May 1, 2003 12:00 PM, BY BLAIR JACKSON

Don't have your dark suit cleaned just because you think that any day now, you're going to be attending a funeral for the compact disc. That format isn't going anywhere any time soon. Yes, CD sales dropped some 10% last year, and Internet file sharing has shown itself to be a formidable foe of prerecorded CDs (but actually a boon to blank CD sales). The fact is, the compact disc is one of the most successful entertainment technologies of all time, and at this point, it is pervasive worldwide. People like the way they sound and like the format's portability and durability. Downloading songs off the Internet is still something that relatively few people do at this point, though the financial impact of this practice has undeniably been dramatic the past two years.

How do you compete with “free”? That's the conundrum that's been tossed around in record company boardrooms with increasing urgency the past couple of years. Tops on the list of solutions seems to be the notion of somehow training the populace to pay for music at “authorized” Internet sites. This is complicated and fraught with a certain degree of peril, as it involves cooperation among companies that are traditionally competitors (though the airlines seem to have worked this out with Orbitz); an admission that the labels' historic reliance on the brick-and-mortar model is perhaps outdated; and appealing to people's innate sense of morality to eschew the free online swapping bazaars in favor of legitimate sites that actually generate revenue for the artists and record companies. Not an easy task, but not necessarily impossible.

Then there's the idea of giving consumers more for their CD dollars: the value-added approach. Of course, the relative length of the CD compared to a traditional vinyl record has always been a selling point. The record companies have raked in millions of dollars by selling remastered albums that include “bonus tracks”: B-sides, outtakes and other related material to fill out the CD's 79-minute potential playing time. But that material is as easily bootlegged and/or ripe for file-sharing sites as any other music on CD, so that concept has lost a little of its luster as a marketing tool. What has caught on, though, is including in a CD package a bonus DVD-V featuring live footage and music videos, for that extra incentive to buy rather than download. So far, this practice has not been widespread, but it has proven successful for both popular and new bands, and we are likely to see more of it in the coming months. It's two media for the price of one, and you can bring in a third when you get into discs that also contain lyrics, biographies, photos and other information that can be read on PCs.

Another area with considerable potential for the music industry is high-resolution, multichannel audio. The audio industry has felt this excitement for a number of years. Who among us has not marveled at a surround demo at an AES show, or in one of the pioneering 5.1 control rooms, or salivated at the mere suggestion that we will someday be able to hear all of our favorite albums in crystal-clear, completely enveloping, multichannel sound? The industry loves it!

But does the public? Does the fact that people have become conditioned to being wowed by crisp, loud, multichannel audio at their local multiplex mean that they want to replicate that experience at home, and with music-only product? Does a generation that thinks MP3 and other compressed Internet-friendly audio schemes sound “fine” care about the wonders of 24-bit, 96k clarity or a floor-shaking subwoofer? Do people who have embraced CD and, more recently, DVD-V want to get involved with another format? And speaking of which, “Do I buy SACD or DVD-A, and will any of these things play in my DVD-V player, and I don't think I can fit a center-channel speaker on top of my digital cable box and…aaaaugh! Help me, Mister Wizard!”

Okay, calm down. Let's look at some of these issues and put them into focus. It really is going to be a cool revolution. And it is coming.

FORMAT FRENZY

Why are we not surprised that the birth of surround audio discs as a popular format has been rather difficult, with competing formats, hardware compatibility issues and consumer confusion? After all, the Beta vs. VHS videotape war wasn't so long ago. Sony and Philips, developers of the compact disc, were lucky in the early '80s: They had no competition for a digital audio delivery system, and the CD quickly became a standard. (However, that didn't prevent both Sony and Philips from failing spectacularly with two other competing digital technologies: the MiniDisc, which does have its share of users today but did not live up to Sony's high expectations; and Philips' Digital Compact Cassette, which virtually no one bought.)

Today, there are two major formats vying for your surround audio dollars: DVD-A, which has been supported by Toshiba, Panasonic and several other manufacturers that were part of the DVD Forum; and Sony/Philips' SACD. Until fairly recently, the two systems were wholly incompatible: You needed a different player for each format. Within the DVD-A group, there are also competing encoding schemes offered by Dolby (AC3 and MLP — Meridian Lossless Packing) and DTS Entertainment (Coherent Acoustics digital audio compression algorithm), though most multichannel receivers are equipped to handle both. Consumers have been justifiably confused by the plethora of hardware choices facing them in the brave new world of surround audio, and disappointed by the relative paucity of software offerings for either DVD-A or SACD.

When we asked Jim Kessler, senior buyer for DVD at Best Buy, the nation's largest home electronics chain, how hardware sales for the two formats were doing, he replied frankly, “Not very well. I think the biggest issues are, number one, the content and what's available. I think between the two formats, there are still fewer than 1,000 titles, which is not a lot of discs. And then, number two, is what do you play them on? We've taken the stance that having two formats like this is not customer-centric, so what we've really been pushing manufacturers to do over the past two years is create a DVD player that will play both formats, and that's finally happening. Pioneer will have a piece mid-year that will play both DVD-Audio and SACD and will retail at only $179. We expect that to do pretty well, much better than the model they have now that's like a $500 or $600 piece.

“Even with the price coming down so low,” he continues, “I believe the target audience is still relatively small for either DVD-Audio or, especially, SACD. The majority of customers just don't listen to music that way anymore: sitting down and really listening carefully and picking apart all the different nuances that go into the music. There is a small percentage of people who do listen that way, and those are going to be the customers for this product. I just don't think it's going to be that big a segment any time soon.”

Naturally, there are many people throughout the industry who hope that Kessler is underestimating surround audio's potential. Up and down the industry, though, there have been complaints that there hasn't been enough software to support consumers' investments in a new player.

“People are smart,” comments David DelGrosso, VP of marketing for DTS Entertainment. “They know the difference between a format that's being supported vs. one that isn't by the number of labels and the amount of current product in that format. The fact is, the support hasn't been there for DVD-Audio so far. You can grab the Billboard Top 100 and count how many of those titles are available on DVD-Audio or SACD, and it's very, very few. That's not a format; that's an audiophile niche — and by the way, it's serving that community very nicely. But people want to see more depth to the catalog and more support from the labels before they buy another piece of audio equipment.”

David Kawakami, director of The SACD Project for Sony, is more upbeat. “We're adding about 150 titles per quarter now, so obviously, a lot of professionals are involved,” he says. “We're especially happy that many of the top producers, artists and engineers are enthusiastic about producing SACDs. On the consumer front, the format is starting to go mass-market. There are a wide variety of affordable players from a number of manufacturers, and bands like the Rolling Stones are selling in the millions. [Pink Floyd's] Dark Side of the Moon, which comes out on March 25th, will no doubt be a million-seller.

“Competition is usually good for consumers,” he adds. “It provides the impetus for manufacturers to refine their formats, products and services so that they offer real value to the consumer. The trend toward ‘universal’ players makes it hard for a consumer to go wrong. These players play every format, so if one falls by the wayside, the product is not obsolete.”

It should be noted, however, that there seems to be some confusion among the general public about the SACD format. It is not exclusively a surround format; it got its start as a high-resolution stereo format, and actually only a small percentage of SACD discs contain surround mixes. Indeed, when we read about the Rolling Stones recently selling upward of 2 million SACDs of their older albums, it must be noted that these discs did not include surround mixes of those albums and that, as is usually the case now, the SACDs included a conventional CD layer, allowing the discs to be played on a conventional CD player. At this point, no one knows what percentage of the people purchasing the discs are listening to the high-resolution versions of those early Stones gems and how many are just popping them into their cars and portable players and listening to the CD layer. Then there's the example of audiophile classical, jazz and blues label Telarc, which has been routinely putting out hybrid CD/SACD surround discs for some time now and racking up impressive sales. There are no numbers to tell us who's listening to which format; just that sales are brisk and there's definitely a buzz about the SACD layer. In both cases, the hybrid discs have unquestionably given a boost to the surround industry: The more hybrid discs a person owns, the more likely he/she is to eventually spring for a system that will reveal the full glory of the high-resolution layer.

The Warner Music Group is the largest of the U.S.-based majors to adopt DVD-A, and though they have been slow to release titles, they are definitely bullish on the technology. “We feel that DVD-Audio is the more natural choice of the two formats for the following reasons,” comments Paul Vidich, executive VP, strategic planning and business development for WMG. “Number one, the extra content included only on DVD-A discs: videos, interviews, photos, etc.; content that has proven very popular on DVD-Video discs. SACD does not support graphical or video capability. Second, SACD does not have renewable copy protection, which is clearly an important aspect in today's climate. And third, unlike DVD-A, which plays on all DVD players, SACD generally requires the consumer to purchase new hardware.”

To clarify the last point: WMG's DVD-A discs contain a Dolby Digital 5.1 mix that can be played on a standard DVD-V player. However, the high-resolution surround mix cannot be played on current DVD-V units. As Vidich notes, “We recognized that some consumers might not necessarily appreciate the difference between the Dolby Digital 5.1 mix and the higher-resolution mix, but our research showed that the vast majority of consumers could appreciate the difference between a stereo mix and a 5.1 mix. We've found that music fans simply love the surround mix, and DVD-A offers consumers the flexibility of enjoying the surround mix without having to upgrade their equipment.”

Still, no matter how wonderful a great surround mix sounds, there is always going to be a sizable segment of the population that is simply not going to purchase the requisite receiver and speakers; in many cases, there are insurmountable space considerations: Some people just have no desire to move “beyond” stereo music listening. But this is an industry still in its nascent stages, and there are changes afoot on many levels, not all of them related purely to music.

GOING MOBILE

“Surround audio is very important for the future of the industry,” stresses Craig Eggers, director, consumer electronics technology marketing for Dolby. “From the Dolby perspective, we've seen surround sound migrate from the cinema to the home theater, and it now has also migrated to the PC platform; it's become extremely important in the gaming community. About 70 percent of the top games out there are encoded with Dolby surround sound, and there are more and more people who are using that as their entry to surround audio. And then the car is the next stop.”

Nearly everyone seems to agree that the future of surround audio lies not in the sale of home systems, but in cars.

“My first thought after I heard DVD-Audio was, ‘God, I've got to get this in the car!’” Eggers says with a chuckle. “We believe that the car is a natural environment for Dolby technologies. And quite frankly, when you look at the demographic that's really into souping up their cars, multichannel surround sound — particularly DVD-Audio — really offers that crowd a chance to get away from the boom-boom-boom and to get into something that's an extremely compelling experience. And that's just the leading edge of the movement. Once the systems start going in cars and people hear it, it's going to change the way they listen to music.”

Adds DTS' DelGrosso: “I did this presentation six years ago, when I produced some of the first music remixed in [surround] with Boyz II Men and Marvin Gaye, and we had to jury-rig a car, but the equipment is readily available now. There's Kenwood, Clarion, Eclipse, Pioneer, Panasonic; there are a lot of great car audio companies that have 5.1 decoding. It doesn't take a lot of research to know that in a lot of cars on the road right now, there are speakers in the front, speakers in the back and subwoofers. Now, all we have to do is add the center — or not, because there's still phantom center capability — and maybe beef up the sub and rewire it all so you can put discrete sound in each channel. Then you've got a system that blows away your previous system. They're already here. In a couple of years, they will be common.”

AND THE WINNER IS…

It is possible — likely, even — that the widespread proliferation of surround systems in cars, coupled with the computer gaming industry's continuing embrace of the technology, will lead to more work for people throughout the audio industry, as well as increased profits for the record labels and game manufacturers willing to put in some money to put out the software that will help drive the boom.

Over the past few years, a number of top recording studios and mastering facilities have invested considerable sums in surround mixing environments. Some are, no doubt, wondering when the big return is going to come, as the spread of surround has been slower than originally predicted by its most ardent adherents. But eventually, when new cars are routinely equipped with surround audio systems, the record companies will suddenly have dollar signs dancing in their eyes again, and surround mixes will become nearly automatic on every new project, which will bring more money into the studios and put more cash into the hands of manufacturers who outfit the surround mixing and mastering rooms. And, naturally, you'll have the opportunity to buy all of your catalog favorites one more time — more money for the studios, engineers and labels.

The surround revolution is not going to solve all of the music industry's woes overnight. As Sony's Kawakami notes, “The market is very segmented and complex [right now]. Different products appeal to different consumer groups. The music-downloading consumer is a very different consumer from the music collector that you'll find flipping through the racks at Tower Records. And for now, the size of the market for music moved through brick-and-mortar as packaged media dwarfs any of the electronic music-distribution models.”

Warner Music Group's Vidich says, “While WMG is strongly committed to helping create a legitimate market for music on the Internet, and has made a catalog of tens of thousands of tracks commercially available for a variety of online services, we feel that optical disc-based formats offer the highest-quality music enjoyment that simply cannot be made available over the Internet due to the extremely large amounts of data that are required. There continue to be hundreds of millions of satisfied buyers of optical media — CD and DVD — around the world, and we expect these physical music carriers to be an important part of the industry for years to come.”

Even so, it's important that the brick-and-mortar model continually has something new and exciting to offer — like surround. It helps, too, that DVD-A and SACD are very difficult to pirate thanks to their technical complexity and the various value-added extras that are turning up more and more on the DVD-A discs in an effort to make them a better value than regular CDs and more in line with the wildly successful DVD-V format.

“Right now,” comments Dolby's Eggers, “the CD represents a handshake between the consumer and the record company, and it's a one-time handshake. But it can be so much more. With DVD-A, you've got a video feature, so you can have interviews with the band on there, or lyrics, sheet music, more album art. Why not put Websites on the disc itself? Why not put the artist's fan club on there? We can put the record company's Website on there. Take it one step further. I don't think record companies have a problem with me making copies of content if it's for my own personal use. If that's truly the case, why not put an MP3 of that content on the disc itself so the consumer doesn't have to rip it? It's there for them to be able to take it and move in to their portable players, etc. In other words, DVD-A can be about a lot more than just a superior-sounding audio product. And it becomes more than just me giving the record companies and the artists some money and them giving me a shiny, silver disc. It makes the whole exper ience of purchasing and listening to music much more interactive, and that will be good for everyone.”

Mastering Both Ways

When we spoke to Stephen Marcussen, whose Marcussen Mastering Studios in Los Angeles has done pioneering work in both the SACD and DVD-A formats, he noted, “Being a studio owner, I can tell you that equipping a multichannel room is an expensive proposition, especially the way I've done it. We have a custom console that's completely handmade. Right now, there's only so much surround work to go around, and if I were building a studio today, I don't know if I'd build a surround room. Two years ago, I almost regretted it. But clearly, surround will grow and people will grow into it. I hope so,” he adds with a laugh.

Does Marcussen have a preference between DVD-A and SACD? And is one easier or less expensive to work with? “My take is that they both sound great,” he says. “If they're handled poorly, either one of them can sound bad. I don't think there's anything wrong with the formats. I think that Dolby and DTS sound good, too. I think 96k is really solid. I enjoy it. And I particularly enjoy it when we're not being hyper-competitive and smacking everything up into the last dB. When you're able to be realistic about utilizing the format, it can be really impressive; some of it is absolutely stunning.”

As for the cost of mastering a typical surround project, Marcussen says that 5.1 usually adds about a full day of work on top of the 2-channel master. “It is an expensive world to work in, but everything the client can do to get the bookkeeping in line in advance really cuts the cost. You don't want to pay me to sit around and determine whether the master take is A, B or C.”

Working in the two formats is different, “because DVD-A is PCM, we get to use more tools,” he adds. “The technology is more accessible. You can plug in your favorite digital box on it; whereas in an SACD world, there are no external digital boxes that are equalizers or limiters or compressors or any of those tools. Working in SACD, you have to really be on top of your game.”
— Blair Jackson

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