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A recent article from The Tennessean:
Sarah Sidwell, a 19-year-old freshman at Belmont University, loves listening to music but doesn’t buy it that often. Instead, she listens to top artists on Pandora, a free online radio station that she customizes to play her favorite songs.
It’s a phenomenon adding to the overall decline in music buying and even the legal and illegal downloading of tunes, according to New York-based NPD Group, a research firm. Instead of buying music, many consumers stream it online without ever opening their wallets to pay artists or record labels for their work.
With tens of millions of dollars in revenue at risk, music labels and musicians in Nashville have been scrambling to find new ways to make money at a time when sales are shrinking and digital downloads haven’t managed to fill the gap.
Adding to the challenge is the fact that more music is becoming available for free.
“Just as music piracy and the advent of digital music ended the primacy of the CD, we are beginning to see new forms of listening challenge the practice of paying for music,” said Russ Crupnick, NPD’s vice president and senior industry analyst.
Teen and young adult consumers increasingly stream their favorite artists on MySpace pages, listen to music over online radio while doing homework or preview an artist’s CD via an online music service before the album’s release date — all without paying a penny.
“The need to buy has diminished because (music) is so accessible,” said Heather McBee, vice president of digital business at Sony Music Nashville.
Web offers samples
Virtually all record companies and artists are trying to target music fans more aggressively on the Web.
For example, country music star Keith Urban is marketing his album Defying Gravity, which hits stores Tuesday, using iLike, an online service that lets users tell friends what music they like and track concert dates.
Since March 17, Urban has exclusively revealed a song off his album each day, along with a video explaining the song. Consumers can click on a link directing them to iTunes to purchase the song for 99 cents.
“We’re specialized for music,” said Ali Partovi, CEO of Seattle-based iLike, adding that his Web site is designed to drive sales. Partovi said even though his company is not yet profitable, about 60 percent to 70 percent of revenue comes from national brand advertising. He declined to provide annual revenues.
Urban has promoted past albums and tours on iLike. One benefit of using the Web site is it provides statistics for artists showing how many people streamed the album or checked out Urban’s profile, said Genevieve Jewell of Borman Entertainment, which works with Urban’s management.
ILike has a universal dashboard that pushes content out to other channels such as Facebook, Orkut or Ask.com, allowing Urban to reach more fans than the average social networking site can reach on its own, Jewell said in an e-mail.
“It’s hard to exactly pinpoint how successful this campaign will end up being, but I think the percentage of sales that end up being digital will be a good way to measure the success,” Jewell said.
The 40th Country Radio Seminar started off in encouraging style with Seth Godin giving an intelligent and rousing keynote. He knows his stuff when it comes to the music and radio industries and he certainly knows how to engage in discussion about the future. Mr. Godin also has a keen skill of inciting vision in those who wish to move from the broken model and into the new world. A brilliant move by the CRS agenda committee to bring him in.
I was hopeful that spirit would continue on into the panels, but unfortunately what I witnessed only took us down familiar traveled roads and led us to a big “You are here” arrow. During the three days of CRS I heard very little discussion and insight about preparing for the changes in the years to come. Part of the problem is no one really knows what is ahead, but at least we should be having conversations about the opportunities within new creative business models. Instead I sensed just a reactionary tone.
For instance, in listening to one particular panel where the guests were talking about how 85% of country retail sales come from the big boxes like Wal-Mart, Best Buy, etc. and how labels and distributors are handling the ever shrinking floor and stock space at these retailers. Yes, these giants have been critical to our past success and are obviously important to our current victories, but what about five years from now? We are still living in a Wal-Mart dominated world, but what happens if Wal-Mart continues to shrink the new music space and only increase catalog? What if Wal-Mart decides they will only carry the Top 20 or 30 selling acts? What if they ultimately conclude that selling CD’s is not part of their plan any longer because they just aren’t that profitable for the space they take up?
What I really wanted to hear was a plan that does not involve CD’s, does not include Wal-Mart or Best Buy, and embraces new technology and innovative marketing. A redefinition of our industry. The same strategic thinking that Mr. Godin touched on in his keynote. Though there were good panels, I wasn’t hearing anything remotely inspiring for the future.
Some within the music industry have made strides in getting up to speed with changes and technology, but we are still only making adjustments to what is happening to us at the moment. We are not leading the way in engaging where the consumer is going and what they will want down the road. That’s what got us in trouble to begin with.
Overall I love Country Radio Seminar. Walking around seeing old friends and making new ones. Having discussions with remarkable individuals who I can learn a great deal from. Talking with people about the partnership opportunities with Compassion International and finding them excited about the possibilities. Checking out amazing artists and songwriters. It’s a great time. I simply expected more focus and vision for the future than what I encountered.
I’m hopeful things will move in the right direction with CRS, but currently the best place to engage the new world is at the Leadership Music Digital Summit being held in Nashville at the end of March. There’s no Bridge Bar, no fans clamoring in the lobby, no free shows, no dinners at The Palm, and no labels dividing up the troops. Yes, not as much fun, but a whole lot more relevant and affordable.
I would like to be relevant in the years ahead, how about you?
Leadership Music’s annual Digital Summit is one of the most valuable and high-impact events in the Nashville music industry community. Join over 600 artists, ISPs, songwriters, venture capitalists, managers, content aggregators, labels, digital music services, publishers, service providers, mobile operators, consumer product developers, retailers, and media to shape the next generation of music in the marketplace.
FEATURED SPEAKERS INCLUDE:
*Ted Cohen, TAG Strategic
*Dorrian Porter, Mozes
*Greg Scholl, The Orchard
*Jim Lucchese, The Echo Nest
*Ali Partovi, iLike
*Jim Cicconi, AT&T
*Dave Ulmer, Motorola
*Ted Cohen, TAG Strategic
*Dorrian Porter, Mozes
*Greg Scholl, The Orchard
*Jim Lucchese, The Echo Nest
*Ali Partovi, iLike
*Jim Cicconi, AT&T
*Dave Ulmer, Motorola
Two days & pre-event kickoff March 23-25, 2009
Added Networking Opportunities and More Live Music
Hot Topics: Mobile, ISPs, Social Net, Intellectual Property and Money
Great Value: All Registration Fees at or below 2008 prices
REGISTER NOW for as low as $129!
All the details are at www.digitalsummit.org
I attended last year’s event and found it to be a stimulating time of learning, growing, and expanding new world thinking.
I’m sometimes put off by the technology everyone is saying I must have, and then if I choose to purchase it, find that within mere moments it is out of date or has a next generation that is the new must have. Following that there will be a new hype of something shiny that is coming out next month. My wallet doesn’t like it much either. I personally don’t carry a wallet or a pocket book (who calls it a pocket book anyway?), but if I did, well, I promise you they wouldn’t like it.
A question I have from the speed at which technology is moving – will it simply come full circle? Watch this video from the only good anchor/reporter NBC has nowadays, Brian Williams. He goes at the hype of digital media and makes some of it appear laughable.
I get the convenience, portability, and on demand factors. Those are huge selling features. I believe that technology is providing all of us with unprecedented opportunities. But at what point are we just becoming lazy, overloaded with entertainment, and bound up in the overindulgence of consumerism? Can our minds, attention, and, um, pocketbooks possibly keep pace?
I know I am becoming more careful about the hype and waiting to see if the technology at hand will genuinely be a benefit for my life or business; or if I really find that the application or technology hits my lifestyle bullseye. Otherwise what is the point really?
My Sprint contract has finally run its course and now I find myself thinking about finally getting an iPhone. I have many friends who absolutely love it and very few who regret the purchase of their Apple device. I have my issues with Apple and AT&T, so I’m weighing the good vs bad options.
While I ponder that, here’s a short article from Digital Music News:
Exactly who is buying the iPhone these days? Initial research suggested a largely a male, post-30-something demographic, though a broader bracket is now joining the party. According to data released by comScore over the weekend, 43 percent of buyers in the United States earn an income north of $100,000. But the biggest growth in coming from those below the six-figure threshold, including those making as low as $25,000 annually.
Americans are notorious for spending beyond their means, though the iPhone stretches things a bit. But instead of a $400 heavyweight tag, the newest phones dip below $200. Of course, that comes with serious AT&T subscription strings attached, though comScore attempted to justify the purchase. “As an additional household budget item, a $200 device plus at least $70 per month for phone service seems a bit extravagant for those with lower disposable income,” said senior comScore analyst Jen Wu. “However, one actually realizes cost savings when the device is used in lieu of multiple digital devices and services, transforming the iPhone from a luxury item to a practical communication and entertainment tool.”
Report by news analyst Alexandra Osorio.
Another fine article from Wired as they covered the Digital Music Forum West last week. This go-round is about social networks, music discovery and recommendation services. A few morsels:
- Radio is still an essential part of the marketing mix. But I question the charts as a goal. The ability of artists to connect with fans is more important. Exposure is a limited win game. You see a lot of exposure — the question is, once you’ve got people exposed and engaged, how do you get the user to take action — register an email address, buy something, etc.?
- The demographic for radio is trending older. Discovery is happening exclusively online for the younger demographic.
- Terrestrial radio is a great passive experience for lots of people, but by and large, they aren’t tastemakers anymore.- The perception of the cost of music is dropping to zero. When users get music for free next to an ad, they lose the perception that music costs money.
The recap of the six executive panel can be found HERE.
Lefsetz lets loose with comments on digital sales for the week of 7/13. Here a few choice morsels that should wake you up if you are living in the past……….
SINGLE TRACKS
27. Madonna (featuring Justin Timberlake) “4 Minutes”
Sales this week: 35,751
Percentage change: -17
Weeks on: 17
Cume: 1,904,262
Stunningly, the album, “Hard Candy”, didn’t make the Top 50 digital album sales chart this week.
Overall album sales are 589,961, with the package residing at number 63.
Sure, you might say she was always a singles artist. But she used to move millions of albums. Now, people only want her single.
102. Kenny Chesney “Better As A Memory”
Sales this week: 12,244
Percentage change: -18
Weeks on: 12
Cume: 186,035
This is utterly astounding. This was a NUMBER ONE RECORD, and it only sold 186,035 copies?
Obviously, the country music business is on the verge of turmoil. Because once its audience gets computers and iPods the Nashville cats are gonna lose control. They’re still living in the nineties, thinking it’s all about radio dictation. But when one gets an iPod, one’s tastes/desires broaden and one is no longer limited to what’s being forced down one’s throat.
ALBUM CHART
13. Blind Pilot “3 Rounds & A Sound”
Sales this week: 4,444
There is no physical album.
It’s only $7.99 on iTunes and was released on the indie Expunged Records.
I’d say this is the future.
Word spreads online, people buy it online. No sales department, no returns, no accounts issues. You may not know about this act, but they and their label don’t care. They’ve got fans who believe they’re credible (no singles on the chart) and they’re on their way to making money, since their overhead is so low.
Either you sell the act, making people believe they stand for something and will be here tomorrow, or you sell the single. There’s more money in the album, but the public, especially the young, net-savvy public, has been burned so many times, it’s wary of albums. Or, it just doesn’t believe in albums, viewing music as evanescent grease. Make them believers if you want to establish a retirement account.
From Digital Music News:
In a democratized media environment, shouldn’t fans pick promising bands from the start? That is currently a theoretical debate, especially given the filtering role that labels have traditionally played.
Of course, bands now have the ability to reach and develop fans directly, a shift that eliminates a critical label function. But millions of artists are now competing for the attention of a fragmented internet audience, one that has limitless media options and limited time.
The situation could spell opportunity for the startup that gets it right. Currently, SellaBand (sellaband.com) and Slicethepie (slicethepie.com) are tossing fan-focused A&R concepts into the ring, though the experiments are just beginning.
On Tuesday, Slicethepie pointed to a number of early metrics. The company has now amassed one million reviews from its stable of scouts, a crew of roughly 50,000. Those critics review the music of unidentified artists, and the best-rated bands (top 2 percent) become eligible for funding from the community.
Since launching in June of last year, a total of 16 bands have received financing from fans and investors totaling 250,000 pounds ($493,675). Additionally, Slicethepie has collectively paid its scout reviewers a total of 50,000 pounds ($98,735) for their efforts. Slicethepie keeps a portion of the funding, as well a cut from future sales.
The Lefsetz Letter makes a compelling case for releasing and selling singles rather than complete albums. Here’s an excerpt:
“But you don’t give them ten more tracks… You give them a dribbling of killers. So they end up becoming fans of the act, not the track.
Everything you know is wrong. The train has jumped the track. The slate has been wiped clean. The old era is over. The Internet and iPod have changed everything. Now you’re only one of thousands of tracks. You’ve got to make it into a listener’s pantheon, or be deleted. How good are you?
New bands… One track only. Maybe you’ll get radio play, good luck. But even so, if it’s that good, people will trade it. And, if you get no traction, you can go back to the drawing board at a much lower price. In the old wave system, you cut an unsuccessful album and you’re over. Today, have a stiff single and you go back to the studio!”
Read his entire argument here and let me know what you think.
Paul Resnikoff in Los Angeles writes about how different platforms are converging and will become nearly indistinguishable from one another and how that will change the patterns of licensing. Check it out at Digital Music News.
One of the more interesting panel discussions of the Leadership Music Digital Summit yesterday was “Digital Retail: What’s The Future?”
On the issue of the future of CD product, UMG Nashville EVP Sales, Marketing & New Media Ben Kline said, “I can’t imagine CD’s ever going away. I can’t imagine Wal-Mart and Target not selling hard product. It’s the ones (retailers) in the middle that will be hurt. I don’t think you’ll be able to walk into a mall and purchase a CD.” Kline went on to comment, ”We still can’t afford to be in the singles business” when asked about the current state of selling digital singles and why labels are not being more singles driven.
One of the major discussions prevailing was how to grow digital sales as CD sales fall. Each panelist had their own ideas including:
- Better devices
- Ubiquitousness
- Multiple product offerings in one bundle
- Player compatibility and coordination between platforms
- Exceed experience of music ownership with consumers
- Stop narrow focusing on subscription based models
On the subject of future business models within retail, the industry vets responded with:
- Ben Kline: “Demand price models (where price is equal to the demand of the music). Not every song should be .99 cents.”
- EMI CMG VP Sales & Marketing Mark Adkinson added, ”Steve Jobs can’t run our business for us or he will run it right into the ground. He wants to sell devices, not music.” Mark also stressed the need for pervasive distribution within the music industry.
Leadership Music Digital Summit is going on today in Nashville. The keynote was delivered by the CEO of iLike, Ali Partovi, who mentioned that it was the first keynote he has given.
With all of the questions, concerns and potential regarding the future of music technology, Ali made a point to say, “What I’m most excited about is the discovery and promotion of music”.
Ali compared traditional broadcast media with new media:
**Traditional media is “untargeted, focused only on hits & singles, while album development suffers”.
**Digital media is “personalized, social, syndicated, targeted and enables artists to pursue their dreams.”
Partovi went on to say that digital media “could replace or solve the problems of traditional broadcasting”.
More highlights from the Digital Summit will be posted this week.
Chris Anderson & economist Jacques Attali speaking at the 2007 Midemnet Forum about the future of the music business. The revolution is happening……
Boston Business Journal published a new report by Forrester Research Inc. that shows that half of all music sold in the U.S. will be digital in 2011 and sales of digitally downloaded music will surpass physical CD sales in 2012.
The report also claims that digital music sales will grow at a compound annual growth rate of 23 percent over the next five years, reaching $4.8 billion in revenue by 2012. In contrast, by 2012, CD sales will be reduced to $3.8 billion.
“This is the end of the music industry as we know it,” said James McQuivey, vice president and principal analyst at Forrester Research, in a statement. “Media executives eager to stay afloat in this receding tide must clear the path of discovery and purchase, but only hardware and software providers can ultimately make listening to music as easy as turning on the radio.”
McQuivey, a former professor at Boston University, tells record executives to cheer up because there are ways to rise from the ashes. He says first, the industry should quit fooling around with music subscriptions and ad-supported models. People want to own their music and downloads have won. Only 7 percent of adults on the Web say they have ever tried a subscription service, according to the report.
In a final note, McQuivey suggests that music artists, who have historically looked down their noses at advertising, had better change. He says the industry should rip a page out of NASCAR’s playbook.
“Artists who used to pretend that their platinum album success was really about their “art” will no longer have that luxurious pretense because labels won’t sign them unless they agree to a barrage of sponsorship opportunities,” McQuivey wrote. “There will eventually come a day when Chips Ahoy will contend with the Keebler Elves over who can be the official cookie of the Taylor Swift world tour.”
