The music business as we know it is dying a fast death and gone are those days of pressing up and selling CDs. That's bad news for those still playing the same old music game but definitely not bad news for those artists and labels willing to ride the new wave. But all is not lost with the music industry. Emerging trends in online marketing and social media optimization has created new opportunities to market to a larger audience. Those who survive will see the need to step outside of the traditional label relationship and be more cost effective while still being able to make money and have longevity in the business. Those who fail will continue to do what they've been doing. Nevertheless, there are some hot new trends to jump start any music promotion campaign in 2008.
8 MUSIC PROMOTION TRENDS FOR 2008
Viral Videos: We saw what it did for Soulja Boy. Imagine what a little creativity could do in your online promotions.
Digital Sales: It's killed CD sales but created new sales opportunities (i.e. ringtones, mobile marketing, etc). Combine your digital sales with your Myspace, Facebook, & social media marketing strategy.
Free Music: It's not completely free but funded by advertisers and sponsors. Heard of RCRD LBL or Spiral Frog? Find out how Puma & other advertisers are helping their artists promote their songs.
Online PR: Print media is always a great source of publicity but notice how magazines are shrinking in size and becoming less content & way too much ads. Besides, online PR gets your message out quicker and to a larger audience.
Blog, Blog, & Blog: Besides being a great tool to stay in touch with your audience, blogging also helps to optimize your search engine rank.
Guerilla Marketing: Nothing beats in your face marketing that you can't seem to avoid.
Control at the Hands of Your Audience: It worked for Radiohead when they let their fans name the price of their CD. It could work for you.
New media technologies: Myspace, Facebook, Ning, Bebo, Joost TV, Goodstorm Mixtapes. Need I say more.
http://ezinearticles.com/?The-Death-of-the-Music-Industry-in-2008&id=940600
dinsdag 6 januari 2009
The End of the Music Industry in 2008
Perhaps I’m searching for validation for my sweeping hyperbole about the “death” of the music industry associations, or perhaps the writing on the wall I’m reading is in a language that others can understand as well. Either way, the pro-artist and pro-p2p non-profit Downhill Battle published their very short and simple predictions yesterday regarding the mainstream music business. Nick of DHB predicts the near-death of all four major music labels in 2008:
“Variety reported last week that “overall music sales during the Christmas shopping season were down an astounding 21% from last year.” No industry can survive a drop like that, especially on the heels of a similarly terrible year and decade. [...] Expect to see the four major labels slashing their operations over the next few months. These labels will probably make a some last gasp moves: dramatic online music giveaways and desperate attempts to get artists to sign over their tour and merchandise revenue. But the trend towards decentralization, self-publishing, and direct artist-fan relationships is simply too strong. There will continue to be a role for online music stores and companies that offer promotional services for artists…”
I’ve been following the work of Downhill Battle for years, and they’ve been pushing for and predicting the eventual demise of the Old Media music business. Their sometimes unconventional forms of activism always push the line of legality, and they’ve been advocating for the legality (and inevitability of file sharing) since before it was cool to do so.
As such, a lot of times their expositions on the industry and goings on of the music industry and file-sharing seem sometimes inconceivable, or at least difficult to support. They are, however, an organization that backs up their words with actions (like the highly successful Save BetaMAX campaign). What’s more, they are usually right in their wild claims and predictions, though sometimes it takes years for public opinion to fall in line with their own.
So when they say something like the death of the music industry is nigh, it is a fair bet they are right, and is worthy of note.
[note: when I started writing the article, the dhb servers were up. they now appear to be having some sort of site issue. in the event they are still down when you read this, Google's cache of DHB - here]
“Variety reported last week that “overall music sales during the Christmas shopping season were down an astounding 21% from last year.” No industry can survive a drop like that, especially on the heels of a similarly terrible year and decade. [...] Expect to see the four major labels slashing their operations over the next few months. These labels will probably make a some last gasp moves: dramatic online music giveaways and desperate attempts to get artists to sign over their tour and merchandise revenue. But the trend towards decentralization, self-publishing, and direct artist-fan relationships is simply too strong. There will continue to be a role for online music stores and companies that offer promotional services for artists…”
I’ve been following the work of Downhill Battle for years, and they’ve been pushing for and predicting the eventual demise of the Old Media music business. Their sometimes unconventional forms of activism always push the line of legality, and they’ve been advocating for the legality (and inevitability of file sharing) since before it was cool to do so.
As such, a lot of times their expositions on the industry and goings on of the music industry and file-sharing seem sometimes inconceivable, or at least difficult to support. They are, however, an organization that backs up their words with actions (like the highly successful Save BetaMAX campaign). What’s more, they are usually right in their wild claims and predictions, though sometimes it takes years for public opinion to fall in line with their own.
So when they say something like the death of the music industry is nigh, it is a fair bet they are right, and is worthy of note.
[note: when I started writing the article, the dhb servers were up. they now appear to be having some sort of site issue. in the event they are still down when you read this, Google's cache of DHB - here]
Music sales boom, but albums fizzle for '08
Americans bought more music in 2008 than ever before, but album sales — the music industry's main source of revenue — dropped for a fourth year.
According to the Nielsen Co.'s year-end figures, music purchases — CD, vinyl, cassette and digital purchases of entire albums (grouped together as total albums), plus digital track downloads, singles and music videos — attained a new high of 1.5 billion, up 10.5% over 2007.
More than 70% of those transactions were digital track downloads, a record total of 1.07 billion that swamped 2007's previous high of 844.2 million by 27%. Last week's track downloads set a record of 47.7 million, and 71 songs exceeded 1 million downloads this year, compared with 41 last year (and just two in 2005). Track downloads outsold albums by a ratio of 2.5 to 1.
Total album sales dropped to 428.4 million, 14% fewer than in 2007, and have fallen 45% since 2000. Even combining album and track sales (by a formula that counts 10 track downloads as one album sale), the 535.4 million total is still down 8.5% from 2007 and more than 30% below 2000's physical album sales of 785.1 million.
Music purchases are "astronomically high," says Rob Sisco, Nielsen's president of music, "but it's a marketplace in transition from physical to digital." He sees promise in the rise of digital purchases of entire albums, which reached a high of 65.8 million in 2008. New albums by big acts bring the market up, he says, but "there hasn't been a steady stream of high-profile releases." Other '08 results:
FIND MORE STORIES IN: CDs | Beatles | Coldplay | Kid Rock | Girl | Death | Fab Four | Timbaland | Taylor Swift | Rainbows | Leona Lewis | Katy Perry | Viva | SoundScan | Fearless | Flo Rida | Kissed | Vida | OneRepublic | Black Ice | All His Friends | Apologize | Bleeding Love | Rob Sisco
•Leona Lewis' Bleeding Love was the year's top-selling digital song with 3.42 million downloads. Lil Wayne's Lollipop also topped 3 million, by 160,000. Rest of the top five: Flo Rida's Low, Katy Perry's I Kissed a Girl, Coldplay's Viva la Vida.
•Lil Wayne's Tha Carter III was the No. 1 album, selling 2.87 million copies. Coldplay's Viva la Vida or Death and All His Friends, Taylor Swift's Fearless and Kid Rock's Rock 'n' Roll Jesus were the only other albums to sell 2 million in 2008, compared with eight in 2007.
•Swift, whose self-titled first album was No. 6 for the year, behind AC/DC's Black Ice, sold 4 million albums overall, tops for any artist. Rihanna was the leader in track sales with 9.94 million.
•Low is the all-time best-selling digital song, with 4.53 million downloads. The only other track above 4 million is Timbaland & OneRepublic's Apologize, at 4.01 million.
•Garth Brooks lost ground to The Beatles but is still by far the best-selling artist of the SoundScan era (post-1991, when Nielsen began tracking album sales electronically), leading the Fab Four by a tally of 68.1 million to 57.1 million.
•Although vinyl albums gave way to CDs years before SoundScan launched, it's worth noting that vinyl sales hit a 17-year high in 2008 with 1.88 million, up dramatically from just under a million in 2007. Radiohead's In Rainbows was the top vinyl seller with 25,800 copies.
According to the Nielsen Co.'s year-end figures, music purchases — CD, vinyl, cassette and digital purchases of entire albums (grouped together as total albums), plus digital track downloads, singles and music videos — attained a new high of 1.5 billion, up 10.5% over 2007.
More than 70% of those transactions were digital track downloads, a record total of 1.07 billion that swamped 2007's previous high of 844.2 million by 27%. Last week's track downloads set a record of 47.7 million, and 71 songs exceeded 1 million downloads this year, compared with 41 last year (and just two in 2005). Track downloads outsold albums by a ratio of 2.5 to 1.
Total album sales dropped to 428.4 million, 14% fewer than in 2007, and have fallen 45% since 2000. Even combining album and track sales (by a formula that counts 10 track downloads as one album sale), the 535.4 million total is still down 8.5% from 2007 and more than 30% below 2000's physical album sales of 785.1 million.
Music purchases are "astronomically high," says Rob Sisco, Nielsen's president of music, "but it's a marketplace in transition from physical to digital." He sees promise in the rise of digital purchases of entire albums, which reached a high of 65.8 million in 2008. New albums by big acts bring the market up, he says, but "there hasn't been a steady stream of high-profile releases." Other '08 results:
FIND MORE STORIES IN: CDs | Beatles | Coldplay | Kid Rock | Girl | Death | Fab Four | Timbaland | Taylor Swift | Rainbows | Leona Lewis | Katy Perry | Viva | SoundScan | Fearless | Flo Rida | Kissed | Vida | OneRepublic | Black Ice | All His Friends | Apologize | Bleeding Love | Rob Sisco
•Leona Lewis' Bleeding Love was the year's top-selling digital song with 3.42 million downloads. Lil Wayne's Lollipop also topped 3 million, by 160,000. Rest of the top five: Flo Rida's Low, Katy Perry's I Kissed a Girl, Coldplay's Viva la Vida.
•Lil Wayne's Tha Carter III was the No. 1 album, selling 2.87 million copies. Coldplay's Viva la Vida or Death and All His Friends, Taylor Swift's Fearless and Kid Rock's Rock 'n' Roll Jesus were the only other albums to sell 2 million in 2008, compared with eight in 2007.
•Swift, whose self-titled first album was No. 6 for the year, behind AC/DC's Black Ice, sold 4 million albums overall, tops for any artist. Rihanna was the leader in track sales with 9.94 million.
•Low is the all-time best-selling digital song, with 4.53 million downloads. The only other track above 4 million is Timbaland & OneRepublic's Apologize, at 4.01 million.
•Garth Brooks lost ground to The Beatles but is still by far the best-selling artist of the SoundScan era (post-1991, when Nielsen began tracking album sales electronically), leading the Fab Four by a tally of 68.1 million to 57.1 million.
•Although vinyl albums gave way to CDs years before SoundScan launched, it's worth noting that vinyl sales hit a 17-year high in 2008 with 1.88 million, up dramatically from just under a million in 2007. Radiohead's In Rainbows was the top vinyl seller with 25,800 copies.
Music downloads hit 1 billion mark
Digital revenue doesn't make up for decline in CD sales.
Digital music downloads reached a milestone in 2008, exceeding 1 billion songs bought online during the year, according to a report from Nielsen SoundScan, which tracks music sales. That represents a 27 percent rise over a year ago.
But the popularity of the download is not enough to offset continued declines in CD sales, which still account for the bulk of the music industry's revenue.
Disc sales fell nearly 20 percent, to 362.6 million, the seventh decline in eight years, according to SoundScan's report, which was released Wednesday.
Overall album sales, including CDs and the digital equivalent, dropped 8.5 percent compared with 2007.
Every musical genre reported across-the-board declines in album sales, and holiday sales were off by 19 percent.
In an effort to cope with changing technology and the threat of Internet piracy, the music industry has been exploring new sources of revenue.
Royalties from satellite and Internet radio and "360" deals with artists, in which the record label shares in concert ticket and merchandise sales, contribute to the labels' bottom line. Video games also generate licensing fees.
Nielsen doesn't track those alternative revenue streams, although they are not yet large enough to offset the decline in CD sales.
Universal Music Group remained the industry's big dog, with a nearly 32 percent share of the album market, followed by Sony BMG Music Entertainment, at 25 percent. Warner Music Group claimed 21 percent of sales, and the smallest of the major labels, EMI Music, had a market share of 9 percent.
Lil Wayne's "Tha Carter III" was the best-selling album of the year. The rock group AC/DC was the best-selling group.
Digital music downloads reached a milestone in 2008, exceeding 1 billion songs bought online during the year, according to a report from Nielsen SoundScan, which tracks music sales. That represents a 27 percent rise over a year ago.
But the popularity of the download is not enough to offset continued declines in CD sales, which still account for the bulk of the music industry's revenue.
Disc sales fell nearly 20 percent, to 362.6 million, the seventh decline in eight years, according to SoundScan's report, which was released Wednesday.
Overall album sales, including CDs and the digital equivalent, dropped 8.5 percent compared with 2007.
Every musical genre reported across-the-board declines in album sales, and holiday sales were off by 19 percent.
In an effort to cope with changing technology and the threat of Internet piracy, the music industry has been exploring new sources of revenue.
Royalties from satellite and Internet radio and "360" deals with artists, in which the record label shares in concert ticket and merchandise sales, contribute to the labels' bottom line. Video games also generate licensing fees.
Nielsen doesn't track those alternative revenue streams, although they are not yet large enough to offset the decline in CD sales.
Universal Music Group remained the industry's big dog, with a nearly 32 percent share of the album market, followed by Sony BMG Music Entertainment, at 25 percent. Warner Music Group claimed 21 percent of sales, and the smallest of the major labels, EMI Music, had a market share of 9 percent.
Lil Wayne's "Tha Carter III" was the best-selling album of the year. The rock group AC/DC was the best-selling group.
Vinyl records making a comeback
TORONTO - A music-buying public enamoured with digital downloads may be abandoning the compact disc in droves, but one physical medium is staging a tiny comeback.
Amid otherwise gloomy music sales numbers released by Nielsen Co. this week, vinyl record sales doubled compared with the year before.
The number of long-play vinyl records sold in the United States rose to 1.88 million units, compared with 990,000 the year before.
While vinyl records represent just a fraction of total music sales, their resurgence could not come at a better time for another under-fire segment of the music industry, the independent record store.
Nielsen said almost two-thirds of the vinyl albums sold last year were from independent shops.
Harmik Grigorian, co-owner of L'Atelier Grigorian music store in Toronto's trendy Yorkville district, said he plans to begin selling new vinyl releases next year because more and more people are coming in asking for them.
"A lot of people are coming in looking to buy or experiment," said Mr. Grigorian. "And now you can see a lot of hardware stores are selling affordable turntables."
Smaller, independent shops are being squeezed by competition from digital music sales and big-box retailers such as Wal-Mart.
Higher sales of vinyl products buck a trend in the music industry, with major labels trying to combat shifting consumption patterns on the part of consumers.
However, an uptick in vinyl record sales will not save labels such as Universal Music Group from the precipitous decline in the sale of compact discs, by far their main money maker. CD sales fell almost 20% last year.
Over the important holiday period, album sales in all formats were down almost 20%.
Last year, sales of digital albums rose 32% to 66 million units from 50 million in 2007. Over the same period, CD sales fell almost 20% to 361 million units from 450 million, Nielsen said.
Figures for Canada will be released later this month, a spokesperson for Soundscan Canada said Friday.
Artists such as Madonna, U2 and R.E.M. have opted to release their latest albums in the vinyl format as well.
The top selling vinyl album in 2008 was Radiohead's In Rainbows, followed by the Beatles' Abbey Road, at 16,500 units.
"From what I'm gathering, strangely enough, it's the younger generation that are really kind of going back to [vinyl]," said Roy Trakin, editor of the U.S. music industry Web site Hits. "It's a nostalgic throwback to listening to music in a traditional way."
Amid otherwise gloomy music sales numbers released by Nielsen Co. this week, vinyl record sales doubled compared with the year before.
The number of long-play vinyl records sold in the United States rose to 1.88 million units, compared with 990,000 the year before.
While vinyl records represent just a fraction of total music sales, their resurgence could not come at a better time for another under-fire segment of the music industry, the independent record store.
Nielsen said almost two-thirds of the vinyl albums sold last year were from independent shops.
Harmik Grigorian, co-owner of L'Atelier Grigorian music store in Toronto's trendy Yorkville district, said he plans to begin selling new vinyl releases next year because more and more people are coming in asking for them.
"A lot of people are coming in looking to buy or experiment," said Mr. Grigorian. "And now you can see a lot of hardware stores are selling affordable turntables."
Smaller, independent shops are being squeezed by competition from digital music sales and big-box retailers such as Wal-Mart.
Higher sales of vinyl products buck a trend in the music industry, with major labels trying to combat shifting consumption patterns on the part of consumers.
However, an uptick in vinyl record sales will not save labels such as Universal Music Group from the precipitous decline in the sale of compact discs, by far their main money maker. CD sales fell almost 20% last year.
Over the important holiday period, album sales in all formats were down almost 20%.
Last year, sales of digital albums rose 32% to 66 million units from 50 million in 2007. Over the same period, CD sales fell almost 20% to 361 million units from 450 million, Nielsen said.
Figures for Canada will be released later this month, a spokesperson for Soundscan Canada said Friday.
Artists such as Madonna, U2 and R.E.M. have opted to release their latest albums in the vinyl format as well.
The top selling vinyl album in 2008 was Radiohead's In Rainbows, followed by the Beatles' Abbey Road, at 16,500 units.
"From what I'm gathering, strangely enough, it's the younger generation that are really kind of going back to [vinyl]," said Roy Trakin, editor of the U.S. music industry Web site Hits. "It's a nostalgic throwback to listening to music in a traditional way."
From Bricks and Mortar to Digital Music Master
As music merchants struggle to adapt their business models, one New York shop is embracing the Web.
Josh Madell needs to invent a new business model, and soon. The 37-year-old co-owner of Other Music, a New York retailer specializing in obscure CDs and vinyl, has watched sales slip sharply as music buyers move online. While his company, in business since 1995, remains profitable, he and his staff of 15 are trying to find new ways to make money, using the same technologies and trends that upended their old business model to build a new one. He is thinking beyond Other Music's core retail business. "If we tell ourselves we have to make our living selling albums or even just selling music, we are bound to be passed over," he says.
The Internet has steamrolled music retailers (BusinessWeek.com, 10/10/07). As consumers fill their iPods with digital downloads—legal and otherwise—the ranks of CD buyers have dwindled. One in four U.S. record stores around in 2002 was gone by 2005, according to U.S. Census data—a net loss of 1,900 stores. But the data suggest that small retailers fared better than large ones. The number of stores with fewer than 100 employees shrank by 18.6% in that period, compared with 34.3% for stores with 100 or more workers.
Other Music noticed CD sales slipping as early as 2000, when free file-sharing programs such as Napster (NAPS) let anyone with a high-speed connection pull music files off a peer-to-peer network. But Madell says the wake-up call that his business would have to adapt quickly or close shop came only during the past two years, with CD sales shriveling fast as digital downloads exploded. Worldwide digital sales mushroomed to $2.9 billion in 2007, up from $20 million in 2003, according to IFPI, a London record industry group. It says online and mobile downloads accounted for 15% of all music sales last year, across more than 500 digital services.
Small Is Beautiful
Music industry experts say small shops have some advantages over chains. Used CDs and vinyl records have higher markups and attract collectors, giving independent stores an edge, says Aram Sinnreich, co-founder of Radar Research, a Los Angeles media and technology consultant. "These small retailers are the kinds of places that build musical communities in ways that Wal-Mart (WMT) and Best Buy (BBY) and even Tower Records never really could," Sinnreich says. Tower went bankrupt in 2006 and closed its U.S. retail stores, including one just a block from Other Music.
Madell says he expected the chains to go under before independent stores. Casual customers more interested in singles than albums can download their fix more easily than the fanatics who haunt places like Other Music. And the Internet exposes more fans to artists beyond those played on the radio or MTV. "I think the market for interesting, underground, cutting-edge music is bigger than it ever was," Madell says. "How to capitalize on that market and make it a real business is another question."
Small companies in many industries disrupted by technology face similar challenges, but Madell believes creative thinking and hard work will see entrepreneurs through. So what's his strategy? Madell wants to bring the experience of shopping at the hip record store to the Web.
Last year, Other Music launched a digital download store that now accounts for nearly a quarter of the company's sales. Labels and artists that aren't featured on iTunes (AAPL) and other digital stores turn up on Other Music Digital first. The company also sells vinyl rarities on eBay (EBAY) and mail-order albums through its Web site.
The company's first online venture began nearly a decade ago with an e-mail newsletter reviewing new releases. The update now reaches 25,000 subscribers, and Madell calls the blurbs his staff writes crucial to the store's role as a tastemaker in the music world. "The people who work at the independent record shops tend to be the specialists and really know what they're talking about, and that's a real advantage when it comes to being online," says Andrew Dubber, a music industry consultant in Britain and author of the blog New Music Strategies. Dubber says stores should try to capitalize on that expertise by helping consumers find what they like amid the near-boundless choice of the Internet (iTunes boasts 6 million songs).
Wooing the Aficionados
While Other Music expands its online presence, it is also trying to keep its brick-and-mortar operation relevant. The store sells tickets to local concerts and hosts free in-store shows. Both get customers in the door and build the Other Music brand as a place for aficionados. The in-store shows are recorded and archived on the store's Web site, along with artist interviews, which can boost sales online. Madell hopes to have sponsors underwrite the video series soon.
Using digital media to connect customers with music they like, and with other like-minded fans, may be the best bet for independent music shops, says Sinnreich. "I would be working hard to integrate tools like Meetup and Facebook into their site, so people could get together and have listening parties or set up ad hoc concerts," he says.
None of this is easy. Madell likens it to starting a new venture, and he says entrepreneurs struggling to revamp obsolete business models need to commit to the same kind of effort. But as grim as recent years have been for music retailers, Madell sees reason to hope. "I feel like there's a lot of opportunity if you're willing to shake up your way of thinking, and approach things in different ways and experiment and take chances," he says.
Flip through this slide show (BusinessWeek.com, 4/21/08) for a look at strategies Other Music is using to adapt to the Web that you could borrow for your own business.
Josh Madell needs to invent a new business model, and soon. The 37-year-old co-owner of Other Music, a New York retailer specializing in obscure CDs and vinyl, has watched sales slip sharply as music buyers move online. While his company, in business since 1995, remains profitable, he and his staff of 15 are trying to find new ways to make money, using the same technologies and trends that upended their old business model to build a new one. He is thinking beyond Other Music's core retail business. "If we tell ourselves we have to make our living selling albums or even just selling music, we are bound to be passed over," he says.
The Internet has steamrolled music retailers (BusinessWeek.com, 10/10/07). As consumers fill their iPods with digital downloads—legal and otherwise—the ranks of CD buyers have dwindled. One in four U.S. record stores around in 2002 was gone by 2005, according to U.S. Census data—a net loss of 1,900 stores. But the data suggest that small retailers fared better than large ones. The number of stores with fewer than 100 employees shrank by 18.6% in that period, compared with 34.3% for stores with 100 or more workers.
Other Music noticed CD sales slipping as early as 2000, when free file-sharing programs such as Napster (NAPS) let anyone with a high-speed connection pull music files off a peer-to-peer network. But Madell says the wake-up call that his business would have to adapt quickly or close shop came only during the past two years, with CD sales shriveling fast as digital downloads exploded. Worldwide digital sales mushroomed to $2.9 billion in 2007, up from $20 million in 2003, according to IFPI, a London record industry group. It says online and mobile downloads accounted for 15% of all music sales last year, across more than 500 digital services.
Small Is Beautiful
Music industry experts say small shops have some advantages over chains. Used CDs and vinyl records have higher markups and attract collectors, giving independent stores an edge, says Aram Sinnreich, co-founder of Radar Research, a Los Angeles media and technology consultant. "These small retailers are the kinds of places that build musical communities in ways that Wal-Mart (WMT) and Best Buy (BBY) and even Tower Records never really could," Sinnreich says. Tower went bankrupt in 2006 and closed its U.S. retail stores, including one just a block from Other Music.
Madell says he expected the chains to go under before independent stores. Casual customers more interested in singles than albums can download their fix more easily than the fanatics who haunt places like Other Music. And the Internet exposes more fans to artists beyond those played on the radio or MTV. "I think the market for interesting, underground, cutting-edge music is bigger than it ever was," Madell says. "How to capitalize on that market and make it a real business is another question."
Small companies in many industries disrupted by technology face similar challenges, but Madell believes creative thinking and hard work will see entrepreneurs through. So what's his strategy? Madell wants to bring the experience of shopping at the hip record store to the Web.
Last year, Other Music launched a digital download store that now accounts for nearly a quarter of the company's sales. Labels and artists that aren't featured on iTunes (AAPL) and other digital stores turn up on Other Music Digital first. The company also sells vinyl rarities on eBay (EBAY) and mail-order albums through its Web site.
The company's first online venture began nearly a decade ago with an e-mail newsletter reviewing new releases. The update now reaches 25,000 subscribers, and Madell calls the blurbs his staff writes crucial to the store's role as a tastemaker in the music world. "The people who work at the independent record shops tend to be the specialists and really know what they're talking about, and that's a real advantage when it comes to being online," says Andrew Dubber, a music industry consultant in Britain and author of the blog New Music Strategies. Dubber says stores should try to capitalize on that expertise by helping consumers find what they like amid the near-boundless choice of the Internet (iTunes boasts 6 million songs).
Wooing the Aficionados
While Other Music expands its online presence, it is also trying to keep its brick-and-mortar operation relevant. The store sells tickets to local concerts and hosts free in-store shows. Both get customers in the door and build the Other Music brand as a place for aficionados. The in-store shows are recorded and archived on the store's Web site, along with artist interviews, which can boost sales online. Madell hopes to have sponsors underwrite the video series soon.
Using digital media to connect customers with music they like, and with other like-minded fans, may be the best bet for independent music shops, says Sinnreich. "I would be working hard to integrate tools like Meetup and Facebook into their site, so people could get together and have listening parties or set up ad hoc concerts," he says.
None of this is easy. Madell likens it to starting a new venture, and he says entrepreneurs struggling to revamp obsolete business models need to commit to the same kind of effort. But as grim as recent years have been for music retailers, Madell sees reason to hope. "I feel like there's a lot of opportunity if you're willing to shake up your way of thinking, and approach things in different ways and experiment and take chances," he says.
Flip through this slide show (BusinessWeek.com, 4/21/08) for a look at strategies Other Music is using to adapt to the Web that you could borrow for your own business.
Album sales in U.S. dropped 14% in 2008
Sales of recorded music fell sharply in the United States in 2008, as consumers continued to migrate away from CDs, large retailers reduced floor space for music and the recession dampened consumer spending during the critical year-end holiday shopping period.
Total album sales, including CDs and full-album downloads, were 428 million, a 14 percent drop from 2007, according to data from Nielsen SoundScan. Since the industry's peak in 2000, album sales have declined 45 percent, although digital music purchases continue to grow at a rapid rate.
The year's biggest seller was Lil Wayne's album "Tha Carter III," which sold 2.87 million copies, followed by Coldplay's "Viva la Vida or Death and All His Friends," with 2.14 million. "Fearless," the second album by the 19-year-old country star Taylor Swift, was third, with 2.11 million.
Swift also scored the sixth-highest seller this year, for her self-titled debut, released in 2006, which sold 1.6 million copies in 2008.
The music industry has grown accustomed to dismal sales numbers, and this year even the good news comes with disappointment. "Tha Carter III" is the first release in SoundScan's 17-year history to top the year-end list with sales of less than three million.
Sales of digital music continued to soar last year. Just over a billion songs were downloaded, a 27 percent increase from 2007, and some record companies say they are finally beginning to wring significant profit from music on Web sites like YouTube and MySpace.
But analysts say that despite the growth and promise of digital music - in 2003 just 19 million songs were purchased as downloads - the money made online is still far from enough to make up for losses in physical sales.
"As the digital side grows, you get a different business model, with more revenue streams," said Michael McGuire, an analyst with Gartner, a market research firm. "But do we get back to where the revenue that the labels see is going to be fully replacing the CD in the next four to five years? No."
Gartner recently issued a report urging record companies to put their primary focus on downloads.
Record companies counter that album sales alone do not give a full picture of the complex new economics of the industry. Rio Caraeff, the executive vice president of eLabs, the digital division of Universal Music Group, said other income, like the fees collected when users stream a video online, had become an essential revenue. Twenty percent of Rihanna's income, he said, has come from the sale of ring tones.
"We don't focus anymore on total album sales or the sale of any one particular product as the metric of revenue or success," Caraeff said. "We look at the total consolidated revenue from dozens of revenue lines behind a given artist or project, which include digital sales, the physical business, mobile sales and licensing income."
Even as most of the industry pushes for greater online sales, two of the biggest albums of the year were by artists who have been vocal opponents of downloading. Kid Rock's "Rock n Roll Jesus" reached No.4 with just over two million sales, and AC/DC's "Black Ice," sold through an exclusive deal with Wal-Mart, was No.5 with 1.92 million.
Neither act sells its music through Apple's iTunes, the dominant online seller. AC/DC has said that selling individual tracks breaks up the continuity of a full album. But à la carte downloads are also far less lucrative than full CDs.
At least one sector of the music industry has continued to enjoy robust success: the concert business. Ticket sales in North America in 2008 rose at least 7 percent, to $4.2 billion, according to Pollstar, the touring-industry trade magazine. But in keeping with the trend of recent years, slightly fewer tickets were sold for more money: Attendance for the top 100 tours dropped 3 percent, but the average ticket price climbed 8 percent, to $66.90.
The record industry has been eager to share in touring's bull market, and many of the major labels' new contracts are for so-called 360 deals, which give the company a much wider share in an artist's income, from touring to merchandising to product endorsements. But those types of contract are still far from the norm.
Despite the growth of online music sales, CDs remain by far the most popular format, although that hold is slipping; 361 million CDs were sold in 2008, down almost 20 percent from the previous year. About 84 percent of all album purchases were CDs, down from 90 percent the year before.
And since CDs remain the record industry's biggest profit engine, many analysts worry that the industry will be particularly vulnerable to inventory reductions at retail stores. Big-box stores like Wal-Mart and Best Buy account for up to 65 percent of all retail purchases, and many of those stores are sharply reducing the floor space allotted to music, said Richard Greenfield, a media analyst at Pali Research in New York.
"CDs no longer drive somebody into a store on Tuesday," Greenfield said, referring to the day new CDs usually go on sale. "So the big risk for 2009 is that you will see even more rapid contraction of floor space, as CDs really go out of sight, out of mind for the consumer."
THE TOP-SELLING ALBUMS OF 2008
1. Lil Wayne, "Tha Carter III" (Cash Money/Universal Motown); 2.87 million
2. Coldplay, "Viva la Vida or Death and All His Friends" (Capitol); 2.14 million
3. Taylor Swift, "Fearless" (Big Machine); 2.11 million
4. Kid Rock, "Rock n Roll Jesus" (Atlantic); 2.02 million
5. AC/DC, "Black Ice" (Columbia); 1.92 million
6. Taylor Swift, "Taylor Swift" (Big Machine); 1.6 million
7. Metallica, "Death Magnetic" (Warner Brothers); 1.57 million
8. T.I., "Paper Trail" (Grand Hustle/Atlantic); 1.52 million
9. Jack Johnson, "Sleep Through the Static" (Brushfire/Universal); 1.49 million
10. Beyoncé, "I Am ... Sasha Fierce" (Music World/Columbia); 1.46 million
Source: Nielsen SoundScan
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