checking in on the music industry…
Old habits seem hard to break, which might explain why me and my old partner still start our mornings scanning the Billboard magazine’s daily e-news. Despite both of us being away from the music business for about three years, there’s still an interest although I admit that some days it’s akin to reading the obituaries in your local newspapers or slowing down when you pass an accident.
If any of you are interested in the business side of music (which is not nearly as much fun as making or listening to it ), in last Thursday’s edition there were several items of note and I thought I’d pass them on to you. Forgive me…this is my dweeb side coming out.
Ed Christman, who has been covering the music retail beat in the US for at least thirty years, started out his year-end assessment like this:
“As expected, the year-end Nielsen SoundScan numbers once again tell a tale of an industry in turmoil. There were a few bright spots, but 2010 was mostly about diminishing returns. During the 52 weeks ended Jan. 2, album sales in the United States fell 12.8% to 326.2 million units from 373.9 million units in the prior year, as the sales of CDs fell by nearly 20% for the fourth year in a row.”
Regarding digital downloading:
“Digital album downloads fared better, posting 13% growth to 86.3 million from the 76.4 million scanned during 2009, accounting for nearly 26.5% of all U.S. album sales last year, according to SoundScan.
Album sales continued to decline, hurt by downloading at unauthorized peer-to-peer networks and shrinking shelf space at fewer brick-and-mortar retail outlets. For the year, only 13 albums managed to scan more than 1 million units, with the best-selling title being the 3.4 million units scanned by Eminem’s “Recovery.” That represents a new low in the SoundScan era, even worse than 2009 when only 22 albums scanned a million units apiece.”
As far as which major corporations are controlling the business:
“Universal Music Group remains the perennial market-share leader. For the year, it garnered 31.4% market share in albums, beating out Sony Music Entertainment’s 27.4% slice and Warner Music Group’s 19.8% performance. EMI finished fourth with 9.6%, while the indie sector collectively garnered 11.6%.”
I must admit I was surprised to see the indie distributors with such a small piece of the pie. Less than a dozen years ago…before record stores went out of business and consolidation fever hit and of course the advent of digital music…independent distribution accounted for about 30% of the overall business. Yikes…
Reprinting an item from Publisher’s Weekly, here’s something about Borders:
“Here’s a tale that reads like the past ten years of music retail: Borders has suspended payments to vendors and vendors are suspending shipments to Borders. In addition, Borders is asking its vendors to accept delayed IOUs in lieu of payments.
Some people may see this news and shrug it off by saying Borders represents a dying business model. While that may be true, publishers do not want a national book chain to go under when they need outlets that cater specifically to book buyers.
It’s the same predicament record labels and their distributors have faced over the years. To keep a fail- ing retailer in business, vendors occasionally take losses on their receivables. In many cases, extending credit and taking losses only prolongs an inevitable bankruptcy and closure. But that’s how it tends to plays out, and it could happen with Borders.”
That less than a month ago Borders made noise and overtures to take over competitor Barnes and Noble, I found this to be another example of how our financial system works. Or doesn’t. Whether Borders is out of money or just saving it for taking over Barnes, not paying their bills has a trickle down effect to all their suppliers. And although their music departments are virtually non-existent, this will still no doubt hurt some labels.
Things over in the UK are no better than in the USA:
“Album sales fell by seven percent in Britain last year, despite a 30 percent jump in the number of digital albums purchased, industry lobby group the BPI said on Wednesday.
The figures compiled by the Official Charts Company extend the trend of recent years, where the sharp rise in legally downloaded music has failed to arrest the overall decline in an industry struggling with online piracy.
On the retail level, music, books, DVDs and games group HMV announced on Wednesday that its sales in the five weeks to January 1 dropped sharply and that it would sell or close around 60 British stores over the next year.”
Ok….so not a lot of good news. But if you like vinyl, here you go:
“The year-end SoundScan numbers, released yesterday, have a lot of minus signs. But one big exception is vinyl sales: While the numbers aren’t massive, they still rose 14% from 2009 to 2010, according to the Nielsen Company and Billboard’s 2010 Music Industry Report. In 2009, 2.5 million vinyl albums were sold; in 2010, that number rose to 2.8 million and cracked the Nielsen SoundScan sales record.”
Before you start having a party, it was the Beatles and other heritage artists such as Pink Floyd, Metallica and Michael Jackson that led sales (by farrrrrr) over anyone else.
Remember the aforementioned Universal….the largest of the music corporations? They sued a guy for selling eight promotional CDs on eBay.
“UMG argued that the sale of its promotional CDs were prohibited. It pointed to a pro-motional statement affixed to the promotional CDs that inform the recipient that the CD is the property of UMG and has been licensed to the recipient for personal use. Troy Augusto argued that UMG had transferred ownership of the CDs and under the first-sale doctrine he was free to resell the CDs.”
So how did the big corporation with their huge legal department do?
“Promotional CD owners are free to thin out their collections without fear of reprisal. On Tuesday the U.S. Court of Appeals for the 9th Circuit court held up a lower court’s ruling that confirmed the right to sell promotional CDs.”
Turns out to be a non-issue (for the moment) as most labels have cut their promotional CD lists and are opting for digital distribution to reviewers, radio and bloggers. The down side to that is that anyone who knows their way around Hotfile, Rapidshare and a good search engine can pretty much find almost anything to illegally download.
Which brings me to Spotify…the UK company that has been trying to bring it’s digital music delivery model to the US for the past year. What’s the hold up? Here ya go:
“Why has Spotify taken so long to launch? Money. “Extremely high cash advances” demanded by record labels, an unnamed senior music executive says.
Despite the roadblocks being thrown up that are keeping Spotify on the other side of the pond for now, you can bet that before the end of the year they’ll be here. Or at the very least, a new company will emerge to bring a successful digital model that will charge a monthly fee in exchange for all the music you can listen to. And you’ll be able to put it on your mobile device and take it with you.
With that….the fat lady will sing.