Myths vs Facts about Digital Distribution

At least in principle on a technical level you can distribute it on your own, bandwidth costs next to nothing these days. But people are creatures of habit and the consensus might still be that you buy music from a music store.

I don't really see why it'd need to be either/or; you can have digital distro and still sell vinyl from your trunk.

What I think is a bit of a shame is that so far digital distribution doesn't really make much use of the medium. With vinyl printed sleeves with liner notes are expensive, digitally they are basically free. I don't see why not more is done with pdf-files with liner notes, pictures, etc. I think Apple was trying something with digital album art but Apple, as always, is only compatible with OSX and Windows so I can't even have a look at their store. I don't think they even allow you to create that yourself; you need to pay them 5 figures. That's not really encouraging to try and make something nice and valuable out of it all.

It'd be nice to do things like release a flac file of a track and some extra loops and hits with it for DJ's to play with, like a modern take on "bonus beats". You could also have generative compositions delivered with annotated sourcecode or a quality picture of the sunset that inspired you to write a certain song or for all I care a flash video-game using your album as the soundtrack. Who doesn't love a record with liner-notes or a poster or sticker? This digital format has the chance to go way beyond picture-discs but so far I don't really see that happen.

That's true, but trust is hard to establish digitally (or between people who never meet in general). I already think it's nice that this way you can at least get people to download quality files based on the original masters. People are going to download anyway and when they do I'd rather see them take quality files than some crap. We could start using digital signatures and have labels somehow unlock files delivered by these distro's; the technology exists, it could even be done in Open Source without compromising security but that would mean more hassle and delivering files would get a lot more involved.

I'm much more interested in how we could use this medium than I am in making sure every cent is accounted for.

Sure.

The first issue would be a matter of the distro selling encrypted files that could only be decrypted using a key from the label/artist. That'd mean all files sold would need to be authenticated by the label and hence the label would know about them. It gets slightly tricky as we have three parties; the distro, the label/artist and the buyer but I think it could be done. You may want to read up on this; http://en.wikipedia.org/wiki/Public-key_cryptography

The advantage would be that all labels could have a central point for all sales while being sure of the amount of sales. The downside is a rather significant amount of cpu overhead for all parties per sale. I don't think anyone would go for that kind of thing. No doubt these online retailers are screwing people but I think they are mainly screwing them in the percentage that goes to the artist and label. Considering the overhead of all labels having to run a computer 24/7 online with a dependable connection to generate keys for this in order to be sure (distro-side logs could easily be forged) and the small profits here I don't think those numbers add up financially. You'd probably be better off setting up your own online distro.

One thing, trust-wise, that you didn't yet touch on is the buyer's trust in the distro. Suppose you would like to buy Kassen Ep on Creme Eclipse (excuse the far-fetched example) from YouTunes.com. One thing the current schemes don't allow for is you trying to ascertain that YouTunes is actually authorised by Creme to sell digital copies of that record. Hopefully you'd like to buy digital copies so you know you get versions straight from the master and the composer gets some cash, but will that be true? Right now you don't know. You could buy Creme records at iTunes or Beatport right now but does mr TLR (who runs Creme) or me (who made that record) get anything for it? How would you know? I think I know but I do because I trust Jeroen (TLR), not because his of digital signature but because I've known him for years and he told me. You, however, can't trust me; I'm even lying about my name here. Maybe you trust the admins on this board whom you might ask to verify this account is indeed linked to a email address linked to "Kassen" and then you might trust me (however, "Kassen" is notorious for perpetually being half-serious). Digital trust is a very tricky thing indeed. All of those hoops your bank makes you jump through to do online account management? Your bank doesn't inherently trust you are Xeheche and you shouldn't trust mybank.com is actually your bank without confirmation (which is why they use https and certificates that your browser checks).

Right. Enough with the paranoia-inspired math.

Some of my favourite records come with stuff. Jazz records come with liner notes, if you are lucky (check out "countdown time in outer space" by Brubeck for a great example) those describe how pieces were made or the inspiration, lyrics or whatever. Modern records might have posters, or stickers or.... All of these are expensive to do. With digital distribution the cost of such things goes down a lot and a lot more is possible. I don't see why buying a full album (as opposed to a few tracks) shouldn't get you extra stuff. Maybe a screensaver or a game, a video clip, perhaps a skin for your digital DJ application made by the artist. Right now all you get is sound; a sort of lowest common denominator. Vinyl had/has fold-out sleeves and cd looked puny in comparison, digital downloads have a lot of potential to go beyond vinyl but so far that doesn't really seem to happen.

Well talked it over with someone else and we came to there is no solution really , its too late in the game to have labels pull their catalog to require shops to have proper copyright signature and accountable report methods.

The perfect scenario would be that labels store their catalog themselves.
Online store purchase triggers authentication code to the label 
Sale triggers label's ftp.
Sale authentication code is encryption code.

I understand that there is very little interest in a label learning how to set up FTP , filling a form and having a store deal with the rest is easiest but you would be surprised if you did the math how fast this would change.

i think you would realize in many cases this is the mother of understatements.