Snapshots

1. My nephew was just at a birthday party for a 7 year old. One of the birthday boy’s presents was an iPod. After opening it, he proceeded to spend the rest of the party walking around with the earbuds in, jamming to some pre-programmed Michael Jackson while all the kids he’d invited played around in the yard.

2. In NYC recently, I couldn’t believe how many people on the streets and on the subway wore headphones or earbuds. It’s like they were tuned in to some new sonic phenomenon, something post-music. Whatever it was they were hearing, they all looked so serious, stylish, eerily detached. You could sense glimmers of the urge to sing out, dance, flex, cry pinned down by the gravity of self-consciousness. Not that anyone needs Rent on the subway, but being amongst the Earbud Army felt like eavesdropping on a therapy session for zombies. 

3. Riding through Harlem on the bus I saw this over and over: parents wearing headphones or earbuds as they toted around their children. 

4. CW is that the average iPod owner has purchased only 22 songs. This comes from Apple CEO Steve Jobs deconstructing DRM in 2007. Now, of course, it’s all DRM-free. Would love to see an updated average-purchase figure…

Variables

“The country’s largest music retailer, Apple, is finally flipping the switch on what it calls ‘variable pricing’ and on what the music industry calls the last, best hope to turn around its rapidly declining fortunes.

That single, comforting price of 99 cents for all songs in the iTunes music store is being replaced today by three pricing tiers: 69 cents for the oldies-but-not-so-goodies, $1.29 for some hot new hits, and 99 cents for nearly everything else. Apple is setting the prices based on the wholesale prices set by the music labels.” - Brad Stone, New York Times, April 7, 2009

So the “last, best hope” for the Record Industry to turn around its “rapidly declining fortunes” is to raise the price on digitally compressed audio files?

Uh-huh.

Cause their rapidly declining fortunes have nothing to do with the clunky one-dimensionality of their product, the boneheadedness of their transition to digital, their failure to distinguish between product and promo, their focus on stores instead of encounters, their legal scare tactics and their stigma of greed?

Nope. The problem is that they weren’t charging enough for hot new product (and charging too much, apparently, for the chilly back catalog). Raise some prices, lower others and voila! – fortunes salvaged.

What the Record Industry doesn’t seem to want to acknowledge is that their digital stores are charities. People give to them. They don’t have to! Between free download searches, promos, streaming sites, bit-torrent, file-sharing and friends with music, you can pretty much find everything you’d ever want – for free. And while it’s true that digital sales have increased as more and more people switch-over from CDs, so, too, has Internet savviness and the ability to find the music you want for the price – or lack thereof – you’re after. Price is not the determining factor in the digital music market. If it were, no one would buy music because they were getting it for free or everyone would buy music because the price and the value of the product were in tune (like the old days!) Price is secondary now – a fork in the road at the end of an impulse. The way it becomes primary is if consumers start feeling ripped-off. Then they all veer left.

The backlash against “variable pricing” will be against the fact that the dollar barrier for digitally compressed audio files has been broken. It’s like there was a gentleman’s agreement that 99 cents was the market value of a digitally compressed song. 99 cents wasn’t what it was “worth”, really, since free and promotional options undermined any inherent value in the product – but it was the acceptable price of having an impulse dependably fulfilled. Old song or new, popular or unpopular – it didn’t matter. If you wanted it – and wanted to pay – it was 99 cents (at iTunes, anyway).

In a variably-priced market, there are two immediate consequences: the potential value of some music has been deflated while the market value of other music has been inflated. Reacting to the deflated music, the consumer sees that they’ve been paying too much. Reacting to the inflated music, the consumer feels like the price is too high. Both observations lead to the same conclusion: the product isn’t worth what I’m paying for it. If consumers had no other options, I’d still bet on the market. But with so many other options for consuming music, it’s hard not to see that breaking the dollar barrier on digital music – without a significant upgrade in the product – is gonna suck the Industry dry. It will be a whole new justification for not paying for music. A widget of disgust, if you will, that gets popularly embedded in consumer’s purchasing decisions. A meta-iTunes app. Nice one!

Of course the issue runs deeper. The fundamental problem, regardless of what the market price is on compressed digital audio files, is that compressed digital audio files are a de-valued, one-dimensional, product. You could give them away at this stage or charge hundreds of dollars a pop and it doesn’t change what they are, what they do or what they’re really worth to people. Without a fundamental change in the product, there is nothing to warrant a shift – higher or lower – in the price. By forcing a shift, the Record Industry is asking consumer’s to decide anew whether or not they think the product is worth their money. And if they decide it’s not, I would venture that the Industry’s “last, best hope” might be to do what they should have already done: re-define, re-design, update and re-introduce their product. With features people will pay for. With functions that are useful. With applicability to consumer’s technology-driven modern lives. Fuck 2.0. The Industry needs to start at 3.

The sad fact in all of this is that somebody’s doing the numbers. They’re looking at market shares and trend-line growth and seeing that the paying market is still growing, regardless of the purchase price. So they figure they might as well squeeze as much cash out of this run as they can. It’s black and white: black numbers on white paper. Well, maybe black and white and red… I just worry that the technicolor of innovation – the momentum – is against them and, sooner rather than later, they’re going to have to address the underlying issues and play one frantic game of catch-up.

It just sucks because $1.29 would have been a great price to start at for an upgraded product! Or if you prefer a projection: upgraded product with a higher price captures both the cross-over consumers that are driving current growth plus a new market for the upgraded product; higher price with no change in product will only get the cross-overs. (And “no-DRM” is not an upgrade – it’s just the removal of an obstacle. That and an admission that the value of the product can’t be controlled.) It will be fascinating to see how variable pricing is dealt with in the inevitable case of a true product upgrade. Think they’ll go straight for $1.99? $20 albums? Think price will be a factor then?

The Record Industry would do well to adopt the digital consumer mantra, and adopt it quick:

“There’s 40 different shades of black.                                                                                                         So many fortresses and ways to attack.                                                                                                     So why you complaining?”

- Pavement, “Elevate Me Later”

It’s a great song, too. A classic. And at 99 cents – a steal!

“New Model” stream-of-conscious

start with a name. call it a “DAP” – digital audio package. call it a “MAP” – multimedia audio package or multimedia artist package. call it something and then give it a feature that distinguishes this “new model” from the MP3/AAC/compressed digital audio model. a feature could be a photo or photos. a video or videos. a “making of” documentary. a lyric sheet. an application. an introduction from the artist. extensive album art. access to a club. update-able features: podcasts, videocasts, news, shows, link aggregates, rss feeds, twitter feeds. exclusive tracks. exclusive content. files for remixing. video files for video-creating. a personal fucking “thank you” note. whatever! the “new model” could have one or all of these features and still legitimately be a “new model”. it’s a question of which features are most valuable. perhaps there’s a template? something consistent but customizable – the way your page on a social network works. standardize the template and give it uses. let artists/labels login from the artist/label side and customize their product. let them change and update elements of content. let the artists make the new model ground zero for news, exclusives, authority, access. as they do so, they expose all the other outlets – the free outlets – for what they really are: secondary sources. the blogs and social networks would still be there, they’d still thrive. a whole culture would still exist around the free jukebox, the casual listener/secondary source audience. the only difference would be that the action would now initiate in a paid environment before it reverberated through the free environments. it would be a perk for the paying consumers – the core audience – to get information and content first. it would be part of what they pay for. if they don’t care, they can consume casually, freely, just as they do now. if they do care, they can pay for the record, the features, the new model. money straight to the artist. evolving content, features, access, perks to the paying fans. AND the whole brouhaha of outlets, networks, giveaways, streams, middlemen that’s regaling us right now. what is there to lose?

Groundwork summary

1. The Record Industry needs a “new model” for selling digital music because A) the current product is indistinguishable from the free promotional material, B) the current product is one-dimensional and out of touch with the technology of our time and C) the current product is being pillaged.

2. In lieu of a “new model”, the Record Industry should be doing everything it can to optimize the sales potential of its current product, the digitally compressed audio file. It should A) focus on a promotional-streaming model instead of a promotional-download model, since the download model is really just a product giveaway, B) push that promotional-streaming model into every point of encounter by way of a customized audio player and C) outfit that audio player with a “Buy it Now” button and/or efficient links to sales outlets, so that the point of encounter is connected to potential purchase.

3. Since recorded music costs money to produce professionally, it’s value has to be protected, whether legally or strategically. Otherwise it’s nothing but a cost with no return and the industry is unsustainable. Strategies for protecting the value of recorded music are A) an entirely new model for the product of digital music that renders the one-dimensional compressed digital audio file value-less, a secondary source B) modest improvements on the present model that distinguish the product from the promotional material, C) a focus on promotional-streaming with links to purchase instead of promotional product giveaways and D) non-threatening consumer education about copyrights and Artist rights.

Taken together, this is either the tip of the iceberg for thinking through the present quandary or the tip of the iceberg as it punctures the ship!

Another interesting question

is: Why are MP3s being given away promotionally?

I mean, if there’s no stopping the file-sharers, why not at least make it more difficult for them? That’s why there’s a difference between promoting a song that’s streaming and promoting a song that’s downloadable: if it’s streaming, the consumer is forced to take another step – whether a purchase or a search for a download – before it’s theirs; if it’s immediately downloadable,  you’re never gonna sell it!

So why present new music as a “free download”? Who dictates this? Music blogs? Fuck that! Music blogs operate within the confines of copyright – if they don’t remove content by request, they’re flaunting the law and risking their reputations. Music blogs only offer free content that is sanctioned as free content (in the hopes that the music will be promoted). Again: why can’t this very same content be streaming, as a matter of principle, instead of downloadable? 

Is it in the Record Industry’s interest to give away the ownership of their product promotionally? As in: here, take this – we hope you like it and that you’ll tell your friends and that you’ll all hurry back for more!  Fine. Why not just stream it? Encourage people to share stream-links instead of files. Will they tell fewer people if the free promotional track isn’t bobbing around in their iTunes library? Will they be less inclined – as though streaming were an affront – to pony-up for the songs they enjoy and identify with? Is this the mind-set of the online music consumer?

And if it is, does it matter? You’re already legally and practically conceding the inevitability of file-sharing. Why make it easy? Why fucking promote it? That file you’re giving away is indistinguishable from your priced product. It is your product! Let people hear it at will – like the Radio. But don’t let them own it without paying for it – or at least working for it!

Would streaming – instead of giving away – new music drive the masses away from promotional encounters and in to the jungle of “renegade ownership”? “Fuck the blogs, man – I can’t get music for free with the push of a button anymore. I guess I’m gonna have to go steal it.” Or would music consumers still appreciate the act of encountering new music and then make an empowered decision about how and where to download it? If the player in which the promo was streaming had quick-links to other information – a sales outlet, for instance – would people find themselves paying for more music they liked, simply out of efficiency? Or would they find themselves going more often to secondary sources, to save their precious 99 cents? Would a roll-back of promotional free downloads be accepted or rejected?

What seems to hang in the balance is the idea of what is monetizable. For the Industry Visionaries who think that  an accessible, streaming library of music is the Industry’s route to digital riches, the idea of streaming-as-promotion-for-sales is one big giveaway. They are holding out for the meta-charge, the monetizing of the very act of hearing music online. For the Capitalists who see consumers as vessels for an array of unique desires – and not just hundreds of millions of tickled ears – streaming is a tool for exposing unique products, and if exposure is efficiently linked to sales outlets, the hope is that more people will pay to own the songs they want. The key for the Capitalists, then, is protecting the value of the product itself. So long as that product is the compressed audio file, they’re being endlessly undermined by free promotional downloads. 

Best case scenario, business-wise, for the practice of promotional streams instead of downloads: consumers accept widespread streaming and, because the presentation of the stream is dynamic – and links efficiently to a sales outlet – there is no love lost and more money spent. 

Worst case: consumers reject widespread streaming on the basis of having grown entitled to promotional downloads and work over-time, expend extra effort, to still get their music for free – while at the same time building a new entitlement to free, ever-present promotional streaming. Now you can’t ever meta-charge them and you’ve given away the bank.

In which case: time for a new model!

Industry Shambles

Points of Encounter

In the constant coin-toss over whether to purchase or pwn compressed digital audio files, there is nothing more significant than the “point of encounter”. And if that point at which you encounter a music file is on a Webstore or in the vicinity of a “Buy it Now” button, chances are good that if you like it,  you’re gonna buy it. The price of a track is negligible – it is NOT what drives consumption. What does drive consumption is the efficiency of being able to get what you want, when you want it. So if your point of encounter with a song you like is in a paying environment, you will pay to enjoy the satisfaction of quickly fulfilling that impulse. Likewise, if that point of encounter is in a non-paying environment – on a blog, for instance – you will not pay, because the most efficient path to satisfaction is downloading without paying. (And since there is no distinction between the promotional product and the priced product, no one will EVER go and purchase music they’ve already downloaded for free, because there is no incentive.)

If point of encounter is so important, what are the strategies at play for hooking consumers and for optimizing sales?

 For Music blogs and Social Networks, the strategy for hooking consumers is to provide free content. In their drive to establish authority and maximize advertising revenues, Music blogs and Social Networks have created a promotional playground that is in direct competition with digital stores. They know that sometimes consumers go shopping, and when they go shopping they go to iTunes or Amazon or wherever. But most of the time they’re winding through a personal maze of interests and impulses, links and embeds of free entertainment that serve as points of reference for their day-to-day lives. So long as Music blogs and Social Networks can keep providing free, updated content, they will remain the primary points of encounter. No sweat.

So the Record Industry, for “promotional” purposes,  has conceded: the songs most likely to be desired are the songs most often encountered for free. What,  then,  is the Industry’s strategy for maximizing the sales potential of their digital product? Which points of encounter are the strategic focus for them? 

Stores. Fucking stores. And with iTunes and Amazon, you can hardly even try things on since the fitting rooms have a 30 second timer (while you can stream the shit out of songs everywhere else!). The Record Industry strategy seems to be: if people want music, they will shop for it at one of our stores. The consumer reality is: if we want music, we can download for free at music sites, find endless points of encounter via search engines, listen for free at streaming sites and on Social Networks, go fishing in the stocked pond of File Sharing or go shopping. And probably in that order.

The store impulse is driven by – saved by, really –  an appetite for elaboration. Promoted hits hook us and we wonder if the band has other songs we’d like. Not knowing what songs to search for, we need an encounter with what’s available and there are two typical options: streaming for free on a streaming site or streaming-for-30-seconds for free at a Webstore. Knowing that if we stream a song and like it, we’re going to need to take another step to own it (paid for or not), we may go straight to a Webstore, since at least then if we like it, we can own it with the push of a button. Since the most important feature of any point of encounter for a consumer is the efficiency of getting what they want, the most valuable feature of a Webstore is the extensiveness of readily available content.

The trick, then, is getting the consumer there, since you risk satiating their appetite promotionally and/or  losing them to streams and searches. One way of getting them there would be to offer something unique but, as we’ve already addressed, that ain’t happenin. Another way would be to encroach upon their consciousness. How? You can advertise. You could set up your store’s own taste-making editorial staff and link in to the music news and culture network (though I wonder if you’d be believable since you’d be essentially critiquing your own products.)  You could promote store links for the music you add each week and furnish bands, publicists and blogs with them, though that’s also kind of the responsibility of bands, publicists and blogs. You could infiltrate their social networks. Check. Thanks, Dad! How then? How can you be strategically ever-present in the consciousness of the online music consumer?

Stream your entire library, eat the bandwidth, and make an embed-able player customizable for singles, albums and artists available to every user. Make it the point of reference in every point of encounter.

Oh, wait – there is something kinda like this being done! Lala.com, baby! Only thing missing?

A “Buy it Now” button on the player!!!

Industry Shambles

An interesting question

is: Why has the Record Industry not found a profitable solution for selling recorded music digitally?

They have the investment capital, one assumes, and certainly the incentive. They can hire tech wizards, design savants, brilliant project managers and marketing geniuses. And the costs of the experiment wouldn’t have to be unwieldly, once the expertise was on board. It would be computers, meetings, tech time. Lean and mean. Where is the evidence – the fits and starts – of an attempt to solve the fundamental problem?

If you look at a chronology from the last 2 years, the story told is this: Labels have consolidated, laid off employees, lost big name Artists to concert promoters, independence and big-box chain deals, broken down the value of MP3s by shedding DRM and by supporting price competition with iTunes, sued the shit out of file-sharers and watched their empire-building product, the Compact Disc, fall off a cliff along with the record stores that had represented them. 

They are fighting for the value of a product that they’ve lost the power to define.  

Problem 1: Defining value

CDs were great. 10, 12, 15 bucks. Something to unwrap, something to read, something to look at. Play it on your stereo, skip tracks with a button. Build a collection. Variety and uniformity. Undeniable ownership.

MP3s are great, too. Free, or 79 – 99 cents a song. Mercurial. Accessible. Tiny packets of core information that you can stream, share, blast, skip, shuffle, delete. You can horde them or chew ‘em up and spit ‘em out. Create a jukebox or a sanctuary. Define yourself or – at will – redefine yourself.

So why were CDs a business boom and MP3s a business bust? 

Because CDs leveraged the product against the reproduction. The Industry defined and then fulfilled what consumer’s expected from the product they paid for. And if you got it without paying for it – a burned copy – you got something less. As a “unique consumer” – an individual who identifies with the products they purchase – there was a satisfaction in getting the product over the reproduction. A consumer satisfaction.

With MP3s, there is no leverage, no difference between what you pay for and what you claim. Paid-for MP3s don’t have a single valuable feature that free MP3s don’t. The only satisfaction is the “karma”. The failure of the Record Industry to define the value of their digital product is a failure of defining the product itself.

Problem 2: Defining the Product

What is it the Record Industry is selling us digitally? Compressed digital audio files, with or without album-cover artwork. A one-dimensional, feature-less, digital download. In what boardroom is this something people are excited about? Because in the great salon of the Internet, it’s a joke. 

There are endless ways of defining the product. Create a template. Make some features customary. A lyric “sheet”. A PDF of album art. A “making of” documentary. An automatic podcast subscription. Exclusive tracks. These are all things people have tried – the question isn’t “are they valuable”, it’s “why aren’t they customary?” Easy, even passe, tools for defining the digital product should be defining the digital product. At least it’s something!

And it can go so much further than that. A new model can – and should – swallow the whole digital sea right now and shit it out as a package that does every single thing it can possibly do. Like what? You tell me! Social networks. Link aggregates. Video and audio remix material. Twitter. iPhone app. Updates. Message boards. Multimedia out the yin-yang. Build it all into and around the value of recorded music. And then sell the unique package.

Will it work? I don’t know. It hasn’t been tried. The people with the money and the incentive are the Labels and they have been too busy defending their badly-tattered pride to try anything proactive. Meanwhile, free digital music has come in one long tidal wave with no end in sight. We’re soaked. With MP3s, free as water. Which isn’t fair – at least they found a way to monetize fucking water!

At the end of the day, recorded music costs somebody money. If it’s Labels and Artists eating all the cost, it can not survive. They talk about the likely Japanification of the U.S. economy – the “long, gray suck” as Ian Welsh puts it – where a stratified society is locked in place – the established stars and the endless nobody’s – with no relief from the cycle of costly output and diminished returns. The Record Industry may prove to be the harbinger. They’ve already had years of “long, gray suck”, with only the Madonna’s, Jay-Z’s, Eagles, Radiohead’s triumphing – at the expense of the Labels, no less. Without a viable product for the future, the Record Industry will be, in effect, Japanified.

So why has the Record Industry failed to find a profitable solution for selling recorded music digitally?

Because they’re too stubborn and stodgy to face the tough choices head-on and use the technological tools that are there, shiny and modern, before them.

Industry Shambles

2 Years in the Record Biz: A Chronology

(Thanks to Rolling Stone magazine, the one consistent reporter on the reelings and dealings of the Record Industry.)

3/8/07: “Copy-Protection Battle Heats Up” - “The Music Industry is poised to make a dramatic shift in strategy, selling music online in the unprotected MP3 format and making it possible to play songs purchased from any retailer on any player. EMI, one of the four major record labels, appears close to a deal with online retailers, including eMusic.com and Yahoo! Music, to distribute at least part of its catalog without digital rights-management software (DRM). The other major labels – Universal, Sony, BMG and Warner – publicly remain committed to copy protection, but sources say they are considering a similar move.” – Evan Serpick, Rolling Stone

6/28/07: “The Record Industry’s Slow Fade” - “Overall CD sales have plummeted 16% for the year so far.” “In the face of widespread piracy, consumers’ growing preference for low-profit-margin digital singles over albums, and other woes, the record business has plunged into a historic decline.” ”In 2000, U.S. consumer bought 785.1 million albums; last year, they bought 588.2 million (a figure that includes both CDs and downloaded albums), according to Nielsen Soundscan.” ”More than 5,000 record-company employees have been laid off since 2000. The number of major labels dropped from five to four when Sony Music Entertainment and BMG Entertainment merged in 2004 – and two of the remaining companies, EMI and Warner, have flirted with their own merger for years.” ”About 2,700 record stores have closed across the country since 2003.” ”Despite the industry’s woes, people are listening to at least as much music as ever. Consumers have bought more than 100 million iPods since their November 2001 introduction, and the touring business is thriving, earning a record $437 million last year.” – Brian Hiatt and Evan Serpick, Rolling Stone

8/9/07: “CD Sales Fall Fifteen Percent” - “The embattled record industry took another hit in the first half of 2007, with CD sales down 15% and digital singles leveling off after years of explosive growth.” – Rolling Stone

8/9/07: “Internet Radio vs. Record Labels” - “On July 15th, new royalty rates for Internet radio were supposed to go into effect, which could have cost online stations more than $1 billion a year – potentially driving many out of business, including Pandora and Yahoo! Music. But two days before the deadline, Sound-Exchange, the organization responsible for collecting royalties, agreed to delay enforcement of the new rates for the time being.” – Rolling Stone

8/9/07: “Get Music for Free, Legally” - “Amid another year of plunging CD sales, the music industry is easing up on its obsession with piracy and is tentatively working with companies that give the people what they want: free music. In June, digital retailer Lala.com announced a deal with Warner Music Group to allow unlimited, free streaming of any track in its digital catalog. Later this year, two new ad-supported services, Qtrax and Spiralfrog, aim to offer streaming and limited downloading of music from all four major labels for free. And this fall, Gnarls Barkley’s label, Downtown Records, will launch the first free, all-digital record company (RCRD LBL). “It’s clear that a large percentage of consumers won’t pay for music online,” says Qtrax’s Allan Klepfisz.” – Evan Serpick

8/23/07: “Beatles, Radiohead Label EMI Sold for $4.9 Billion” - “British private equity firm Terra Firma purchased EMI, home to the Beatles, Radiohead and Coldplay, for $4.9 billion, taking the company off the London Stock Exchange and making it the only one of the four major labels to be privately owned.” – Rolling Stone

9/20/07: “How iTunes Conquered the Music Biz” - “After four years of rapid growth, iTunes has achieved a feat that few could have imagined at its birth: This year, the store outpaced the physical retail chains to become the country’s third-largest seller of music, with only Best Buy and Wal-Mart beating it in the first quarter of 2007.” “Like Wal-Mart and Best Buy, Apple does not depend on music sales for a significant portion of its profits. Apple’s priority is selling $300 iPods, not 99-cent songs. ‘The digital-download business is a terrible business – the margins are zero,’ says Ian Rogers, general manager for Yahoo! Music.” “For all of iTunes’ popularity, the average iPod owner has bought only twenty-two tracks.” – Brian Hiatt, Rolling Stone

10/18/07:  “Amazon Goes After iTunes” - “Amazon.com launched a new download store on September 25th, selling 2.3 million songs, most for 89 cents – ten cents cheaper than Apple’s iTunes Music Store. The tracks are in MP3 format and contain no copy protection.” “Tracks come from two of the four major labels, Universal and EMI, as well as 20,000 indies.” – Steve Knopper, Rolling Stone

11/1/07: “Superstar Acts Ditch Major Labels: Inside Radiohead’s Biz-Shaking Release” - “Radiohead – who became one of the world’s biggest unsigned bands when their EMI contract expired in 2003 – launched a new website, inrainbows.com, where fans can pay whatever they want to download the album.” “Radiohead’s move suggested that as the major-label system declines, established artists have a previously unimaginable range of options available to them.” “Radiohead didn’t make sales numbers available at press time, but their management said that most fans paid something for the download.” – Brian Hiatt, Rolling Stone

11/1/07: “Superstar Acts Ditch Major Labels: Madonna’s Innovative $120 Million Deal” - “Madonna is leaving her longtime record label, Warner Music, to sign with concert promoter Live Nation, sources say.” “Under the $120 million deal, Madonna would receive $50 million for performances; 90% of ticket sales; a total of $50 million to $60 million for three new albums; and a $17.5 million advance.” “‘Touring is where the gold mine is,’ says Dennis Arfa, agent for Metallica and Rod Stewart. ‘The record companies have to make money off the records. Live Nation only needs them as a promotional tool for the touring.’” “With CD sales down 25% since 2000, many in the industry believe major artists have less incentive than ever to sign to a major label.” – Steve Knopper, Rolling Stone

11/1/07: “RIAA Wins First Trial Against Illegal File-Sharing” - “Jammie Thomas, 30, of Brainerd, Minnesota, lost a $222,000 judgement to the RIAA, which represents the major labels.” “The RIAA, which has filed 26,000 lawsuits against alleged file-sharers since September 2003, initially offered Thomas a settlement of $4,750 in August 2005.’To the extent that anyone had any ambiguity about the law or about the strength of the cases that we do decide to bring, this verdict may help provide some useful insight,’ says RIAA spokesmen Jonathan Lamy.” – Rolling Stone

11/15/07: “Big Chains Push CDs Off Shelves” - “Sales at big-box retailers have dropped 17% in 2007, according to Nielsen SoundScan, even more than the 14% overall decline of CD sales so far this year.” “Digital downloads still aren’t making up the difference; they account for only about 10% of music sales, and their growth rate is slowing dramatically.” – Brian Hiatt and Steve Knopper, Rolling Stone

11/29/07: “Reinventing Record Deals” - “Sinking majors ask acts to share profits from merch, touring.” “With album sales down 25% since 2000, major labels are trying to branch into new revenue streams. The $3.6 billion concert business, as well as merchandise sales and song publishing – which has been booming in recent years thanks to rising profits from music licensing – are all up for grabs in the new deals.” “But many artists and managers are suspicious of the contracts. ‘Now that there’s not as many album sales and record companies aren’t making as much money, they try and screw [artists] by getting half of their touring and their merchandising and publishing,’ says Natalie Maines of the Dixie Chicks. ‘I hope new artists would sense that desperation and know that with the Internet and technology today, you don’t have to be so hungry for a record deal.’” – Steve Knopper, Rolling Stone

11/29/07: “TV’s New Biz: Music” - “CBS launches label to break acts on TV, then sell their tunes.” – Evan Serpick, Rolling Stone

12/27/07 – 1/10/08: “Major Labels Drop the Ax” - “The major labels are slashing jobs this Christmas, as another terrible year in the music industry comes to an end – with CD sales down 19% and the growth of digital sales leveling off.”  ”The first ax to fall was at Island Def Jam, which laid off about a dozen people – including top execs in the A&R  and radio-promotions departments – in late November.” “Sony BMG began laying off twenty to seventy employees in early December, sources say. The cuts were concentrated at its Columbia and Epic labels, and some speculated the two will merge and redundant staff will be eliminated. The biggest cuts of all may well come at EMI, purchased earlier this year by British equity firm Terra Firma, which has pledged to slash costs.” “The fourth major, Warner Music, began laying off 400 employees in May, as its stock has gone down more than 50% this year.” – Steve Knopper, Rolling Stone

12/27/07 – 1/10/08: “The Death of High Fidelity” - “Over the past decade and a half, a revolution in recording technology has changed the way albums are produced, mixed and mastered – almost always for the worse.” “Just as CDs supplanted vinyl and cassettes, MP3 and other digital-music formats are quickly replacing CDs as the most popular way to listen to music. That means more convenience but worse sound.” – Robert Levine, Rolling Stone

1/24/08: “Labels’ Unhappy Holiday” - “‘For years, the labels have been looking for the answer to declining album sales,’ says one former A&R exec. ‘The answer is that there is no answer.’” “Universal’s Island Def Jam kicked off the holiday season blitz, axing A&R ace Rob Stevenson, whose signings included Fall Out Boy and the Killers, and seven others.” “Days after Universal’s first round of firings, Sony BMG followed suit, cutting more than a dozen in publicity, video and marketing departments. Columbia lost its head of rock promotion, among others, and Epic suffered cuts across the board. And on December 13th, Universal imprint Geffen Record let go approximately 20% of its staff – an estimated 30 people – and is expected to fold most of its operations into those of its sister company, Interscope.” “Though both Warner Music Group and EMI were mostly spared, both labels had already purged substantial portions of their staffs throughout the course of 2007.” “Since 2000, more than 5,000 music-industry employees have lost their jobs.” “Says one of Sony BMG’s executive-level casualties, ‘This time, they definitely seemed to focus on cutting the higher salaries.’” – Jenny Eliscu, Rolling Stone

1/24/08: “Warner Music Takes on iTunes” - “In a dramatic reversal of company policy, Warner Music began 2008 by releasing hundreds of thousands of songs in an unprotected digital-music format through Amazon’s MP3 store – but not Apple’s dominant iTunes Store. Warner is the third major label to join Amazon, boosting its selection to more than 3 million tracks, most for 89 cents, all compatible with any music player.” “For almost a decade, the majors staunchly opposed releasing their music in an unprotected format. Last February, in response to Apple CEO Steve Jobs’ declaration that copy protection is bad for a free music market, top Warner exec Edgar Bronfman Jr. declared Jobs’ comments ‘without logic or merit.’ A major-label source says Warner changed course in part because executives realized DRM restricted their ability to put out music on a range of Web sites and players.” “Says a major-label source, ‘A lot of people in the industry would like to see consumers shift away from iTunes and see more competition in the marketplace.’” – Steve Knopper, Rolling Stone

1/24/08: “Live Nation Drops Ticketmaster” - “Live Nation, the world’s biggest concert promoter, will replace Ticketmaster early next year with its own ticket service, at livenation.com.” “Ticketmaster, which in 2006 sold about 20 million tickets for Live Nation shows, will still handle concerts by smaller competitors such as AEG Live…” – Rolling Stone

2/7/08: “2007: From Bad to Worse” - “After years of sinking sales, the record business collapsed even further in 2007, with album sales down 15% and massive layoffs at the major labels.” “’2007 was the year it really hit home that it’s a complete free fall,’ says Bob McLynn, co-manager of Fall Out Boy. ‘The traditional record business is no more. Buying CDs is going to become a collectors’ hobby like buying vinyl is now.’” “Sales in every major genre dropped dramatically, particularly hip-hop (30%), alt-rock (19%), and country (16%).” “The labels’ strategy of the last several years to emphasize digital downloads and ringtones seemed increasingly misguided in 2007, when growth of the formats finally began to level off. But execs saw new opportunity in Amazon’s MP3 store and “360-degree deals,” in which labels take a cut of touring and merchandising in addition to CD sales. But what was most obvious by the end of 2007 was that many artists simply don’t need major labels anymore.” – Steve Knopper, Rolling Stone

2/7/08: “How You Spent Your Money” - “CDs: $5.6 billion (500.5 million units); Digital singles: $836 million (844.2 million units); iPods and other portable players: $3.2 billion (20.4 million units); Guitar Hero and Rock Band: $935 million (10.5 million units); Concert tickets: $3.9 billion (36.8 million tickets)” – Rolling Stone

2/7/08: “Sony-BMG, Amazon vs. iTunes” - “In late January, Sony-BMG will join the other three major labels in selling music without copy protection via Amazon MP3. The move makes the digital-music service the first real competitor to Apple’s iTunes.” “Apple controls more than 70% of the digital-download market, but the only DRM-free tracks it sells are from EMI. And Amazon sells top tracks for 89 cents – 10 cents less than Apple. Amazon expects a surge in users after the Super Bowl , when it launches an MP3 giveaway with Pepsi and Justin Timberlake.” – Rolling Stone

2/21/08: “U2 Manager Takes on File-Sharing” - “In a passionate address at the MIDEM music conference in Cannes, France, U2 manager Paul McGuinness railed against Internet service providers – calling on them to ban users who trade music illegally and suggesting that ISPs share profits with affected artists. ‘We must shame them,’ he said. ‘Their snouts have been at our trough for too long.’ McGuinness proposed a ‘three-strike’ system in which egregious P2P users would be banned from the Internet. ISPs have the power to ‘change all this pretty much overnight,’ he said.” – Rolling Stone

3/6/08: “EMI Changes the Game” - “On January 15th, EMI CEO Guy Hands announced a vast overhaul that he hopes will transform EMI into a smarter, leaner and more profitable company, offering the rest of the failing music industry a road map for the future. How does he plan to do that? By cutting costs, for one thing.” “In the new EMI, most functions, including marketing, promotion and distribution, will be centralized, while duplicate departments at imprints such as Capitol and Blue Note will be eliminated, cutting 2,000 employees (about a third of the company).” “Hands also points to EMI’s global roster of 14,000 artists as unsustainable, promising to slash unprofitable acts or release their music in limited ways.” “And he plans to increasingly use corporate sponsors to defray the costs of producing and distributing music – Nordstrom, Victoria’s Secret and the New York Daily News have all paid for the right to put their brand on music from EMI artists.”  ”Hands also plans to increase revenue by leveraging the label’s vast catalog, which includes the Beatles and Coldplay. In one early example of this, EMI is releasing a Radiohead hits package this year without the band’s approval.”  ”Many affiliated with the label are withholding judgement until the first round of significant layoffs, expected in the coming weeks, hits.” – Evan Serpick, Rolling Stone

4/3/08: “Wal-Mart Demands CD-Price Cut” - “Wal-Mart, the nation’s largest music retailer, has threatened to stop selling CDs entirely if the major labels don’t drastically slash prices, according to music-industry sources. The superstore has insisted that the labels lower wholesale prices enough that the chain can profitably sell hits for $10 to $12, popular catalog titles for $7 to $9 and budget albums for as little as $5. (Most albums at Wal-Mart currently go for $13.99; some special promotions are priced at $9.72.”  ”Wal-Mart, which draws 127 million consumers a week into its stores, accounts for 16% of domestic music sales.” “The chain, which has traditionally used music as a ‘loss leader’ to draw consumers into stores, has reduced shelf space by 20% in recent years.” “According to a new survey by the NPD Group, a consumer-research firm, the spending on music declined from $44 to $40 per person in 2007, a decrease of 10%, as 1 million people dropped out of the CD-buying market.” “An astonishing 48% of teenagers bought no CDs last year.” “‘That’s the real underlying problem of the industry: The kids have stopped buying records,’ says Russ Solomon, founder of the now-defunct Tower Records.” – Steve Knopper, Rolling Stone

4/3/08: “The New Music Market” - “CD, Digital Sales By Age: 13-17, 10% CD, 14% Digital; 18-25, 15% CD, 21% Digital; 26-35, 19% CD, 27% Digital; 36-50, 32% CD, 32% Digital; 51+, 25% CD, 5% Digital.” – Rolling Stone

4/17/08: “NIN, Eagles, Pumpkins: Who Needs Labels?” - “In the past year, artists including Radiohead, Madonna, Nine Inch Nails, the Eagles and the Black Crowes have all released – or announced plans to release – music without a major label. The trend signals a shift in thinking among artists and managers: Thanks to digital distribution, sites like MySpace and YouTube, and an ever-expanding array of companies looking to partner with musicians, the labels are less necessary than ever.” – Evan Serpick, Rolling Stone

4/17/08: “The Raconteurs’ Surprise Album (New record’s rush release could be fresh model for biz)” - “When the Raconteurs’ Consolers of the Lonely hit record stores and online retailers on March 25th, it was the latest evidence that the music industry’s old rules no longer apply. The band had announced the release only one week earlier.” “No advance copies went out to press or radio.” “Despite the unprecedented speed, the album still leaked early. A glitch at the iTunes music store made the Raconteurs’ album briefly available four days early. And CDs that arrived early at retailers also quickly showed up online as unauthorized files.” – Brian Hiatt, Rolling Stone

5/1/08: “MySpace Opens Music Store” - “On April 3rd, MySpace announced that it will launch an online music store, offering paid downloads and free streams of music from Universal, Sony BMG and Warner Music Group.” “The tunes will be available in the DRM-free MP3 format.” “The MySpace music deal is another example of labels pushing to create competitors for market-dominating Apple, whose iTunes store recently overtook Wal-Mart as the top U.S. music retailer.” – Rolling Stone

5/1/08:  ”Live Nation Strikes Deals With Jay-Z, U2; Shakes Biz” - “While the music business as we know it collapses, one company is sweeping in to pick up the pieces: Live Nation, the world’s largest concert promoter, made another set of aggressive moves beyond its core business in recent weeks, striking broad deals with U2 and Jay-Z.” “The U2 pact guarantees that Live Nation will promote tours by the band for 12 years, as well as handle the ban’s merchandising, run its Website and sell its tickets (financial terms were kept under wraps). The $150 million Jay-Z deal is even broader: The company will release his future albums, promote his tours, handle his merch and partner with him on various entrepreneurial ventures under the name Roc Nation.” “After a series of acquisitions and other moves, Live Nation is becoming a company like no other in the history of the music business, with tentacles extending into ticketing, recorded music, merchandising, fan clubs and artist Websites.” “Live Nation – which books more than 150 venues worldwide – will dump Ticketmaster beginning next year, instead offering tickets through its own system, which will allow sites such as u2.com to sell directly to fans.” “In the past two years, Live Nation also bought Musictoday, which runs artists’ fan clubs, and Signatures Network, a leading music-merchandising company.” “Unlike record companies, Live Nation will deal directly with consumers online, allowing it to offer, say, Madonna or Jay-Z MP3s to fans who just bought tickets to their shows. In this scenario, albums become just another form of merchandise.” – Brian Hiatt, Rolling Stone

5/15/08: “Metallica, Bjork Rally Around Local Record Stores” - “In the past year, 190 stores have shut down in the U.S., according to the Almighty Institute of Music Retail, part of a wave of 1,500 closings since 2003 – a decline of more than 40%.” “Major labels have tried to protect existing stores from further bleeding, in part by dropping the wholesale prices they charge for many catalog titles in recent months.” “As of last fall, according to the NPD Group, big-boxes accounted for 42% of total CD sales, while indie stores sold just 8%.” – Steve Knopper, Rolling Stone

5/29/08: “NIN Release Free Album Online” - “While labels typically build up to an album release with multiple singles and a major press push, Reznor has chosen to get music out as soon as he finishes it. ‘Internet searches peak around the leak, not around the single or the album,’ says (NIN manager) Jim Guerinot. ‘By the time the album comes out, it’s done.’” – Evan Serpick, Rolling Stone

5/29/08: “Starbucks Cuts Music Division” - “Amid record-store closings and Wal-Mart reducing its shelf space for CDs, Starbucks announced plans to scale back its own music-retail ventures. The coffee giant reduced its entertainment division from 40 employees to less than a dozen and plans to cut the number of CDs it carries.” – Rolling Stone

5/29/08: “Artists Fight for New Hi-Fi Formats” - “High-fidelity audio may be endangered in the age of MP3, but a growing number of artists are refusing to see it die without a fight: Neil Young, Trent Reznor, John Mellencamp and T Bone Burnett have all joined the battle recently, embracing sound formats that are superior to both MP3s and CDs.” “Burnett says that, despite the popularity of iPods and the seeming failure of previous better-than-CD formats such as SACD, consumers want better sound – he cites the growing niche popularity of vinyl. ‘Nobody knew they wanted high-definition television until they saw it,’ Burnett says. ‘We need musicians to stand up for pure sound. It’s unthinkable that we’re still hung up on this 25-year-old technology of CDs.’” – Brian Hiatt, Rolling Stone

6/12/08: “Vinyl Returns in the Age of MP3″ - “As CD sales continue to decline and MP3s are traded without thought, the left-for-dead LP is staging a comeback. In 2007, according to Nielsen SoundScan, nearly 1 million LPs were bought, up from 858,000 in 2006. Based on to-date sales for 2008, that figure could jump to 1.6 million by year’s end.”  ”Despite the uptick, vinyl remains a niche market. Most new releases, indie or major, sell between 2,000 and 10,000 copies.” “An LP can cost as much as $4.50 per unit to manufacture, compared to roughly a dollar for a CD.”  - Rolling Stone

7/10-24/08: “Lil Wayne Sells a Million in a Week” - “Lil Wayne defied the music-industry slump and sold more than 1 million copies of his new album, Tha Carter III, in its first week of release. For two years Wayne has promoted himself with a constant stream of mixtapes, and his infectious Number One single, “Lollipop”, helped to give him mainstream appeal. After he topped the charts, the MC made a YouTube video for his fans. ‘Everybody who went and got that, I appreciate it,’ said Wayne.” – Rolling Stone

7/10-24/08: “Gas Prices, Economy Shake Sales for Summer Tours” - “Four-dollar-a-gallon gas prices are eating away at the summer-concert business, with top festivals and tours taking unexpected box-office hits over the past few months. Bonnaroo and Coachella fell short of sellouts for the first time in years, tours such as Stevie Wonder, Janet Jackson, Maroon 5 and George Michael are struggling, and even perennial sure things like Bruce Springsteen and Nine Inch Nails are soft in some cities.” “Madonna – who is playing stadiums in Los Angeles and San Francisco – has sold out 15 of her 25 shows and 88% of the total seats.” – Steve Knopper, Rolling Stone

8/7/08: “Live Nation Signs More Superstars” - “Following the lead of Madonna and Jay-Z, Nickelback and Shakira have signed multimillion-dollar ’360 degree’ deals with Live Nation.” “Nickelback’s three-album, three-tour arrangement is reportedly worth $50 million to $70 million, while Shakira’s 10-year deal is worth $70 million to $100 million.” – Rolling Stone

8/7/08: “Midyear Music Biz Report Card” - “Despite blockbuster debuts from Lil Wayne and Coldplay, the record industry is facing its fourth year in a row of declining sales. At midyear, sales of physical CDs were down 16.3%, according to Nielsen SoundScan. And while sales of digital tracks are still increasing, the rate of growth has slowed from 48% in mid-2007 to 30% this year.” – Rolling Stone

8/21/08: “Kid Rock’s Hot Summer; No iTunes Required” - “Kid Rock’s album Rock N Roll Jesus has been climbing the charts, selling over 1.3 million copies and landing at Number Four in late July.” “Since Rock has long refused to sell his music as digital downloads, fans who want to get (hit single) “All Summer Long” – legally, at least – have to buy the album.” “As the record industry struggles with weak album sales, Kid Rock’s success has execs considering a new strategy. ‘It’s definitely interesting that he’s the only artist that’s not available on iTunes with a monster hit right now, and we’re seeing that kind of growth,’ says Livia Tortella, general manager of Atlantic, who acknowledges that the company is considering keeping other artists’ singles off iTunes in hopes of building album sales.” – Austin Scaggs, Rolling Stone

9/4/08: “Sony and BMG End Partnership” - “The four-year-old merger of Sony and BMG ended on August 5th when Sony bought out BMG’s 50% stake in the company for $900 million.” “The acquisition, which is expected to take effect by the end of the year, probably won’t affect labels such as RCA and Columbia, and a source says layoffs and artist-roster cuts are unlikely.” – Rolling Stone

9/4/08: “Labels Plan Big Releases for Fall” - “Follwing two fizzled-out fourth quarters in a row, the jamor record labels have prepared a superstar-packed holiday shopping season, with U2, Beyonce, Dr. Dre, Metallica, AC/DC, Jay-Z and top American Idol stars dropping albums through the end of 2008, label sources say. For an industry mired in an eight-year slump, with album sales down 11% so far this year, according to Nielsen SoundScan, the pre-Christmas schedule is a rare bit of good news.” – Steve Knopper, Rolling Stone

9/18/08: “MySpace Preps Music Store” - “Social-networking giant MySpace will open its long-promised music store later this month, allowing fans to download and stream millions of songs – including new music and back catalog – from three of the four major labels. In an attempt to differentiate themselves from the two leading digital-music retailers – Apple’s iTunes and Amazon’s MP3 Store – MySpace Music will let fans share music through their pages and build communal playlists, as well as purchase merchandise and tickets.” “Songs will be available as unprotected MP3s and prices will be competitive with other services.” – Rolling Stone

10/2/08: “Tour Biz Strong in Weak Economy” - “At the end of the key summer concert season, the world’s biggest promoter reports that high gas prices and a slumping economy did little to dampen business. ‘Across every metric, we’ve had one of our best summers in recent memory,’ says Jason Garner, CEO of Live Nation’s North American division.” “Still, the economy did hurt some artists. According to Adam Friedman, CEO of L.A.-based Nederlander Concerts, acts that appealed to younger, less-affluent audiences, including Nine Inch Nails and Maroon 5, hit soft spots or notched fewer sellouts than in recent summers.” – Steve Knopper, Rolling Stone

10/16/08: “MySpace Music Takes on iTunes” - “On September 25th, MySpace launched MySpace Music, which will allow fans to stream millions of hits and classics for free – as well as buy downloads of songs or albums.” “In order to land those digital rights, MySpace made the four major labels (Sony BMG, Warner Music Group, Universal Music and EMI) equity partners in the site.” “MySpace Music’s scheme is simple: Lure fans with free streaming tunes. Once the fans are there, they’ll be enticed to buy additional products – eventually, band merchandise and concert tickets – or download songs. (Fans who want to download music purchase it through Amazon’s store, but the process is well-integrated.) The labels – and ostensibly musicians – will get an undisclosed cut of the site’s advertising revenue as well as earn money from downloads.” – David Browne, Rolling Stone

11/13/08: “AC/DC Score Hit With Wal-Mart” - “Like the Eagles successfully did a year ago, AC/DC are sellig their record exclusively through Wal-Mart’s 3,500 stores, tapping into the chain’s marketing might and 200 million annual customers at a time when CD sales dropped 36 % between 2000 and 2007, according to data from Nielsen SoundScan.” “The deal is paying off for AC/DC in a big way: Black Ice was on track to sell 900,000 copies in its first week, making it the year’s second biggest debut.” “Other superstars are making similar deals: Best Buy will release Guns n’ Roses Chinese Democracy on November 23rd and the Police’s Certifiable box set on November 11th. And Christina Aguilera’s Keeps Gettin’ Better hits package will come out at Target on November 11th.” – Steve Knopper, Rolling Stone

11/13/08: “Radiohead Reveal ‘Rainbows’ Sales” - “… 3 million copies, a figure that includes digital downloads as well as physical-CD sales. They also sold 100,000 copies of the $81 deluxe edition. Radiohead claim to have made more money on the digital release of In Rainbows than they made for their total take on 2003′s Hail to the Thief, which has sold 1 million copies in the U.S.” – Rolling Stone

11/13/08: “Ticketmaster Hires Eagles’ Manager” - “Ticketmaster announced on October 23rd it would buy Irving Azoff’s powerful Front Line Management and install the veteran manager as CEO. The deal gives Ticketmaster a large stable of superstars – such as the Eagles, Van Halen, Jimmy Buffett and Steely Dan – and positions the company to compete with concert-promotion giant Live Nation.” “As of January 1st, Live Nation will begin selling tickets through its own online system, removing as much as 17% of Ticketmaster’s business.” – Rolling Stone

12/11/08: “Ticket Battle Shakes Music Biz” - “When Live Nation, the world’s biggest concert promoter, announced that it would begin selling its own tickets starting in January, it seemed like the beginning of the end for Ticketmaster. Instead, the move has triggered a war that is reshaping the entire music industry, with the two companies battling for a piece of every dollar fans spend on music, from concerts and merchandise to albums and digital downloads.” “From 2000 to 2007, CD sales plunged 36%. But concert revenues soared, from $1.7 billion to $3.9 billion – shifting power to touring artists, their managers and concert promoters.” “The benefits Live Nation will accrue by selling tickets from its own Website are clear: The company can eliminate Ticketmaster’s much-derided service charges, and make its site a one-stop music shop for artists it works with – selling tickets, albums, merchandise and more.” “Not surprisingly, selling tickets is just one business the newly christened Ticketmaster Entertainment Inc. plans to pursue. (New CEO) Azoff suggests that Ticketmaster could use its Website, from which some 141 million fans bought tickets last year, to sell digital downloads, Cs and merchandise. The company will also sell tickets in new ways; it recently announced a plan for fans to buy tickets directly from their BlackBerrys by the ened of this year.” “Both Live Nation and Ticketmaster stocks have taken a beating during the recent financial crisis. Although Live Nation’s revenues climbed in the third quarter, Wall Street analysts have said they doubt the company will sell as many tickets in 2009 as it has in recent years. And Ticketmaster recently reported concert-ticket sales have dropped 7% since July.” – Steve Knopper, Rolling Stone

12/25/08 – 1/8/09: “Summer Bummer for Rock Festivals” - “Bonnaroo and Coachella fell short of sellouts for the first time in years, and promoters canceled Jersey’s Vineland Festival before it even went on sale.” – Rolling Stone

12/25/08 – 1/8/09: “Vinyl Takes Another Spin” - “Fans flocked to the once-presumed-dead format of vinyl in ’08: Sales are on track to hit 1.6 million copies for the year, up 60% from 2007.” – Rolling Stone

1/22/09: “Artists Slash Prices as Recession Rocks the Concert Business” - “After eight years of growth, during which concert revenues more than doubled, the economy finally seems to be catching up with the touring business. Fearing a deeper recession, top acts are scrambling to cut expenses like special effects, buses, lighting and crew, slashing ticket prices or waiting a few months before hitting the road.” “Many acts are pairing up in cost-effective packages, like Oasis and Weezer, both of whom saw empty seats in the fall.” – Steve Knopper, Rolling Stone

2/5/09: “Digital Album Prices Slashed” - “Many artist managers believe that since millions of fans continue to download songs illegally, for free, $9,99 for a full album is far too expensive. But executives at major record labels generally resist dropping online prices, arguing that they can’t absorb the significantly lower profit margins and don’t want to devalue music.” “Amazon and other stores are willing to reduce their profits in order to attract new customers.” “On January 6th, Apple officials announced iTunes would begin selling some singles for $1.29. the store will also sell older catalog titles for 69 cents apiece.” “iTunes recently put some of 2008′s best albums, such as Fleet Foxes’ Fleet Foxes and MGMT’s Oracular Spectacular, on sale for $7.99.” “Many managers are pushing labels to slash prices even more. ‘I’d love to sell our records for $4.99 – it’s just getting the label to agree,’ says Fall Out Boy manager Bob McLynn. ‘The labels want to raise prices. It blows my mind.’” – Steve Knopper, Rolling Stone

2/5/09: “Bright Spots in a Bad Year” - “After four years of decline, the record business hit a new low in 2008, with album sales down 14.4%. But there were some reasons for optimism: Despite the economy, the tour business was up 7% over 2007. ” “Even though labels scored big with a handful of artists, it became clear that booming sales of digital downloads will likely never replace lost CD revenue. So the four major labels made aggressive moves in 2008 to shift to a business model where they make money off many things – from ring-tones to part-ownership of MySpace Music to ’360 degree deals,’ where the label shares in tour, merch and other revenue.” “Many say it’s a sound rebuilding strategy after a long, tough period.” – Rolling Stone

2/5/09: “The Music Biz’s Long Decline” - “Albums sold in 2004: 666.7 million. Albums sold in 2008: 428.4 million. Digital Singles sold in 2004: 140.9 million. Digital Singles sold in 2008: 1.07 billion. Total Music Sold in 2004: 680.7 million. Total Music Sold in 2008: 535.4 million.” – Rolling Stone

2/5/09: “RIAA to Stop Mass Lawsuits” - “After suing 35,000 people since September 2003 for illegally sharing music files online, the RIAA announced in December that it has halted its controversial lawsuit campaign.” “The RIAA will immediately change its strategy: It plans to team up with Internet service providers to identify copyright infringers, send warning letters and, in extreme cases, shut off service.” – Rolling Stone

2/19/09: “Live Nation Ticket Fees Anger Concertgoers” - “For decades, fans have complained about the service charges Ticketmaster tacks on to every ticket it sells. So it was big news in 2008 when Live Nation, the world’s largest concert promoter, announced it would break with Ticketmaster and sell tickets through its own Website – and suggested an end of those fees.” “But since Live Nation’s in-house ticketing services launched January 1st, fees for shows have been just as high as Ticketmaster’s.” “Live Nation declared service fees make up 17% of its gross income, compared to 43% from beer and other ancillary products at shows and 24% from tour sponsorship.” “‘(The service-charge system) is a profit center – that’s the bottom line,’ says a concert-industry insider. ‘For all the heat that Ticketmaster has taken over the years protecting the service-charge revenue that passes through to the promoter, it’s uncanny that Live Nation has ended up with the same model at the same cost.’” – Steve Knopper, Rolling Stone

3/5/09: “Merger Would Create Biz Giant” - “The proposed $2.5 billion merger between Live Nation, the world’s largest concert promoter, and ticket-selling behemoth Ticketmaster would create the most powerful company in the music business.” “Ticketmaster CEO Irving Azoff, who whould be executive chairman of Live Nation Entertainment Inc. (as the combined company would be called), sees the merger as a way of fixing a concert business he says is ‘broken.’ Azoff imagines the new company will take a broad role in artists’ careers. He envisions more flexible ticket prices and lower service fees; an online store in which T-shirts and downloads are bundled with tickets; and beefed-up revenues from VIP packages and from reselling tickets via its TicketsNow site. He says ticket prices could be lower overall, because the new operation could bring in more corporate sponsors.” “Artists who work with the new company could be managed by Azoff’s Front Line, have their tours promoted by Live Nation, sell their tickets through Ticketmaster and even distribute CDs and merchandise – all without the participation of any outside entity.” “The merger will take place in late 2009 if it passes regulatory hurdles. Many insiders expect the Obama administration to be much tougher on greenlighting such a merger than the Bush administration, which approved massive concert-business consolidation.” “For Live Nation, the merger proposal is a sharp strategic turn from January, when the company ended its longtime contract with Ticketmaster and began selling millions of tickets through its own site.”  - Steve Knopper, Rolling Stone

3/19/09: “Tanking CD Sales Shutter Stores” - “With Virgin Megastore closing three of its six remaining outlets in April and May, Circuit City shutting all 567 of its stores, Borders threatening to cut its music-and-movie shelf space by 70%, and 30 other music retailers going out of business so far in 2009, the record industry is bracing for the death of the 27-year-old compact disc.” “CD sales have dropped 48.9% since 2000, according to Nielsen SoundScan.” “2.680 stores have closed since 2005, according to the Almighty Institute of Music Retail.” “One winner in all this has been Amazon.com, which sells both downloads and physical CDs and has boosted its proportion of music sales from 6% in 2007 to 8.3% last year, according to NPD.” – Steve Knopper, Rolling Stone

3/19/09: “Ticketmaster, Live Nation Argue for Merger in D.C.” – At hearings in late February, members of Congress expressed concern over the planned $2.5 billion merger of Live Nation and Ticketmaster. Live Nation’s Michael Rapino and Ticketmaster’s Irving Azoff faced tough questioning over claims that the combined company would lower ticket prices and service fees.” “Opponents testified that the proposed merger would create an illegal monopoly.” “It’s unclear when the Justice Department will rule on the merger.” – Rolling Stone

3/19/09: “Flo Rida Smashes Sales Record” - “Rapper Flo Rida’s new single ‘Right Round’ sold 636,000 downloads its first week, setting a new record for single-week digital sales. (The record was previously held by Flo Rida’s 2007 tune ‘Low.’)” – Rolling Stone

4/2/09: “Virgin Megastores Shut Their Doors” - “The last of the U.S. Virgin Megastores – in Los Angeles, Denver and Orlando, in addition to previously announced locations in Manhattan and San Francisco – will close by midsummer.” – Rolling Stone

4/2/09: “Buy No Doubt Tix, Get Free Tunes” - “No Doubt are giving away their entire seven-album catalog online to fans who buy tickets starting at $42.50 to the band’s reunion tour, launching in May.” “In a similar move, Depeche Mode recently announced they would charge $18.99 for an iTunes Pass, which buys the group’s new LP, Sounds of the Universe, as well as upcoming exclusive live tracks, remixes and videos.” – Rolling Stone

Industry Shambles

Which industry?

Fair question, recession and all.

This blog is about the Record Industry. And it’s in shambles because it has failed to figure out how to present and sell recorded music in a digital format.

What about iTunes and Amazon and…?  Yeah, they sell “digitized music”. iTunes is even the top music retailer in the United States, over-taking Wal-Mart a year ago. (Digital conquering physical!) But think about what iTunes sells: compressed digital audio files (in their case AAC’s) with album cover artwork. And the free version? Compressed digital audio files (most often MP3 and often with album art). They both sound the same, look the same, play in the same player. The only difference is the price and it is unsustainable.

You can not have an Industry in which production costs but payment for the product is optional. Imagine this with burgers. “But if I go around back, you’re giving away the burgers, so why should I pay for them?” Well, because if you don’t pay for them, there won’t be any money to keep producing them. “Then why are you always giving them away for free?” Because we’re whetting your appetite for fries? “This is a mind-fuck!” I know!

Sorting through these shambles feels less productive than accepting them. It is not the consumer’s fault that the Record Industry hasn’t figured out how to distinguish between digital product and promotion. The consequence, however, is that the current product – compressed digital audio files with or without album art – is essentially promotional and if you’re paying for it, you’re either an altruist or a sucker. And most of us aren’t either. We’re “unique consumers”, which means we are defined by the things we want and if it has a price, we pay for it. And we want music! And it’s being given away! And now – deep breaths – it will be given away forever…

So why not “redefine” the product? An MP3 is really just like a blank tape or a CDR – a secondary source. So why is it indistinguishable from the primary source? The Record Industry had no problem selling cassettes when the popular format was cassette or CDs when the popular format was CD. What did they do then to distinguish between the product and the copy? 

They created a package. While it may not seem like much, the difference between a Maxell cassette scrawled with a song listing and the store-bought “Appetite for Destruction” was revelatory. The garish art, the lyrics, the fold-out, the smell… it connected the consumer to the product in a way that a less dynamic version never could. It gave you the satisfaction of connection. Recorded music was never just about the music – from vinyl through Compact Disc, it was about the package.

So why is digitized music lacking dynamic at precisely the point when technology has mastered the art of dynamic? There’s no good reason, though stubbornness and inefficiency are starters. Meanwhile the cascades of visual stimulation, functionality, connection, the worlds opening in to worlds that we experience every day on the Internet have broken the compressed audio file down to an elementary tool. Literally. Entire generations are growing up that theoretically won’t pay for recorded music once in their lives. But they’ll consume the shit out of it!

They need the option of paying for recorded music in a digital package that is distinct from the one-dimensional MP3. At the very least, this would make the option of buying “product-driven”, instead of conscience-driven. At the most, this digital package could redefine the standard for what we expect from a recorded music product. It could shower us with features. It could connect us to other fans. It could live, in that it could update and expand. It could cut out the middlemen – and the costs! – by connecting the Artist to the audience. It could be the most powerful point of encounter a music fan experiences. It could sell!

And it will. There aren’t better strategies for the future of the Record Industry than a “new model”. And there’s not a better service to fans than the creation of a product they can connect with. The cost of a digital album is the fucking cost of lunch – it’s priced for consumption! And consumed it will be, as soon as the product is distinct from the giveaway.

So this blog is intended to think through, in an open way, strategies that can help shape the future of selling and consuming recorded music. There’s also a working vision, but big whoop. The important thing is that we can construct something incredibly cool out of the shambles – something for the biz, the Artists and the fans alike. Something modern and marvelous. Something true.

Industry Shambles