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Digital effects have revolutionised the way guitar effects are used over recent years. They're available in complex and powerful multi-effect rack units, medium power multi-effect floor units, and simple stompbox style boxes.
Digitally processed effects have been available for many years, however, they have stepped into a new realm of digital modelling over recent years. In addition to using a mini-computer to process the signal in real time, these devices use sophisticated filtering, subtle delays, and other techniques to emulate real world equipment and environments.
One of the first commercially available devices of this type was the Roland VG-8 in the early 1990s, which emulated the entire sound from the guitar itself, its pickups (type and position), guitar effects, then different amplifiers, speakers and microphones! Roland later released their GP-100 effects processor, which emulates effects, amplifiers, speakers and a microphone. Boss then released different cut-down versions of the GP-100, with a Boss GX-700 rack effect, followed by their GT series of floor and rack multi effect units.
Other manufacturers joined this trend, and some have fallen away. Line 6 launched their popular first version Pod and developed several amplifiers utilising that same technology such as the AxSys and Flextone I and II. They evolved that technology into a second generation with the Vetta & Flextone III amps and Pod XT, fine-tuned even further in their X3 series. Line 6 has also diversified by making much of this technology available as software plug-ins for home recording.
Other notable early contributors were Yamaha and Digitech (as Johnson Millenium), while Vox, Zoom and Fractal have produced more recent offerings. Many manufacturers have developed software amp-modelling: In addition to Line 6, some popular choices include Peavey Revalver, Ampeg Amplitude, Waves GTR and Native Instruments Guitar Rig.
Like anything different, there are pros and cons:
Digital effects are incredibly versatile compared to their older analog counterparts. You really can have Fender, Marshall Vox & Mesa Boogie tones in the same box as all your favourite cabs and effects! Some manufacturers offer algorithms designed to distribute the available processing power between the effects used, so if you don't need chorus for example, you might have extra reverb features or quality.
Effects can generally be used in any order, without the limitations of hard wired effects. You don't have to be too concerned about matching levels and impedances.
Bang per buck
Digital effects are becoming cheaper and more powerful. They are computers which process digital data in real time. As costs decrease and power increases in the computer industry, we reap the benefits in this equipment. They already provide effects more cheaply than if the same sounds and flexibility were to be built with analogue components.
Digital modelling can deliver far more gain than is technically possible in a physical analogue design. Normally this would mean more noise as well, but fortunately digital noise gates are also very powerful, and can make the noise unnoticeable while you're playing, and dead silent when you're not.
It is possible to create new sounds that have never been available before. True harmonisers and synth-type effects are some examples of this. As above, overdrive effects can have far more gain than is possible with real components, which would suffer uncontrolled oscillation (caused by "electronic feedback").
Your tone at any volume
A common use of overdrive pedals is to allow you to get overdriven tones at lower volume levels. It doesn't sound as good as running a tube amp at high volume levels, but in the past, that's really been the only alternative if you want that sound at a lower level. Now that the amp and its cabinet can be modelled and deliver a line level output which can be amplified cleanly at any level without changing tone.
Many players find that even the most powerful processors are not as natural as the real thing. There are several reasons for this. Analogue to digital, and digital back to analogue conversions require a high degree of accuracy to faithfully reproduce the dynamic range of a guitar. Accurate amp modelling requires more processing power than most manufacturers currently believe customers are prepared to pay for, so they take some short cuts. It also takes time to process data, so players sometimes perceive a tiny delay between what they play and what they hear in cheaper modellers.
Sound can be cut out for a short period when changing patches. This is not a problem with new equipment. Changing patches, particularly if it changes the algorithm used by a processor, is effectively the same as closing a program on a computer and reloading another. This takes time, and because nothing can be processed during the changeover, there is a short silence between patch changes. This is most noticeable when you sustain a note or chord then change patches. Some newer effects can mask this blackout to a small extent by letting the echo effects (delay and/or reverb) ring out while the underlying patch is changed.
True vintage effects
Some vintage effects require an enormous amount of processing power to be reproduced digitally. Modulating delay time is something that cannot be easily achieved, however, this is precisely how the original flanging and chorus effects were produced. Unless you're prepared to pay a lot for a powerful processor, some modellers fake these effects using different techniques to give a similar sound.
Despite offering several parameters to modify effects, they cannot be customised any further. Some of the best vintage effect sounds came from basic effects that were customised either deliberately or accidentally by tinkerers. Jimi Hendrix is reputed to have had most of his effects customised. This problem can be quite serious in digital effects, because you're at the mercy of using emulated effects that sound the way the manufacturer wants. It should be said that Line 6 have done some good work in emulating the sound (warts and all) of vintage effects. On the other hand, Fractal Audio have highly "idealised" effects that you can tweak to your own taste.
Early modelled effects were designed to sound impressive (so you buy them), but the down-side was that the great subtle vintage effects like true phasing and true chorus were not available. I've heard phaser effects which are clearly a watered down flange effect, however, vintage phasing and flanging were produced in an entirely different manner, making them very different effects. Likewise, some digital chorus effects are emulated by mixing a delayed and detuned signal with the original. This was only ever a side-effect of vintage chorus when you set the rate too high!
It might seem strange to say that because digital gear reproduces the full frequency range well, it is a disadvantage. This is mainly troublesome with digital overdrives and distortions, where even the built-in equalisation cannot effectively remove the high frequency harshness of these sounds. I used a Roland GP-100 that has an excellent speaker simulator that did roll off these offending highs giving a slightly muddy tone. Rocktron made a digital rack box that advertised limited bandwidth as a feature! Of course, some players will like this as a new shred sound. The original analogue stompboxes have the opposite problem: if you use many of these in a chain, their limited bandwidth can accumulate to give you a muddy sound.
A second generation of technology (eg Line 6 PodXT and Boss GT8) has opened up more of the high-end in their processing. This has eliminated the "blanket over the speaker" muddy high end that earlier models delivered. It also allowed for some sparkling cleans and quite authentic "on the edge of breakup" tones. Unfortunately with heavily overdriven tones, it has exposed some unpleasant and very unmusical high-end distortion, which has been popularly labelled as "fizz". This should not be confused with normal fuzz that is the musical buzziness you get with overdriven sounds. Fizz can be alleviated to acceptable levels with skilful equalisation, better cabinet models and by using real guitar speakers.
Well, this is going to be my opinion based on a lot of gear I've bought, borrowed, used and often sold, so read on with that in mind ... The quick answer is that with the latest devices, such as Fractal Audio's Axe-FX, the answer is: "Really good. Really!" For high-end prosumer gear, I think the Line 6 Vetta amp, with upgraded speaker models by Armin, is also good. The Vox Tonelab was the first I recall that modelled the dynamic feel of a tube amp to some extent, and I liked this for clean and on-the-edge tones in particular.
If there's one thing that distinguishes an old and/or cheap modeller from a high-end product it is tonal richness & complexity. Good modellers have a genuine tonal character and one that varies as notes fade away (or if you use lower guitar volume settings). Older and/or cheaper modellers have a somewhat bland or sterile tone that doesn't vary much with input volume.
If you want to use a modeller that doesn't include an amp, you'll need to plan your amplification. The best modellers are designed to sound their best into a FRFR (full range, flat response) system, so you can use a high quality powered monitor on stage and feed the same signal to FOH knowing it all sounds the same. As we go to lesser models, you're likely to benefit from using guitar speakers with a powerful solid state amp, while the cheap models are probably best thought of as effects units and used with a traditional tube amp with guitar speakers.
If you're using a reliable tube amp now that gives you all the sounds you need, there's little reason to even consider a digital solution. But if you're tired of a limited range of sounds (even if they're great) as well as the hassle of a large pedal board, you should definitely try out some of the good modellers available now. I don't buy the argument anymore about guitarists being put off by menu systems and buttons either: If you can work a mobile phone and a TV remote, you can work a modeller ;-)