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Seeking Solutions
August 4, 2006
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"In times of change, learners inherit the Earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists."
-- Eric HofferWithout a doubt, one of the best articles about the state-of-the-industry in a long time is the one below titled 'Drawing Up Music Retail's Future.' I encourage all readers to click on the link and read it.
From that article: " Last week's numbers were not pretty. According to Nielsen SoundScan figures, physical album sales were the lowest they've been since January 1994; as of the week ended July 25, CD sales had dropped 7.8 percent for the year. While the sale of digital albums has grown by almost 123 percent in 2006, the development of that sector so far is not keeping pace with the decline of physical product; adding in equivalent digital albums, the business overall remains down 0.7 percent this year. Oh, brave new world."
I've talked about the "brave new world" for four years now here in this newsletter. In fact, the very first issue was titled 'Brave New World' back in November 2003. Some of the things I talked about in that commentary were CD prices, piracy, Apple's iTunes early signs of success, the increase of people downloading illegally globally, the diminishing role of artist development at all labels, and more.
It's hard to believe that at this late point in time, music retailers are still wondering about their collective future when all the warning signs have been so evident for so long. If they actually believe things might ever be secure again, they are indeed mistaken. Like it or not, nothing will ever be secure at music retail again. Things have moved too fast and have gone too far to ever bring the active music consumers back into stores to buy CDs in any significant numbers to evidence marked increases.
If the industry is truly looking for solutions to keep disc sales at satisfactory levels and (maybe even more important) keep margins that can generate satisfactory revenues for labels and retailers, then something else will have to be implemented to make that happen.
One idea that could do both almost immediately (and discussed here in the newsletter back in May 2005, and then again more recently in June in the article ' WHY THE DUAL DISC WITH DVD PLUS MAKES SENSE' ) would be to increase CD/DVD Plus releases that offer consumers more value for their money. The increased list price on these discs would be justified by the video content and keep consumers buying disks.
I'm sure there are many label executives who have all the arguments against the CD/DVD Plus already memorized or data to show that these discs would not prove really viable in today's marketplace. To all of you I would ask only one question: " Can you provide a better idea for recapturing disc sales in today's marketplace? If so, what is it? " And of course if you do have a better idea, you'd better use it fast.
Of course I'm not suggesting the CD/DVD Plus format is the sole remedy to the problems at retail. But it sure would put some excitement back into retail and give consumers more for their money. In a time when the 'Now That's What I Call Music' CDs reflect the public's moving away from purchasing CDs from artists that only contain one or two good songs, it would make all the sense in the world to try something new and different. To not react to the changes in the marketplace and the habits of music consumers is sheer stubbornness.
Things continue to change quickly. This week Ad Age magazine reported on the demise of 8-year-old print edition of 'Teen People.' This is just another indication just how quickly digital media can change things. The magazine was an instant hit when it launched, but a lack of ad pages led to a decision that the brand would be more effective as a Web site that could generate even more ad dollars. In even bigger news this week, Time Warner's AOL changed its entire model to offering most services to free and generating revenues from more strategic alliances and ad dollars online. (See article below, ' AOL Makes More Services Free' )
And this week, Wired magazine says " Forget about plastic discs and DVDs. The future of gaming belongs to the Internet and downloadable games." While console disc sales dropped by more than $700 million from 2004 to 2005, according to NPD Group, Jupiter Research says digital downloads on game consoles earned $143 million in 2005 and should grow to $2 billion by 2011. ( At a recent conference, Microsoft's corporate vice president of interactive entertainment, Peter Moore, described the future of gaming: "Years from now, the concept of driving to the store to buy a plastic disc with data on it and driving back and popping it in the drive will be ridiculous," he says. "We'll tell our grandchildren we did that, and they'll laugh at us." ) As Wired notes: "Digital distribution means, eventually, the end of the disc" for video games, movies, and music. This is a plus for everyone. It means the end of expensive packaging and distribution deals."
And then there's the news that more than 70% of 2007-model American cars will be iPod-ready, with most new vehicles from Ford, GM and Mazda offering factory controls to operate the iPod in what Apple described today as "seamless integration." More iPods (or similar devices) means an even faster attrition in retail disc sales.
So while the retailers and labels meet in Florida this week, let's hope some real ideas are suggested that can provide some solutions to the problems at hand.
Talking about these problems is one thing. Doing something about them is quite another. If the industry doesn't want to try and answer the same questions at NARM 2007, then something/anything must be done soon.
Thomas Edison said, " I have not failed. I've just found 10,000 ways that won't work." Let's try just a handful of good ideas and see what happens.
When Music TV Tangles With The Net
Music television is the endangered species of the pop world, and is learning the hard way that it must adapt to the Internet age, or die.
Britain's "Top of the Pops," the world's longest-running weekly music show, will be declared extinct Sunday when it's broadcast for the last time on the BBC. Two days later MTV, one reason for the demise of "Top of the Pops" and at the cutting edge of music for so long, begins to reinvent itself with a new interactive TV channel and Web site that will target the online social networking craze.
Young, Internet-literate listeners are not prepared to wait for a weekly digest of chart acts, and the preselected programming of 24-hour music channels is also losing its appeal in an age where music choice is greater than ever.
Read more about it by clicking here.
EMI Offers Music Catalog To Mashboxx
EMI Group, as part of a larger effort to support peer-to-peer networks that allow the sharing of licensed music files, has agreed to share its digital library with P2P start-up Mashboxx.
The record label, whose 1,000-plus artists include Janet Jackson, Gorillaz, the Rolling Stones and Coldplay, is not the first to license its content for use on Mashboxx. According to founder Wayne Rosso, the New York-based Mashboxx--currently preparing for a beta test launch--already has deals with Sony BMG and Universal, and has completed negotiations with Warner Music.
Read more about it by clicking here.
AOL Makes More Services Free
Stepping up the chase for online advertising dollars, AOL will give away e-mail accounts and software now available only to its paying customers in a strategy shift likely to accelerate the decline in its core Internet access business.
The decision, announced Wednesday by AOL parent Time Warner Inc., removes the few remaining reasons for AOL subscribers to keep paying when they already have high-speed Internet access through a cable or phone company.
AOL will still offer its dial-up accounts at $26 a month for unlimited use, but the company no longer will aggressively market it. That's likely to mean the end of mailboxes stuffed with CDs of trial AOL software, as well as job cuts in marketing and customer service. There was no immediate word on how many layoffs will result.
The changes are to fully take effect in early September.
Read more about it by clicking here.
Should Marketers Make Friends On MySpace?
The volume of advertising in MySpace and other social networks is expected to balloon in the next few years, and much of it could blur the lines between socializing, entertainment and marketing.
Kids are especially at risk, critics say, because as a thriving group on social networks, many younger teens are not sophisticated enough to treat with skepticism this new, seductive form of advertising. For example, marketers behind movie characters like "Superman" and products like Wendy's hamburgers pose as potential "friends" for kids to network with on MySpace.
Read more about it by clicking here.
YouTube Overtakes MySpace...The Rise and Rise of YouTube
YouTube has established itself at the top of the league of the new generation of community websites by becoming even more popular than MySpace, according to research.
The video sharing site has taken a 3.9% share of global internet visits a day compared with 3.35% for MySpace, according to internet analysis company Alexa.
Read more about it by clicking here.
The Upside Of The Downside of Technology
ONE THING I LOVE ABOUT traveling, and trust me there aren't that many, is that I get to grab all these freebie business magazines. I picked one up the other day and came upon an article about Bluetooth--stereo Bluetooth and the Advanced Audio Distribution Profile (A2DP)...
The music industry was a bit late to the game, but even they are trying their hand at using "traditional" Internet-based peer-to-peer networks as a marketing platform. Now, let's take that mobile set and see how we can capitalize on that emerging trading behavior as a new marketing vehicle. In much the same way that brands are starting to tap into online social networks, brands should also be looking at these personal mobile social networks as the next frontier. I guess we could call it miral initiatives--the application of a viral campaign on a mobile platform.
Read more about it by clicking here.
Report: La La A Threat, But Labels Should Hold Tongue
An analyst report calls La La a savvy new music site for helping people swap CDs via the U.S. Postal Service. But, the report notes, the company is also a highly effective way to pirate music.
La La allows music lovers to find used CDs on the company's Web site and then order them from their owners, other La La members. The discs are then mailed from one party to the other. What may alarm some music-label executives is that many CDs lack copy protections, and there's nothing to prevent songs from being converted to MP3 files and spread across the Web, according to a report issued by IDC analyst Susan Kevorkian.
The same is true in the case of brick-and-mortar used-CD stores, but "those stores lack the potential scope of La La," Kevorkian said in her report. "This perceived threat will only grow as La La's community does."
Read more about it by clicking here.
XM and Sirius Satellite Radio Report Continuing Losses
NEW YORK (Adage.com) -- You gotta take the bad news with the good -- that appears to be the story for XM's and Sirius's second quarter earnings. Despite continuing losses, CEO Mel Karmazin was bullish on the potential of advertising as Sirius' second revenue stream.
Losses at both satellite radio companies widened during second quarter, though Sirius, reporting results today, said its advertising revenues were up. The satellite radio company, led by former CBS Radio chief Mel Karmazin, lost $237.8 million for the period compared with a loss of $177.6 million during second quarter of 2005.
Despite the losses, investors appeared encouraged by a growth in the overall market.
Read more about it by clicking here.
Europe To Guzzle 70 Million Free iTunes Songs
Apple Computer is teaming up with Coca-Cola in Europe to give away about 70 million songs on its market-leading iTunes Music Store--more than a third of the total number of songs it has sold there to date. The companies declined to disclose terms of the deal.
In just over two years, Apple has sold 200 million songs in Europe, with about 150 million coming in the last 12 months. Previously, Apple had teamed up with Coke's rival PepsiCo for a giveaway of 100 million songs in the United States.
Read more about it by clicking here.
How the Web Was Won
Departing Washington Post technology writer Leslie Walker reviews her reporting of Internet business over the last eight years and comes across an interesting folder labeled "big bad bets." Essentially, it's about tech startups with loopy ideas that attracted crazy amounts of VC cash back in the heady mid-to-late Nineties.
Anybody remember Beenz and Flooz, the guys who tried to create Internet "currency"? Or CueCat, the cat-shaped bar code scanner that wanted to bring magazine readers from print ads to Web commercials (err, not here). What about iWon.com? The sweepstakes Web site that planned to give $10 million away to people who clicked on its links? That one's still giving stuff away today, as part of Barry Diller's InterActiveCorp...When you look at how much ($3 billion!) Yahoo put into GeoCities--widely considered the first social network--News Corp. got the market-dominating MySpace for one-sixth of that. And what did Yahoo ever do with GeoCities anyway? In 1998, Walker points out that the 10 fastest-growing Web sites "were ones where users create the content," and this is long before "blog" was even a word.
Read more about it by clicking here.
Drawing Up Music's Retail Future
The National Association of Recording Merchandisers convention begins in earnest Thursday at the Gaylord Palms Resort in Kissimmee, Fla. Many attendees at the 48th annual confab for music retailers likely will be wondering if they are staring into the abyss.
The record business has weathered crises in the past: The '90s saw massive consolidation at labels and music chains alike, and distributors and retailers were rocked--frequently into bankruptcy--by the violent contraction of the business. But with the rise of the digital universe, merchants and labels have moved into terra incognita.
Last week's numbers were not pretty. According to Nielsen SoundScan figures, physical album sales were the lowest they've been since January 1994; as of the week ended July 25, CD sales had dropped 7.8 percent for the year. While the sale of digital albums has grown by almost 123 percent in 2006.
Read more about it by clicking here.
Rolling Stones By Phone
Can't make it to Europe for the current tour by the Rolling Stones? No problem. Dial a toll-free number and listen to them perform all down the line in real time for $1.99 per seven minutes.
The British rockers are the first to use a new technology called Listen Live Now, which is backed by Hollywood talent firm Creative Artists Agency, tour promoter Live Nation, and veteran artist manager Marty Erlichman.
Read more about it by clicking here.
THIS WEEK'S 'WHO CARES' NEWS ITEMS
ITEM#1: Heather Mills McCartney claiming she made Paris Hilton cry and vow to give up fur after showing the heiress a DVD that featured cats and dogs being skinned alive for their pelts. Oh, so that's what Heather's was doing with all of Paul's money.
ITEM#2: Janet Jackson changing the name of her upcoming album from 20 Years Old to 20 Y.O. at the suggestion of fans participating in a Yahoo! Uh, changing the title's not going to make it sell Janet if it ain't in the grooves.
ITEM#3: Star Jones Reynolds denying rumors that she and husband Al Reynolds are headed for divorce court. Does anybody in the universe care whether she gets divorced or not?
ITEM#4: No, that's not Paris Hilton nude in the latest Playboy--it's her increasingly tiresome and talent less look-alike wannabe, Natalie Reid, who says she hopes the exposure will "lead to a lot of opportunities" in modeling and acting. Acting? Don't hold your breath Natalie. Maybe we'll see you in a new reality show "My Life On The Celebrity Z List.'
ITEM#5: Tom Cruise's ex-girlfriend, Penelope Cruz, joining the list of people who claim to have laid eyes on his daughter, Suri. According to reports baby Suri looks like a million other babies.
FOR A GOOD CAUSE
Ozzy Osbourne designing a limited edition T-shirt to benefit the Sharon Osbourne Colon Cancer Program at Cedars-Sinai Medical Center in Los Angeles.
HAR-HAR-HARDEE-HAR-HAR
Owen Wilson responding to Steely Dan's claim that the movie 'You, Me and Dupree' was based on the band's Grammy-winning song, "Cousin Dupree," claiming he had "never heard the song" and did not "even know who this gentleman, Mr. Steely Dan, is." "I hope this helps to clear things up and I can get back to concentrating on my new movie, 'Hey 19,' " the actor joked.
SO IF THEY BREAK UP, DOES THAT MEAN FOUR DIVORCES?
Pamela Anderson and Kid Rock traded vows in the South of France last Saturday, in the first of four weddings the couple plans to have. Next up on the Kid & Pam marital tour: Malibu, Detroit and Nashville. What a cheesy way to get as many wedding presents as possible.
NO 'SLOW HAND' CONCERT IN MOSCOW
Officials in Russia inexplicably pulling the plug on an Eric Clapton concert set for Red Square next week. Maybe 'Layla' didn't translate properly?
FANTASIA EMBELLISHMENT
American Idol executive producers Ken Warwick and Nigel Lythgoe complaining about their depiction in 'Fantasia: Life is Not a Fairy Tale,' the telepic about the life story of Fantasia Barrino scheduled to air on the Lifetime channel. Both Warwick and Lythgoe deny they ever asked Barrino to step down from the show because she was an unfit role model, as the movie suggests. "It's a complete fabrication," Warwick told the New York Post.
WELL, IT'S A WHOLE LOT BETTER THAN ANY TIME IN THE SLAMMER...CAN YOU IMAGINE HIM IN THERE?
Boy George serving his court-ordered community service by picking up trash on Manhattan city streets for five days beginning Aug. 14, a sanitation spokesperson told the New York Daily News.
MEATLOAF COOLS
Meat Loaf dropping his multimillion dollar lawsuit against songwriter Jim Steinman, whom he had accused of wrongfully registering the phrase "Bat Out of Hell" as his trademark in 1995.
IT CAN'T BE BECAUSE SHE NEEDS THE MONEY
Cher auctioning off about 700 items from her home, including her bed, her 2003 Hummer and numerous Bob Mackie costumes in a sale expected to raise more than $1 million.
TBS JOINS OTHERS IN MAKING CONTENT AVAILABLE ON ITUNES
iTunes may be singing all the way to the bank. TBS has joined a number of other TV companies in making iTunes Music Store business deals. Programming from CNN, Adult Swim and Cartoon Network will now be available for a download fee of $1.99.
ACCENTUATING THE POSITIVES
The Alabama Bureau of Tourism planning to put up billboards featuring American Idol winners Taylor Hicks and Ruben Studdard and runner-up Bo Bice, who are all natives of the state.
NEW CLAY
Clay Aiken releasing his third album, A Thousand Different Ways, on Sept. 19. The album--the Idol runner-up's first since 2004--features covers of 10 well-known songs, plus four original songs. Clay's debut album. 'Measure of a Man' was certified triple-platinum.
GET WELL WISHES TO
Doug Fieger, frontman for The Knack, undergoing successful brain surgery Thursday to have two tumors removed, his doctor said. Feiger is expected to make a full recovery.
COMING SOON!
- Christina Aguilera, Back to Basics (8/15)
- OutKast, Idlewild (8/22)
- Bob Dylan, Modern Times (8/29)
- Old Crow Medicine Show, Big Iron World (8/29)
- Jessica Simpson, A Public Affair (8/29)
2006 Industry Conferences
Date Name Location CMJ October 31 - November 4 New York
Quotes of the week
"So when you get groups like The Killers and Scissor Sisters who come along, it's thrilling. I'm so over the tattoos and the T-shirts and rings through the noses. It's not pretty, it's not pleasant, it's not exciting. Please stop it now."
-- Elton John"The artist formerly know as Prince is getting divorced from his wife. He was seen removing belongings from the house formerly known as his."
-- Jay Leno"Are you applauding for me or for the air conditioning?"
-- David Letterman"As you may have heard, Mel Gibson was arrested in Malibu on a DUI. I don't know what he was drinking but I think you can rule out Manischewitz."
-- Jay Leno"There is no excuse, nor should there be any tolerance, for anyone who thinks or expresses any kind of anti-Semitic remark," Gibson says in the statement. "I want to apologize specifically to everyone in the Jewish community for the vitriolic and harmful words that I said to a law enforcement officer the night I was arrested on a DUI charge."
-- Mel Gibson, apologizing for his bad behavior after being stopped for DUI in Malibu after his antics became widespread via the Internet."I don't think I'm going to see any more Mel Gibson movies."
-- Barbara Walters, on 'The View'"Who's Tony Blair?"
-- Paris Hilton demonstrating her grasp of world affairs to GQ magazine.
NARIP Information
NARIP (The National Association of Record Industry Professionals) promotes career advancement, education and good will among record executives. To find out more about this great organization, how you can join or attend their events, just go to: www.narip.com.
The B-Side - 'Blips'
MY ID? SURE...IT'S RIGHT HERE...OOPS!: WESTLAKE, Ohio -- Maybe she should have paid better attention to her server. Last week, a waitress at the Moosehead Saloon in Westlake, Ohio, asked a woman to show proof of age after the customer ordered a drink. When the waitress looked at the ID, she realized the customer's ID was actually her own license, police said.
The waitress, a 22-year-old Lakewood, Ohio, woman, had reported her wallet stolen from a bar on July 9. Her driver's license and credit card were in the wallet. The credit card had already been used for $1,000 in illicit purchases, police said.
As the waitress called police, the woman apparently got suspicious and took off, according to police. She was identified by a friend as Maria Bergan, 23.
Bergan was arrested at her home Saturday night and remains in the Westlake City Jail. She has been charged with identity theft and receiving stolen property.
Police Captain Guy Turner said the odds of something like that happening defy calculation.
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