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Reconstructing via Deconstructing
October 10, 2008
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"If your environment is changing, you must change with it. If you don't, you perish."
-- Business strategist Curtis E. SahakianI used the above quote in the newsletter back in January 2004, in June of 2006, and yet again in February of this year. I don't like using the same quotes often, but this one just sums up the one basic tenet necessary for any business to survive. In the case of the music industry, I find the quote even more relevant.
I've offered suggestions a few times on things I believe the industry can do to better itself. In the August 29th issue I talked yet again about lowering CDs prices (hard to believe one would even have to still suggest that in this retail environment); launching online stores that would compete with iTunes by offering consumers more bang for the buck; re-launching vinyl in bigger fashion as sales increase dramatically year over year; developing consumer loyalty and acquisition programs; and refocusing the RIAA away from wasting millions on the lawsuits that accomplish nothing to creating meaningful solutions to a better future.
Given the dire conditions the industry faces, the industry can only save itself through reconstruction. To do that, the following have to occur:
1. It's time to face reality and do SOMETHING. That sounds pretty dumb, right? I mean it's 2008, and by now the labels have all done that, right? One would assume so, but if every label executive has faced the reality of what's happening (and been happening for a long time), it begs us to ask why hasn't change occurred faster? If music companies and their management teams have recognized their problems for a while (declining CD sales, plummeting revenues, disappearing retailers and the consumers moving away from home audio systems as iPod sales approach 200 million, etc.), then why is it taking so long to put meaningful plans in action? Label heads need to seriously create their new models now because the industry's lame-duck association, the RIAA, obviously is doing nothing.
2. Stop the Internet blame game; seek solutions. It is disingenuous at this point in time to claim the Internet is killing the industry (it is not) and blame it for all the problems that exist today. If it was, iTunes would not have sold over five billion songs already, and amazon.com, Wal-Mart.com, etc. would not all be seeing increases. A confluence of factors undermined the old music industry model, and many of those factors were at work for the better part of at least a decade. And yes, the Internet is one factor and obviously, one could make the argument if there was no Internet, things would be different. But there is an Internet, and the labels knew about it a long time ago. They avoided the inevitable reality that the Internet would replace traditional distribution methods for as long as possible. It's long past the time to seek viable solutions for the future. Now. A study released this week by web content provider Break Media reports that nearly 70% of men ages 18-34 would rather give up TV than the Internet. Labels need to figure out how to reach that audience and turn them into music consumers.
3. Prepare for disassembly and reconstruction. Most major labels were secure for decades. They dominated the industry with strong rosters, strong promotion, marketing, A&R and sales teams. They had the dollars to spend when needed and pretty much could do what they wanted price wise because they controlled retailers via "co-op ad dollars." As the business grew bigger and bigger over the years, and especially after the CD was introduced at retail, labels developed better distribution systems to maximize their margins and ensure their product could get into the retail marketplace in faster time. Along the way, labels realized huge profits from re-releasing top-selling catalog titles in CD format. Unfortunately, a lot of the profits generated during that time were not put back into building great A&R. In the traditional business world, this would be "R&D dollars" -- research and development money. That was fine as long as profits and sales levels continued along without major disruption. But again, as I mentioned already, a confluence of factors undermined the old music industry model, and many of those factors were at work for the better part of at least a decade. Today, because of the lost focus on artist development and great A&R, labels very existence are in jeopardy.
4. The radio-records love affair has been over for some time. The once symbiotic relationship between labels and radio is over. Whatever was left of those relationships was destroyed by (then New York State Attorney General) Eliot Spitzer's "pay for play" investigations that cost the labels and corporate radio tens of millions. There are still program directors who care about music and who value label promotion people, but they are in the minority. The corporate radio monoliths destroyed music radio's vitality and impact on the industry when they started to watch their quarterly profits for Wall Street, instead of focusing on their local audiences on their main streets.
Radio is no longer the most important thing to the new generations of music consumers. In fact, most find out about new music online or from friends via file-swapping. Today's teens and college students have absolutely no affinity for radio. (If you don't believe it, ask your kids if they fit into those demographics.) Hence, the traditional thinking about launching a new artist on radio is no longer valid. The Internet is the new media of choice, and it offers consumers a wide open world of music, more than radio ever could. The iPod is the new player of choice, and consumers are loading them up with the music they want to listen to. More time with their iPods means less time listening to the radio as well, if at all. Because of this radical shift in listening habits, labels must redefine their marketing radically if they haven't done so already.
Then there's the fact that labels (and some artists) want radio to pay even more to play their music. I won't even start on that, but you can read more about it in Jerry Del Colliano's great post 'Record Labels' Death Wish for Radio'.
4. Decrease the number of releases to better focus on maximizing artists and rosters. I'm not suggesting here that labels decrease potential revenues by doing so, in fact, I'm suggesting just the opposite. In today's marketplace, it takes longer to break new artists, and longer for them to reach multi-platinum sales levels. By concentrating on artist development for the long-term, revenue potential will increase proportionately. Artists that can consistently sell at platinum levels are a whole lot healthier for any label than million-sellers that burn out quickly with short chart life, and don't repeat with subsequent releases. Flavors-of-the-month are always nice revenue generators, but by themselves they provide no security for the industry. One need only look at the top 20 albums in Billboard to see the great number of titles that enter one week and drop out of sight (and mind) in the second and third weeks.
What has always supplied the industry with security are artists that are able to deliver quality music year after year. As I said in last week's commentary, "It's no accident that Pink Floyd's "Dark Side Of The Moon," The Beatles "Abbey Road," the Eagles "Greatest Hits," Michael Jackson's "Thriller" and dozens of other great classic titles still sell very respectable quantities decades after they were originally released, and others (gee, so many here, let's just use the Spice Girls as one example) that sold millions when they were "hot" at retail, are now out of our memory banks."
5. Seek partners whenever and wherever possible. As Sun Tzu wrote in 'The Art Of War,' "If you do not seek out allies and helpers, then you will be isolated and weak." I've said it before, but now more than ever, labels need to generate new alliances and strategic partnerships that will in turn will generate new revenues from ancillary streams never before exploited. Artists like Prince, Paul McCartney, Radiohead, Nine Inch Nails, Coldplay and dozens more have all explored alternative avenues for exposure. (Some to their labels' dismay, but they aren't waiting anymore to make decisions that might pay off.)
Why can't a major label use a major metro newspaper (ala Prince & McCartney) to expose new music? Newspapers are in big trouble also and circulation in almost all cities is down. Perhaps such a partnership would generate more readership, and in return create exposure for more new music. Who knows what might happen? This is just one idea, but the possible tie-ins that might exist with a myriad of companies are abundant. Attention all label marketing people: This is a great opportunity for you to come to next week's meeting with some creative partnership suggestions.
6. Hire passionate people. That sounds pretty fundamental, and it should be. The music business did better when it was focused on MUSIC more than BUSINESS. Sure, labels need the finance and business affairs people as much as any other company. But those guys should not be running labels because those are not the people that have the vision necessary to drive the creative engines. Let the passionate people do their jobs and the money will come and the finance and business affairs people will have plenty to do.
7. The customer rules. Actually, the customer has always ruled. But in the halcyon days of the industry, that was mostly forgotten. There are simply too many entertainment options out there today all vying for the same disposable dollars from consumers, and companies that waste time trying to fight realities in the marketplace (like suing people for downloading), take time away from studying how to better give their customers what they want.
The very survival of the industry requires labels to disassemble their traditional thinking and outdated structures so they can seek to regain some control over their destinies. No, it's not going to be an easy task. But sometimes by taking apart a machine, we can look at it and ask ourselves, "How can we build it better?"
AND THIS...
The first news story below is about EMI's launching its own online store.
I've asked why major labels haven't created their own online stores many times in the newsletter, and I applaud EMI for undertaking such a huge project.
The article says, "Attempts to rival music download services like iTunes have had trouble gaining traction, largely because they failed to offer music from competing labels." That doesn't mean, however, a great online store can't work if put together well, and if it offers customers value-added components that only a label itself can provide via agreements with their artists.
If EMI executes the launch well, and does it right, they might be on their way to creating a great success story. I, for one, hope so. The success of any online stores that labels might launch will mean more music sold online and less stolen. It also means that the labels will be able to generate more revenues because they remove the "middleman," in this case, iTunes. (Or any other online stores)
A successful online store would also provide EMI (and other label that might do the same) a great advantage in negotiating with artists.
Now all we have to do is wait and see what happens. I wish them the best of luck.
EMI To Launch iTunes Competitor By Christmas
FT.comEMI is hoping to enter the crowded digital music space by this Christmas, launching a site that will market music from its stable of artists directly to consumers. EMI is keeping its plans close to the vest for now, but the site is expected to offer video content in addition to music, and some sections of the site will be free.
Most record labels these days have some consumer-facing presence, but attempts to rival music download services like iTunes have had trouble gaining traction, largely because they failed to offer music from competing labels.
Read more about it by clicking here.
Business And Labor Urge Bush To Sign RIAA-Backed Copyright Bill
With only five days left for President Bush to decide whether to sign into law a controversial copyright bill, business lobbyists and even the AFL-CIO are pushing for it to become law. Most bills to expand copyright law are bipartisan -- one aimed at file-swappers and pre-release movies in 2005 comes to mind -- and the so-called Prioritizing Resources and Organization for Intellectual Property Act is no exception. Sens. Patrick Leahy, a Democrat, and Arlen Specter, a Republican, are the sponsors, and it enjoys the support of the Recording Industry Association of America.
While industries have been defensively adapting to a globalized economy and game-changing technologies, intellectual property holders are on the offense. The messages from companies like Procter & Gamble and NBC Universal are being carefully tailored to reveal the benefits of bolstering IP protections--whether it's a promise to U.S. politicians of more jobs, better products for consumers, or faster development for leaders abroad.
Read more about it by clicking here.
Serato Audio Research Launches Whitelabel.net
Serato Audio Research, the company synonomous with DJing and Scratch Live, is launching Whitelabel.net, a digital distribution system that will allow labels to deliver promo releases directly to DJs. The Whitelabel high-quality mp3 format is tagged with artist and song information, BPMs and Scratch Live overviews pre-built. The files will play in full high-quality audio when played in Serato Scratch Live. The company developed the service with the input of a number of renown labels from around the world.
The site allows DJs to preview and download music in a "Scratch LIVE ready" format, while providing record labels the required security necessary for digitally distributing their copyright material. Whitelabel.net provides record labels secure access to easily deliver music to the DJs, and allows them to track where their music goes. This gives the record labels the ability to see that their music goes exactly where intended... to the DJs.
Read more about it by clicking here.
"Rock Band" Offers Real Merchandise For Fake Bands
If you've already mastered every instrument for every song on Rock Band 2, game makers Harmonix and MTV Games have figured out a way to make your gaming experience all the more better: By allowing you to order merchandise bearing the fake logo of the fake band you create.
Read more about it by clicking here.
Has Apple Hit The 10 Millionth iPhone Mark?
It might sound a little preposterous, but several bloggers (not Apple) using unofficial manufacturing data claim the company has surpassed its goal of selling more than 10 million of the popular gadgets. (And stock market tumble or not, if true, I'm buying Apple stock ASAP)
Read more about it by clicking here.
YouTube Adds Click-to-Buy For Songs, Games
YouTube has rolled out "click-to-buy" ads that give viewers the option to buy the products featured in them. The ads, which let music lovers click to buy their favorite mp3s and games from iTunes or Amazon.com, are the first release from YouTube's eCommerce platform, a new monetization strategy aimed at giving content providers an additional revenue stream from their videos.
Read more about it by clicking here.
COLDPLAY EP
Coldplay's Chris Martin revealed on the band's website that they've reconfigured the track list for their upcoming "Prospekt's March" EP. The eight-track disc contains five new songs and three updated versions of "Viva La Vida" tracks. Additionally, the new version of "Lost!" will feature a verse by Jay-Z.
BRITNEY BACK ONLINE
Britney Spears will relaunch her website today (10/10), according to a countdown clock. Britney's new "Womanizer" video debuts tonight on '20/20.'
SAMMY DOES CHICKENFOOT
Van Halen castaways Sammy Hagar and Michael Anthony are in the studio with guitarist Joe Satriani and Red Hot Chili Peppers' drummer Chad Smith for a new supergroup called Chickenfoot. The band first played together at a Las Vegas concert in February.
BEYONCE NEWS
With her third solo album due out November 18th, Beyonce is already making room in her 2009 schedule for a tour. The jaunt will kick off abroad in the spring before making its way back to North America in the summer.
MORE KISS MERCH
KISS' line of sneakers is now for sale. Each pair of shoes features all four members from their 1978 solo albums.
AND WHO WOULDN'T WANT A BIRTHDAY GIFT LIKE THIS, DEPT
Lil Wayne received an unbelievable birthday gift ever this year when Cash Money exec Bryan "Baby" Williams handed Weezy a Louis Vuitton briefcase stuffed with $1 million in cash. Now he has enough money to buy some pants that fit.
MAYBE LIL KIM CAN BORROW SOME OF THAT LOOT FROM LIL WAYNE
Lil Kim has been sued for $2 million for allegedly breaching her contract with record company Brookland Media.
HICKS PICKS OWN LABEL
Former "American Idol" winner Taylor Hicks is scheduled to release his next album with the independent artist services company A2M (Artist to Market) on Feb. 10th, 2009. Hicks was dropped by RCA last year and will release his new album with on his own Modern Whomp Records label.
MAN IN BLACK NEWS
Johnny Cash's life is explored a new in a documentary that will air on the Bio Channel on October 23rd. PT. "Johnny Cash's America" will also screen at the Country Music Hall of Fame, the American Cinematheque in Hollywood, the Memphis Indie Film Festival and the Paley Center in New York throughout October before coming to CD/DVD on October 28th. The film features interviews with Bob Dylan, John Mellencamp, Snoop Dogg and Al Gore, among others, and includes 27 Cash songs and some never-before-seen footage of Cash's 1965 TV show and sessions with Dylan.
Quotes of the week
"I am so excited to have this opportunity. You don't understand. I got ESPN tattooed on my arm."
-- Lil Wayne, showing his enthusiasm and commitment to his sports blog on ESPN.com."It might be a shock to see me, but that's no reason for people to act crazy, and it doesn't give them license to chase me down the street."
-- Prince, describing some people's reaction to finding him knocking on their doors as a Jehovah's Witness, to USA Today."I'm a 45-year-old rock star and I'm worried about being tardy."
-- Red Hot Chili Peppers bassist Flea, on at the University of Southern California, to MTV."He does have a very good sense of what an artist is about and what he should be doing and what he should not be doing. It's very important from an artist's point of view to have someone who understands and has a vision."
-- Neil Diamond, talking about his producer, Rick Rubin, in Rolling Stone.
The B-Side - 'Blips'
THE ONION (www.theonion.com) STORY OF THE WEEK:
Congress Can't Remember Last Time It Got Together And Legislated Like This
WASHINGTON-In the midst of negotiating the largest economic bailout ever proposed, congressional leaders agreed Friday that the chaos and volatility of the past week has rekindled a sense of excitement for legislation many had thought lost forever.
The financial crisis also brought back some once-familiar faces to Capitol Hill. Former House speaker Newt Gingrich surprised a large crowd of representatives when he took the congressional stage unannounced Thursday, joining some former colleagues as he added one of his many "classic addenda" to the bill. "Shit. It feels good to have the gang back together again," the former representative of Georgia's sixth district said. "This is why we all got into politics in the first place. Well, this and the drunken sensation of unchecked power."
Read the rest here and laugh: http://tinyurl.com/4ghj94.
THE RADIO INTERVIEW on 'THE AMERICAN PERSPECTIVE' - From newsblaze.com
"Steve Meyer is on the front line of global music sales and distribution which he expects will soar to pocket-bursting levels. What's more, he shares his insight and ingenuity with us. Steve gives us both historical perspective and futuristic vision as he chats with Judy about the love of his work, trends of the business and his personal points of view about success, happiness and blending life with the lust for life. Steve joins Judy and helps us discover the thrill of having it all with a sense of balance and purpose. "
You can listen to an interview I did with Judy Piazza of 'The American Perspective' by clicking here: (It runs about 15 minutes)
http://www.thesop.org/index.php?id=10306.
The Blogs
Check out a great blog by Jerry Del Colliano, the Director Executive Programs, Clinical Professor Music Industry & Recording Arts, at the Thornton School of Music,University of Southern California, by clicking here: http://www.insidemusicmedia.blogspot.com.
Box Office
Check The Daily & Weekly Box Office (and more film info) at: www.boxofficemojo.com.
TinyURL
Check out www.tinyurl.com where you can make a smaller URL that will work for any webpage you wish to link to or reference. (As you can see, I'm using it in my news stories above!)
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