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The Right Place (ONLINE)...The Right Price...And More
October 7, 2005
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In the continuing saga of the labels versus Steve Jobs and Apple's iTunes, this week EMI Group Chairman Eric Nicoli echoed Edgar Bronfman Jr.'s remarks from two weeks ago, and also disputed Apple's contention that a single price for songs sold via the Internet helps prevent industry piracy. He also denied labels are being "greedy" when it comes to thoughts about increasing prices of online music.
"I'm not persuaded by the argument that a single price deters piracy," Nicoli said. "I'm not persuaded of the fact that a lower price deters piracy. What I am persuaded of is that making music more convenient and better value is a deterrent to piracy." Gee, isn't that exactly what Apple's iTunes has done Mr. Nicoli?
Mr. Jobs has done (again, whether the labels like it or not, this is a fact) what NOBODY on the label side has done thus far. He's created an online music store where over a half-billion songs have been SOLD not STOLEN for free elsewhere. I wonder how many artists are upset about the revenues they've received from iTunes?
No sooner had Mr. Nicoli spoken when the news came out of the U.K. that sales of online music there have been slow to take off because "in spite of the mounting competition among suppliers, pricing for subscriptions, albums and individual tracks remains stubbornly high." (Source: ' U.K. Online Music Hobbled By Low Prices', CNET News 9/29/05, http://news.com.com/U.K.+online+music+hobbled+by+high+prices/2100-1027_3-5885452.html ) Hmmmn...big sales of online music here in the U.S. at the 99 cent price, and slower sales across the pond with higher prices. Draw your own conclusions.
The music industry (via the RIAA) has spent more time and money the past several years suing several hundred people who they claim have downloaded songs illegally on P2P websites than in assisting labels in developing plans to create online music destinations where consumers might purchase more music and stay in the habit of buying for the future.
Now, attorneys representing hundreds of people say their clients are being wrongly sued by the RIAA for illegally trading music online and that many are innocent. The people are fighting back and one attorney put the number of people he believes are innocent "in the thousands." (Source: 'RIAA Takes Shotgun to Traders', http://www.wired.com/news/digiwood/0,1412,68951,00.html?tw=wn_story_page_prev2 ) Regardless of the outcome of all these legal doings, it's further evidence that all the lawsuits the RIAA files are simply as effective as using a pea-shooter to try and stop a tank. I guess Mr. Bainwol also missed the AP news blip this week about new software already developed that can mask the identities of P2P users. No identities ... who you gonna sue?
And in the RIAA's never-ending battle for truth, justice, and the American way, Chairman/CEO Mitch Bainwol said this week, "Even as we continue to transform ourselves and transition to the digital marketplace, the music community is still suffering enormously from the impact of various forms of music theft. One of the stories we need to repeatedly tell in the coming months is that illegal downloading and burning continue to compromise the industry's ability to invest in the new bands of tomorrow."
We all know the stories, Mitch. Now, how about DOING something about helping to "transform" the industry? Lawsuits don't transform anything. And transform fast because year-to-date total sales of 414.7 million units, represents a 10.4% deficit versus a year ago. That means 48.2 million fewer albums were bought than from January through September of 2004.
And now the good news. Digital music sales tripled in the first half of 2005 and it now makes up 6 percent of total sales, or about $790 million, according to first-half figures released on Monday by the International Federation of the Phonographic Industry (IFPI) trade group (See story below, ' Digital Music Sales Surge Amid Broader Decline' ) while CD sales continued to decline. Maybe, must maybe, the price is right online.
READER FEEDBACK
Many comments from readers from my commentary last week ('Bronfman Wants To Take A Bite Out Of Apple') and the follow-up article I e-mailed out ('The New Music Download Battle' by John C. Dvorak, www.pcmag.com ).
Here's a few of the best:
" Steve - How ironic that the labels are moaning about Apple and iTunes when they themselves continue to always attempt (and usually succeed) to contractually reduce the artist's royalty base with first a 25% 'standard' packaging deduction, then a blanket 'free goods' reduction (deducted whether or not that percentage of free goods is actually dispersed), plus other royalty reducing 'industry standards' such as slashing the artist royalty by 50% when they run a TV advertising campaign.
The label 'standard' is to apply this 50% reduction to ALL sales that take place during (and somewhat after) the TV campaign. That means that if an artist is already selling well before the TV ads are run, the royalty base is diminished not only on the increased sales that might be generated from the campaign but, on all units sold.
Then there are also royalty reductions on record club, military and foreign sales. Don't forget recoupable charges for the employment of indie services like press, marketing, and radio promotion much of which is required to fill gaps left by staff reductions enacted to improve bottom line profits (and executive bonuses). And then there is recoupment for videos.
Are major label execs still pulling down tremendous salaries despite bottom line performance? Are they still flying first class and using limos? Are they still expensing costly lunches and dinners? Do they still insist on giving artists daily per diems that wouldn't even pay for their own hotel breakfast? Does one label still have the best quality tuna flown in from Japan to be served in their corporate dining room?
I haven't seen the labels attempt to change improve 'standards' for artists. Yes, labels own the repertoire, but who's making that music? - An Artist Manager and Ex-Major Label Executive
"Steve - Great item on Bronfman. His sudden embrace of variable pricing is nice. Too bad the Best Buy clerk wouldn't buy that argument when I went and offered to pay $5 for the debut of World Leader Pretend, instead of the same $18 on the sticker like on Linkin Park's latest.
Bless his pointy little head." -- Mike Lyons, 'Forest Columnist' at www.triplearadio.com
"The reason for the success of iTunes is two-fold: a) a fair price for music for the first time since 45's were a buck; b) a LARGE allowance of indie music banned from top radio stations that is far superior to the crap payola-ed onto commercial stations. It has become a unique arena to fairly select great music you can't hear anywhere else at, once again, a fair price.
Bronfman and Lack are preparing to dismantle the finest thing that has happened in the music business in the last thirty years because: a) they didn't think of it first; b) they cant compete with it; c) they don't realize that price is the key ingredient. Once you remove that, it falls back into the same zone and mentality that destroyed their businesses in the first place iTunes is brilliant because it borrows from Warner's 1970's loss leader marketing. Bronfman & Lack can only see that Jobs is selling a ton of iPods and they don't have a piece of that. Unfortunately, they can't see or realize that they have benefited ENORMOUSLY financially by helping to pop the cherry of the download for money market. But it sticks in their craw that Jobs sells all those iPods. It was a brilliant idea, you morons!! Just because you can't come up with one, don't destroy what has satisfied billions of consumers into paying for music downloads. It's just so easy to outprice them back to peer to peer, but you'll find that out shortly as you destroy the music business again with plain simple jealousy and greed. At least I lived long enough to see it COULD work, if only for a short while." -- Al Kooper, www.alkooper.com.
"Steve - Bronfman complains about Apple's savvy marketing synergy between the iPod and iTunes, but had it NOT been for somebody promoting the SALES of online music, those half billion plus songs iTunes has sold would've generated NO revenues for those artists or labels. People would've simply downloaded the songs elsewhere on the Internet somewhere else. It sure sounds like Bronfman (and I assume others in his capacity at other labels will soon join the chorus) is trying to make up for missing the boat with the Internet with stockholders and other industry executives. Is there anybody out there who doesn't think Apple is the primary reason people are BUYING songs these days, whether at iTunes or elsewhere online?" -- Label Guy Who Wishes I'd Bought Apple Stock Long Ago!
"Steve - Is it just me? It seems like anytime I read something good in the news about online music sales increasing, I automatically wait for someone at one of the major labels to talk about: a) raising prices; b) how selling songs vs. CDs is killing the industry's ability to make satisfactory revenues. What's REALLY hurting CD sales is lousy CDs with only one or two good songs and the public isn't going to spent $10-$15 on them anymore. Apple's iTunes at least keeps people in the habit of buying music, even if it's only songs, and the 99 cent prices is a big reason. " -- P.L.E.A.S.E. Don't Print My Name...I'd Like To Keep My Job As Long As Possible
Digital Music Sales Surge Amid Broader Decline
The music industry cheered a tripling of digital music sales in the first half of 2005 that was spurred by mobile phone ring tones and online services and offset persistent declines in overall sales.
Digital music now makes up 6 percent of total sales, or about $790 million, according to first-half figures released on Monday by the International Federation of the Phonographic Industry (IFPI) trade group.
Read more about it by clicking here.
Musicians Tell How To Beat System
Web sites instruct fans on how to beat copy-protected CDs.
NEW YORK (Billboard) -- Major labels Sony BMG and EMI are releasing more and more new CDs that block fans from dragging their tunes to iPods. Now, in the most bizarre turn yet in the record industry's piracy struggles, stars Dave Matthews Band, Foo Fighters and Switchfoot -- and even Sony BMG, when the label gets complaints -- are telling fans how they can beat the system.
Read more about it by clicking here.
Universal Music, Motorola dial up iRadio deal
LOS ANGELES (Hollywood Reporter) - Universal Music Group is the first company to make its catalog available on Motorola Inc.'s Motorola iRadio, the commercial-free music and talk mobile phone service expected to launch in January. The partners jointly made the announcement Tuesday.
Read more about it by clicking here.
Studios to move online to beat pirates
By ReutersThe film industry is working to launch online movie download services to avoid the same fate as the piracy-ridden music industry, NBC Universal Chief Executive Bob Wright said Tuesday.
Read more about it by clicking here.
Record Labels, Satellite Radio In Conflict
LOS ANGELES -- The record industry may next aim its legal guns at satellite radio due to a dispute involving new portable players that let listeners record and store songs, an analyst and industry sources said on Wednesday.
The record industry, led by major labels such as Vivendi Universal, Warner Music Group, EMI Group and Sony BMG, believe the recording capability is a clear copyright violation and could take revenue away from paid download music services.
Read more about it by clicking here.
FOR SOMEONE WHO REALLY WANTS TO GET IN BRTINEY'S PANTS
Britney Spears auctioning off her jeans and other clothing from her closet on eBay to raise funds for Mississippi victims of Hurricane Katrina.
MARTHA'S NOT COOKING IN HER TIME SLOT
NBC-TV is moving its much touted "The Apprentice: Martha Stewart" show to 9 p.m. Wednesdays in hopes of improving its ratings. This past week, "The Apprentice: Martha Stewart" dropped 9 percent from its weak premiere a week before, earning a scant Nielsen Media Research 2.1/6 in adults 18-49 and 6.1 million viewers, and tying for fourth place.
RIGHT OUT OF 'SPINAL TAP'
Mick Jagger denying rumors that his girlfriend L'Wren Scott is creating a rift between him and the other members of the Rolling Stones after a British newspaper report claimed Scott angered the band by giving them fashion tips and telling them to quit smoking.
SHE'S STILL SINGLE
Per an interview in Vanity Fair, Beyonce denying rumors that she is secretly married to Jay-Z. The singer said she is not even engaged to her longtime boyfriend.
NO BLING-BLING IN THE RING-RING FOR EMINEM
Eminem's publishing companies filed suit Tuesday in an effort to stop the rapper's songs from being used as cell phone ringtones. Lawyers for the rapper saying they also plan to go after karaoke companies that sell Eminem's songs without permission.
'THE DAILY SHOW' DOES MUSIC
The White Stripes becoming the first band to play on The Daily Show with Jon Stewart on Dec. 1.
This week's releases
- Ricky Martin, Life (10/11)
- Dolly Parton, Those Were the Days (10/11)
- Alicia Keys, Unplugged (10/11)
- Clap Your Hands Say Yeah, Clap Your Hands Say Yeah (10/11)
- Jamie Cullum, Catching Tales (10/11)
- Danger Doom, The Mouse and the Mask (10/11)
2005 Industry Conferences
Date Name Location October 3-5 2005 Computer Disc Jockey Summit/Convention & Expo Tampa Bay, FL November 11-12, 2005 Portable Media Expo Ontario, CA 2005 Digital Entertainment & Media Expo (DEMXPO) November 30th, December 1st, Los Angeles, CA January 5-8 International CES Las Vegas, NV
Quotes of the week
"Happy Rosh Hashanah everyone. This is of course a happy day of celebration. Unless of course, you're the host of a late night show and all your Jewish writers are off."
-- Jay Leno"Well it's finally autumn in Los Angeles. It's the time where the leaves turn red--because they're on fire!"
-- Jay Leno
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.
Date Name Location October 17 Business Plan Development Part I w/Harry Redinger Los Angeles October 24 Business Plan Development Part II w/Harry Redinger Los Angeles November 5 NARIP Workshop - Independent Distribution Solution w/Clay Pasternak Los Angeles
The B-Side - 'Blips'
HOW YOU CAN HELP OUR ECONOMY AND PUT A BIG CHECK IN THE BANK: WASHINGTON -- So, you think you know better than the politicians about how to preserve the American Dream? Here's your chance. If have an idea on how to help grow the economy and create well-paying jobs, it could be worth $100,000. A contest sponsored by the Service Employees International Union is looking for ideas that will help the economy grow, encourage existing companies to expand and create well-paying jobs. The winning idea will be worth $100,000 and two runners-up will claim a second prize of $50,000 each. The country needs new ideas for how to strengthen its economy and compete in the fast-changing international marketplace, said SEIU President Andrew Stern. And he thinks ordinary Americans are the best people to ask for those ideas. The contest entries should outline, in 175 words or less, a problem or issue, how it should be fixed, and how fixing it will benefit working men and women. A panel of two dozen judges includes Democrats, Republicans, economists, chief executives and interest group leaders. Entries should be postmarked by Dec. 5, 2005, and mailed to The Best Idea Since Sliced Bread, SEIU, Fifth Floor, 1313 L St. N.W., Washington, D.C. 20005.
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