you must do so before November 21st, 2006. We recommend that you review and set your rollover plan now to lock in at the lowest price per download available After Nov 21st, if you want to upgrade, you'll no longer be able to upgrade into the older plans. All the more reason to upgrade now!
So it's basically a 33% price increase per download for new $9.99 a month subscribers. At 33 cents a track, that's still a great deal for anyone spending at least $10 a month on digital downloads. But not quite the bargain as before...

tags:

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October 30, 2006

Not So Fast
by David Harrell
Not So Fast
Mark Mulligan at Jupiter Research clarifies some misconceptions about his report on mp3 players and digital music sales:
So this report got a lot of attention in the media, which shows how much interest there is in the topic. However some of the coverage has been quite selective in which parts it has highlighted and some have even used it as evidence for Apple-bashing. So for the record here are the key thrusts of the report (all of the below refer to Europe): MP3 player owners of all types (iPods included) don't regularly buy much digital music. iPod owners are actually more likely to buy digital music than other MP3 player owners. Free online music consumption significantly outweighs paid, significantly more so for owners of non-iPod MP3 players. Device owners are much more likely to buy CD albums online than digital albums.
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More Money, Less Music
by David Harrell
More Money, Less Music?
My friend Amy at Shake Your Fist clued me in to this recent Economist chart. The US is first in total music sales, but only fourth in music sales per person:

chart of music sales by person by country truncated version of graph click it to see the full version

While the Economist claims that fans "buy more music per person" in Britain, Japan, and Norway, that might not be true. They're spending more, but based on pricing differences for CDs and digital downloads relative to the US, it seems more likely they're just paying more for the same amount of (or even less) music. (At least in Britain and Japan, I don't know about music prices in Norway relative to the US.) What I'd really like to see is a breakdown of average number of albums or songs purchased each year by music fans in each country.

related: Variable iTunes Pricing, Varying iTunes Prices for Different Markets, The European Premium for eMusic

tags:


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October 27, 2006

Tower Odds and Ends
by David Harrell
Tower Odds and Ends
In this NY Times piece, Anthony Tommasini observes the limitations of online music shopping:
You could argue that Tower Records courted its own demise in 1995, when the company became one of the first marketers to introduce an online shopping site. Those who embrace the Web as the ideal way to purchase CD's argue that Tower Records became obsolete. Anything can be bought online these days.

Maybe. But for many people, tracking down a CD online, with only various critiques by unknown purchasers to guide them, is not the same as mingling with other opera buffs in front of the Verdi shelves. I am convinced that there is money to be made for someone willing to set up a classical music CD shop in New York, a place that does not promise to stock everything, but provides an in-depth catalog, including a smart selection of historic recordings and essential reissues.
Thanks, Aaron, for the link.

And independent labels are hoping (but not necessarily expecting) that online sales can make up for lost Tower revenue:
Rob Miller, partner in the Chicago-based alternative-country label Bloodshot Records, said that online sales account for just 10%-15% of the company's business. He estimates that Tower accounted for about 5% of Bloodshot's sales.

"If it was a one-to-one trade (for lost physical sales), it'd be great, but it's not," Miller said of online sales. "It's a good bandage on a much larger hemorrhage."
No mention of digital downloads, though. Thanks, Porter, for the link.

related: The Death of the Record Store

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October 26, 2006

More Long Tail
by David Harrell
More Long Tail
Via Marginal Revolution: Harvard's Anita Elberse and Felix Oberholzer-Gee examine the Long Tail effect in video sales:
"In the paper we show that both the long-tail and superstar effects take place -- but that each comes with a twist," Elberse says. "Consumers can find videos online that they can't find anywhere else. And yes, there is a shift in sales to the tail -- but there is also an increasing number of titles that do not sell at all."
According to this summary of the study, they also believe the "music industry may be more of a long-tail beneficiary than the movie industry."

Maybe so, but I think the number of non-selling music titles is going to increase as well. If you're in the mood, here's a PDF of the full paper (50 pages).

related: The Long Tail, the Fat Middle, and Tiny Slices, The Long Tail of eMusic?

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The New Walkman
by David Harrell
The New Walkman
Is the iPod truly revolutionary? Slate's Michael Agger doesn't think so:
The iPod seems like a revolution because there was a brief gap in the march of personal stereo products. As the sales of Walkmen and cassette tapes declined, Sony was ready and waiting with the Discman. But the early models were prone to skipping, and CDs were never as portable as cassettes. Also, you couldn't comfortably fit a Discman in your pocket. So, for a few years, there was dip in the number of people running around with headphones on. In 2006, more than 50 million iPods are in circulation, and the media love fest is in full bloom. Still, the iPod does not match the star quality of the Walkman in its heyday. To take one cultural field: The Walkman served as a plot device in Ghostbusters, Back to the Future, The Goonies, and (insert your movie here). The Walkman was also first--the original king.
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October 25, 2006

Corporate iPods
by David Harrell
Corporate iPods
Articles like this one have me convinced that the iPod's market dominance isn't going fade any time soon. From today's Wall Street Journal:
When Gaddis Rathel needed to learn Spanish for his job, his boss gave him an unusual tool to help: a black video Apple iPod, preloaded with language lessons.

Last month, Mr. Rathel's employer -- ACG Texas LP, a Plano, Texas, franchisee of the pancake-house chain IHOP Corp. -- started testing Apple Computer Inc.'s digital media player on a few employees to save money on Spanish-language classes. Now, rather than sit in a class on company time or read a textbook, Mr. Rathel uses the iPod for audio training in his spare time. "I've used it in several scenarios around the house and in the car," says Mr. Rathel, 45 years old, who, as a manager of field training, spends a lot of time on the road. He also uses it while waiting to pick up his daughter from soccer practice.

People used to hide their iPods from their bosses, if they used them in the office at all. Now the bosses are passing them out to their employees. Companies from health-care suppliers to fast-food chains are handing out free iPods so that employees can download audio and video files of CEO announcements, training courses and sales seminars.
With the exception of watching videos, everything mentioned in this article could be accomplished with pretty much ANY portable mp3 player. But "iPod" has become the new Kleenex, Xerox, etc. For the uninitiated, a portable listening device is, by definition, an iPod.

Maybe there's an opportunity for Microsoft in this new corporate market to offer package deals for Zunes to the companies that already purchase hundreds of licenses for Word and Excel. But given the brand recognition and appeal of the iPod, any other device will probably be viewed as an inferior substitute by the average employee...

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October 24, 2006

Scouts, Not Pirates
by David Harrell
Scouts, Not Pirates
No joke -- Boy Scouts can now earn an anti-piracy activity patch:
Boy Scouts in the Los Angeles area will now be able to earn an activity patch for learning about the evils of downloading pirated movies and music. The patch shows a film reel, a music CD and the international copyright symbol, a "C" enclosed in a circle.

The movie industry has developed the curriculum.

Scouts will be instructed in the basics of copyright law and learn how to identify five types of copyrighted works and three ways copyrighted materials may be stolen.

Scouts also must choose one activity from a list that includes visiting a movie studio to see how many people can be harmed by film piracy. They also can create public service announcements urging others not to steal movies or music.

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October 23, 2006

More Songs, Fewer Albums
by David Harrell
More Songs, Fewer Albums?
A Consumer Reports survey on music-listening habits and portable music players:
Acquiring an MP3 player may well change your music habits or those of someone you're shopping for. It's likely to increase how much music is heard, where it's heard, and how it's bought -- with more of it acquired online, unsurprisingly, and perhaps song by song rather than in the album-sized helping of the compact disc.
Online distribution has made it easy for virtually any musician to obtain worldwide distribution (via online sales of CDs in Amazon.com and digital downloads via iTunes and eMusic). Yet this increased ease of distribution means that the competition for the time of music listeners intensifies daily.

So any increase in total listener hours is a wonderful thing. But I wonder if the growth in available content can ever be accommodated by expanded listening hours. As I wrote in this guest post for Shake Your Fist back in June, there are only so many hours in the day...

related: Bandwidth Thoughts, Part I: The Long Tail, the Fat Middle, and Tiny Slices

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iFive
by David Harrell
iFive
The Washington Post observed five years of the iPod with a slew of iPod and digital music pieces:

Rob Pegoraro -- Digital, Our Song for the Ages:
Five years ago tomorrow, a computer company with no history of selling music devices released a portable media player that cost more and did less than much of the hardware already on sale. Naturally, this gadget and its successors sold in the millions, all but defining the entire digital-music industry in the process.
Scott Sternberg -- iPod Cheers: Once a Skeptic, Now Baptized Into the Mac:
The iPod completes my conversion to Mac in general -- even though I held on to my PC beliefs long after my friends had switched over. ITunes is so functional, whether for managing songs or listening to friends' music. It's simple, seamless integration. And maybe that makes me less hard-core -- a sellout who bought into the marketing and joined the bandwagon. It's not because I can't figure out computers -- it's just easier. I may never buy another PC again.
Neal Mueller -- iPod Jeers: Van Halen Fell Silent On Top of the World:
Watching my fellow climbers lug their broken iPods up and down Mount Everest gave me some strong opinions. I'd go as far as to say I think Paris Hilton is to Hollywood what the iPod is to portable music players. Both are radiant, glossy and coveted, and like any flash-in-the-pan they are overpriced and cantankerous.
Mike Musgrove -- A Messy Age for Music

Frank Ahrens -- Music Store Cold War

Yuki Noguchi -- Changing Her Tune on Apple's iPod

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October 19, 2006

A Trade-In Value of Zilch
by David Harrell
A Trade-In Value of Zilch
Kirk at Medialoper lists the nine reasons why digital media products are a bad deal for consumers, including:
8. No resale value. So you logged onto iTunes in a drunken haze and downloaded the complete works of A Flock of Seagulls. What happens after the hangover has passed and you realize your mistake? In the good old days you could take your used CD's down to the nearest record store and sell them for cash or credit. When you buy digital media products that's not an option. The traditional Right of First Sale has been stripped away in the digital age.
Lack of resale value is one of the main reasons I believe digital music downloads are overpriced relative to CDs, at least at the $9.99 (or more) iTunes price. I really don't have the economics vocabulary to really describe this, but it seems obvious that some portion of a CD's selling price reflects its potential resale value, even if you never plan on selling it. After all, if you didn't have the option of ever selling your car, you probably wouldn't be willing to pay as much for one. (As someone who sees used copies of his own CDs selling on Amazon.com, I realize that used CD transactions don't generate any income for the artist or label, but you could also argue the resale potential also makes it more slightly likely for someone to buy a new disc in the first place.)

Take that away and it seems like the price should drop, at least by 25% or 30%. And when you tack on all the other things in Kirk's list, I think the "fair" price is closer to the eMusic model, where the digital download version of album costs around $2.50.

There is, of course, the argument for the greater convenience of digital downloads. For many consumers, that convenience alone is no doubt worth the trade-off of lower fidelity, lack of resale, artwork, and liner notes, etc. But I'm not one of them, at least not yet...

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iPod Thursday
by David Harrell
iPod Thursday
Consumer Reports has a two-page spread on portable digital players. CR likes the ease of use of the iPod/iTunes combo but dings the iPod slightly for poor battery performance:
CR's take. iPods remain a leading choice in digital players for ease of use and appearance. The players work almost seamlessly with their iTunes music-management software, and the iTunes Store is the biggest online content retailer, with many exclusive songs and videos.

CR's take. Though our data can't predict performance for current iPods, our findings raise continuing questions about how long iPod batteries might last compared with those of other brands. And iPods are at best undistinguished in tech support and features.
And the WSJ on Apple's latest numbers:
The latest results defied concerns among some analysts and investors that the iPod, which dominates the market for MP3 players, was seeing weak sales in the market. The company sold 8.7 million of the devices in the quarter, for $1.56 billion in revenue, up from 6.5 million iPods and $1.21 billion in revenue a year earlier.
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October 18, 2006

Today's Wall Street Journal
by David Harrell
Today's Wall Street Journal
Label-authorized file sharing:
But now there's a growing recognition among some record executives and performers that the people who are downloading illegally are frequently huge music fans and that marketing to them may be more desirable in the long run than suing or otherwise harassing them.

Hence the alliance between Jay-Z and Coke. By inserting promotional material into the decoy files, and then planting those files prominently on file-sharing sites, record labels and other marketers can turn what is now an antipiracy tool into an advertising medium. "The concept here is making the peer-to-peer networks work for us," says Jay-Z's attorney, Michael Guido. "While peer-to-peer users are stealing the intellectual property, they are also the active music audience," and "this technology allows us to market back to them."
Lee Gomes on YouTube and Google:
With YouTube, though, the company isn't getting any technology to speak of; in fact, YouTube users will probably notice an improvement in coming months in some of the secondary parts of the site, like mail and messaging, which were known for their occasional hiccups and downright outages.

Instead, Google is getting an awesome brand name, and the eyeballs that come with it. It's one of the ironies of the current Internet that success is often uncorrelated with a company's R&D budget or the number of programmers on its staff. As proven with social networking sites such as MySpace, what makes for success is often being in the right place at exactly the time that a particular fad breaks your way.
And Universal sues video-sharing sites:
The suits, against Sony Pictures Entertainment's Grouper Networks Inc. and Bolt Inc., mark the first time a major media company has tried to use the courts to narrowly interpret "safe harbor" protections provided by the Digital Millennium Copyright Act of 1998 so it would exclude video-sharing sites.
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October 17, 2006

Expensive iTunes in the UK
by David Harrell
Expensive iTunes in the UK
Bob Lefsetz isn't happy about iTunes prices in the UK:
And what you'll find out is a fucking digital file album, sans packaging, sans disc, sans anything but the lousy compressed files with DRM no less, costs $14.69 cents in the U.K. But it gets worse, MUCH worse. Let's say you want the new Jet album, or the John Mayer album, then the price is 9.48 pounds sterling, or $17.63. But, it gets even WORSE! Let's say you want the Justin Timberlake record, then you pay 9.99, or $18.57 cents. Same price for Diddy's new masterpiece. As for Dylan's "Modern Times", you're paying 8.99, or $16.72. THIS IS FUCKING NUTS!
related: Variable iTunes Princing, Varying iTunes Prices for Different Markets, The European Premium for eMusic

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October 16, 2006

Popularity Based Download Pricing
by David Harrell
Popularity Based Download Pricing
Late last year, Adam Penenberg wrote a Slate piece proposing commodity-like pricing for digital music downloads, where prices would increase based on a track's popularity. I didn't think much of the idea, my beef being that demand-based pricing ignored the fact that -- unlike true commodities -- there is an endless supply of digital files.

But the concept has been put into practice by a new download store called Amie Street. From Saturday's Wall Street Journal:
The song "Waitin'" by R&B and hip-hop singer Choklate, can be downloaded from several places online. On iTunes and Napster.com, it costs 99 cents. But on a new Web site, it's selling for 23 cents -- for now, anyway.

Amie Street, a recently launched music Web site that carries independent -- and mostly little-known -- artists, is trying an unusual model for selling music. Instead of selling songs at one fixed price, the site determines prices for songs based on how frequently they're downloaded. Newly submitted tracks are free when they're added and then rise in price as people download them; after about 130 buys, they reach the site's maximum price of 98 cents. Many songs on the site are currently priced at six cents or less.
I'm still not sold on the idea, but off the top of my head, there does seem to be a few things that could work in favor of Amie Street artists:

1. Lots of indie musicians offer free mp3 tracks (MySpace, band websites, etc.) but there's little perceived value to this free music. Free music (or music that is close to free) within the context of a store might seem more appealing. That is, someone might never make it your band's website to download free tracks but would eagerly snatch them up for free or for a few cents within a download store.

2. Popularity within the Amie Street store (as shown by a higher download price) might be a signal to both music buyers and record labels. Perhaps the bands that are selling for the most within Amie Street will attract attention from labels.

tags:

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October 13, 2006

Friday Odds and Ends
by David Harrell
Friday Odds and Ends
Via Online Fandom: Juliana Hatfield is selling mp3s on a "choose your own price" basis, with 50 cents a track as a suggested minimum:
When a song is downloaded, you will have an option. You can decide that ownership of this song is your right and freely distribute the files to your friends and to the people who also think it's their right, without payment.

Or, you can support the artist who wrote and recorded this song and click the PayPal button at the top of the page and send Juliana a contribution. The iTunes standard of $.99 per song may seem too high for you, in which case you can send $.50 - though there is virtually nothing else you can buy legally for $.50. Alternatively, you can think of the number of people with whom you might share these files and give a multiple of $.99 for each song you download.
Kinda like what Jane Siberry has been doing (for an average of $1.14 a track). No details yet for what the average buyer is paying for JH tracks, though.

---------

Some folks on the Velvet Rope message board report iPods with minds of their own.

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The Wall Street Journal on the new Sony Walkman:
One distinctive feature: The ability to sidestep the computer altogether by allowing users to upload music directly onto the device by connecting it to a CD player with a cord. The Walkman can be plugged directly into Sony's Net Juke home-stereo system, which was revealed yesterday.

While stressing the new Walkman allows users to organize music on personal computers in a similar way to Apple's iTunes, Sony said it saw non-PC users as a significant opportunity for growth.
Hmm. Maybe there is a demand for this feature currently unmet by the iPod and other players. But if so, it doesn't seem like there's anything to prevent Apple from just adding the same feature to the next release of iPods...

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October 11, 2006

Amazon Dismantling Free Download Section
by David Harrell
Amazon Dismantling Free Download Section



You can still search for (and download) free mp3s at Amazon.com, but download charts are no longer available. And there's no longer an option for artists and labels to upload download files. I've got a feeling that by time Amazon launches its music subscription service, free downloads will be a thing of the past.

related: CD Baby Delivers Digital Content To Amazon, Is Amazon Phasing Out Free Downloads?

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October 09, 2006

My Latest eMusic Download
by David Harrell
My Latest eMusic Download
Until today, my music collection didn't include Nancy Sinatra. If asked, I would've said the chances of my ever owning a Nancy Sinatra album were nil. I doubt I'd ever buy one of her CDs, even from the bargain bin. And if someone gave me a Nancy Sinatra disc as a gift, it'd probably on a shelf for the next five years without ever making it into the CD player.

But when you have 30 unused eMusic downloads that expire in a couple days, your decision-making process changes, hence my latest download:

Nancy Sinatra Boots album cover


It's not like I was searching for this album, or that I stumbled across it when exploring eMusic editorial or subscriber recommendations. The only reason I found it was that it's #38 on the chart for today's top downloads. Add in the camp factor of both the album cover and the song selection (The Statler Brothers! The Beatles! Bob Dylan!) and you make a quick impulse decision. After all, it's not like you're reaching into your pocket to "pay" for it, your credit card has already been charged for your monthly or annual subscription.

It makes wonder just how many eMusic download decisions are made this way. And if the download charts are somewhat "self perpetuating." That is, if there's a stickiness factor to the eMusic charts because subscribers tend to look to see what's popular and are far more likely to download those albums, just because they see them...

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October 06, 2006

Additional Trademark Claims
by David Harrell
Additional Trademark Claims
More details on Apple's trademark claims, from the Onion.

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October 05, 2006

More Profits for Apple
by David Harrell
More Profits for Apple
Apple faces more competition for the iPod Nano from the new Sansa Rhapsody, but could conceivably increase profits even while losing market share. According to this EE Times article, decreased component costs have lowered Apple's production costs considerably for each unit. (Thanks to Porter for the link.)

Meanwhile, the Wall Street Journal's Walter Mossberg loves the new iTunes software and likes the new iPods, but gives a somewhat lukewarm review to the new Sansa Rhapsody.

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October 04, 2006

More Naming Fun
by David Harrell
More Naming Fun
Somewhat similar to the "pod" trademark issues -- Re/Max was wrangling with a smaller real estate firm, Amerimax, over the use of "max." A judge just ruled for the little guy:
In explaining his ruling, Judge Norgle cited numerous other companies that use "max" in their names, including OfficeMax Inc. and CarMax Business Services LLC. Amerimax's use of "max" is "not likely to cause confusion among consumers," Judge Norgle said.

Indeed, trademark infringement cases are generally "about consumers and whether they're confused," said Philip Jones, a partner at Chicago law firm Brinks Hofer Gilson & Lione.

To win the case, Re/Max would need to submit evidence, such as a survey, showing that consumers have suffered from confusion as a result of the two names, Mr. Jones said.
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October 03, 2006

Pre-Apple Podding
by David Harrell
Pre-Apple Podding
I guess there's a lot that I don't understand about trademarks. According to this Wired story, Apple is trying to register "pod" as a trademark and it's going after any other manufacturer who dares to use (or try to trademark) a name that contains the word.

But Apple certainly wasn't the first company to use "pod" within the name of music-related product. Line 6 has been selling its guitar amp emulation products under the Pod name since the late 1990s, years before Apple introduced the iPod.

Maybe the distinction is music listening vs. music production. Still, I don't get it...

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October 02, 2006

Recommendations
by David Harrell
Recommendations
Netflix is offering a $1 million prize for an improved movie recommendation system, based on personal preferences:
Computer scientists say that after years of steady progress in this field, there has been a slowdown -- which is what Netflix executives say prompted them to offer the problem to a wide audience for solution.
I'm not sure why, but -- for me at least -- collaborative filtering seems to produce better recommendations for movies than it does for music. The iTunes recommendations, for example, have gotten better but some of the early suggestions were hilarious. According to Apple, my purchase of a Lone Justice track meant that I was likely to enjoy to this band.

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    THE LAYAWAYS

    Out Now -- "Maybe Next Year" -- The New Holiday Album:

    <a href="http://thelayaways.bandcamp.com/album/maybe-next-year">Joy To The World by The Layaways</a>

    "This is a sweet treat, deliciously musical without being overbaked for mass media consumption." -- Hyperbolium

    "Perfect listening to accompany whatever holiday preparations you may be making today." -- Bag of Songs


    O Christmas Tree - free mp3 lyrics and song details
    Away In A Manger - free mp3

    Download from eMusic, iTunes, Amazon MP3, or Bandcamp. Listen to free streams at Last.fm.



    album cover art from The Space Between

    <a href="http://thelayaways.bandcamp.com/album/the-space-between">Keep It To Yourself by The Layaways</a>

    "...about as melodic and hooky as indie pop can get." -- Absolute Powerpop

    "Their laid-back, '60s era sounds are absolutely delightening." -- 3hive

    "...melodic, garage-influenced shoegaze." -- RCRD LBL

    Where The Conversation Ends - free mp3
    January - free mp3
    Keep It To Yourself - free mp3

    Download from eMusic, iTunes, Amazon MP3, or CD Baby, stream it at Last.fm or Napster.



    album cover art from We've Been Lost

    <a href="http://thelayaways.bandcamp.com/album/weve-been-lost">Silence by The Layaways</a>

    "The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music

    "Catchy Guided by Voices-like rockers who lay it on sweetly and sincerely, just like Lionel Richie." -- WRUV Radio

    Silence - free mp3 lyrics and song details
    The Long Night - free mp3

    Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.



    album cover art from More Than Happy

    "These are songs that you want to take home with you, curl up with, hold them close -- and pray that they are still with you when you wake up." -- The Big Takeover

    Let Me In - free mp3
    Ocean Blue - free mp3

    Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

    More Layaways downloads:

    download the Layaways at eMusic download the Layaways at iTunes

    the layaways website