First introduced in 1982, Audio CD still remains an important format and medium for distributing music and other audio (audio books, for example). Most artists release their music albums on Audio CD, while other media (files, vinyl records) are mostly seen as associated releases.
On the other hand, various devices that work with files instead of or in addition to Audio CDs become more and more popular. There are almost no portable CD players anymore, they are replaced with music file players (like iPods). Such file players offer multiple advantages over portable CD players: they are very compact, insensitive to shocks, can store more music, etc. Furthermore, home entertainment also moves to powerful media players that work with HDDs and USB sticks and support many popular audio and video formats.
So, while still buying albums as Audio CDs, you may want to convert the music into some digital format for storing and using them with various file players / media players. But what format should you prefer?
There are two basic categories of audio formats: lossy and lossless. If you convert an Audio CD track into a lossless format, the resulting file will contain an identical copy of the original audio track. With a lossy format, you will have a copy with some bits of audio information missing. Files in lossy formats are typically smaller than the same audio in a lossless format.
Popular lossy formats use so called perceptual coding today. This means that the codec does its best to keep all significant audio information and throw out only the parts that aren't important to the human ear. Thus, a typical person should not be able to hear any differences between lossless and lossy with a sufficient bitrate / frequency. In the real world, many people argue that they can clearly hear the difference, and that lossy is inferior to lossless.
To rule out possible psychological factors, you can create a list of songs in a lossless format and their copies in a lossy format, shuffle the list and start playing it with your hardware. Try guessing which song is lossless and which is lossy, then check your guess. Write down your results. If after a number of songs your results look like 50/50, then most probably you cannot hear any difference (you should take into account that a small number of tries would not give any representative results, but it still can be fun). If you always can tell which song is lossy and which is lossless, then lossy is hardly an option for you.
So, lossless files are bigger, but better. Lossy files are smaller at the expense of some audio information that one probably cannot hear anyway (we speak about files having decent bitrate / frequency values; with a 64 Kbit/s 22 KHz MP3 you will hear a difference right away).
There is one more consideration that we should take into account. You can always create lossy from lossless, but not the other way around. While technically it is possible to convert some song from a lossy format to a lossless one, the resulting copy will be identical to the lossy file. So conversion from lossy to lossless does not make any sense: you get significantly bigger files with the same quality.
If you want to back up your Audio CDs, lossless would be a logical option. If you convert CDA tracks for use with certain devices, choose a format that is supported by the corresponding device.
Among lossy formats, one must mention MP3. It's the most popular and most widely supported lossy format. It is likely that all your devices capable of playing music support MP3. It offers a wide range of frequencies and bitrates, with most people using bitrates 192 Kbit/s and higher (up to 320 Kbit/s) and frequency at 44 KHz for music.
WMA is a pretty popular lossy format by Microsoft supported by quite a number of devices, but its support is not universal. There is also WMA Lossless.
M4A in its lossy variant uses the AAC codec, offering better quality and smaller file sizes compared to MP3 with the same bitrate. It's a default format in Apple devices (iPod, iPad, etc.), but devices by other manufacturers may fail to support it.
FLAC is one of the most popular lossless audio formats and codecs. Being free and open, it does not require licensing and is supported by many media players. APE is another popular lossless format that offers a better compression ratio compared to FLAC, but it uses a symmetric algorithm and thus needs more resources for the decoding process.
Your choice of your favorite format will depend on the purpose and your hardware. For portable players, MP3 may be the best option. For home media centers with expensive speakers and amplifiers, FLAC or APE can be considered.
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