Monday, May 28, 2007

Plunge in CD Sales Shakes Up Big Labels

Plunge in CD Sales Shakes Up Big Labels

By JEFF LEEDS

“Sgt. Pepper’s Lonely Hearts Club Band,” the Beatles album often cited as the greatest pop recording in music history, received a thoroughly modern 40th-anniversary salute last week when singers on “American Idol” belted out their own versions of its songs live on the show’s season finale.

But off stage, in a sign of the recording industry’s declining fortunes, shareholders of EMI, the music conglomerate that markets “Sgt. Pepper” and a vast trove of other recordings, were weighing a plan to sell the company as its financial performance was weakening.
It’s a maddening juxtaposition for more than one top record-label executive. Music may still be a big force in pop culture — from “Idol” to the iPod — but the music business’s own comeback attempt is falling flat.

Even pop’s pioneers are rethinking their approach. As it happens, one of the performers on “Sgt. Pepper,” Paul McCartney, is releasing a new album on June 5. But Mr. McCartney is not betting on the traditional record-label methods: He elected to sidestep EMI, his longtime home, and release the album through a new arrangement with Starbucks.

It’s too soon to tell if Starbucks’ new label (a partnership with the established Concord label) will have much success in marketing CDs. But not many other players are.

Despite costly efforts to build buzz around new talent and thwart piracy, CD sales have plunged more than 20 percent this year, far outweighing any gains made by digital sales at iTunes and similar services. Aram Sinnreich, a media industry consultant at Radar Research in Los Angeles, said the CD format, introduced in the United States 24 years ago, is in its death throes. “Everyone in the industry thinks of this Christmas as the last big holiday season for CD sales,” Mr. Sinnreich said, “and then everything goes kaput.”

It’s been four years since the last big shuffle in ownership of the major record labels. But now, with the sales plunge dimming hopes for a recovery any time soon, there is a new game of corporate musical chairs afoot that could shake up the industry hierarchy.

Under the deal that awaits shareholder approval, London-based EMI agreed last week to be purchased for more than $4.7 billion by a private equity investor, Terra Firma Capital Partners, whose diverse holdings include a European waste-conversion business. Rival bids could yet surface — though the higher the ultimate price, the more pressure the owners will face to make dramatic cuts or sell the company in pieces in order to recoup their investment.

For the companies that choose to plow ahead, the question is how to weather the worsening storm. One answer: diversify into businesses that do not rely directly on CD sales or downloads. The biggest one is music publishing, which represents songwriters (who may or may not also be performers) and earns money when their songs are used in TV commercials, video games or other media. Universal Music Group, already the biggest label, became the world’s biggest music publisher on Friday after closing its purchase of BMG Music, publisher of songs by artists like Keane, for more than $2 billion.

Now both Universal and Warner Music Group are said to be kicking the tires of Sanctuary, an independent British music and artist management company whose roster includes Iron Maiden and Elton John. The owners of all four of the major record companies also recently have chewed over deals to diversify into merchandise sales, concert tickets, advertising and other fields that are not part of their traditional business.

Even as the industry tries to branch out, though, there is no promise of an answer to a potentially more profound predicament: a creative drought and a corresponding lack of artists who ignite consumers’ interest in buying music. Sales of rap, which had provided the industry with a lifeboat in recent years, fell far more than the overall market last year with a drop of almost 21 percent, according to Nielsen SoundScan. (And the marquee star 50 Cent just delayed his forthcoming album, “Curtis.”)

In other genres the picture is not much brighter. Fans do still turn out (at least initially) for artists that have managed to build loyal followings. The biggest debut of the year came just last week from the rock band Linkin Park, whose third studio album, “Minutes to Midnight,” sold an estimated 623,000 copies, according to Nielsen SoundScan data.

But very few albums have gained traction. And that is compounded by the industry’s core structural problem: Its main product is widely available free. More than half of all music acquired by fans last year came from unpaid sources including Internet file sharing and CD burning, according to the market research company NPD Group. The “social” ripping and burning of CDs among friends — which takes place offline and almost entirely out of reach of industry policing efforts — accounted for 37 percent of all music consumption, more than file-sharing, NPD said.

The industry had long pinned its hopes on making up some of the business lost to piracy with licensed digital sales. But those prospects have dimmed as the rapid CD decline has overshadowed the rise in sales at services like Apple’s iTunes. Even as music executives fret that iTunes has not generated enough sales, though, they gripe that it unfairly dominates the sale of digital music.

Partly out of frustration with Apple, some of the music companies have been slowly retreating from their longtime insistence on selling music online with digital locks that prevent unlimited copying. Their aim is to sell more music that can be played on Apple’s wildly popular iPod device, which is not compatible with the protection software used by most other digital music services. EMI led the reversal, striking a deal with Apple to offer its music catalog in the unrestricted MP3 format.

Some music executives say that dropping copy-restriction software, also known as digital-rights management, would stoke business at iTunes’ competitors and generate a surge in sales. Others predict it would have little impact, though they add that the labels squandered years on failed attempts to restrict digital music instead of converting more fans into paying consumers.
“They were so slow to react, and let things get totally out of hand,” said Russ Crupnick, a senior entertainment industry analyst at NPD, the research company. “They just missed the boat.”
Perhaps there is little to lose, then, in experimentation. Mr. McCartney, for example, may not have made it to the “American Idol” finale, but he too is employing thoroughly modern techniques to reach his audience.

Starbucks will be selling his album “Memory Almost Full” through regular music retail shops but will also be playing it repeatedly in thousands of its coffee shops in more than two dozen countries on the day of release. And the first music video from the new album had it premiere on YouTube. Mr. McCartney, in announcing his deal with Starbucks, described his rationale simply: “It’s a new world.”



I always find articles like this interesting....since they predict the downfall of the record companies or the down fall of the CD. However, they offer no prediction as to what the future holds.

So what do I think will happen? I think vinyl albums and CDs will continue to be around for awhile longer - probably about 10 years. They just won't be produced in mass numbers/quantities. Downloads will definitely continue and continue to gain in numbers. DRM and other copy protection is not the answer. Someone will always find a way around it. Will the music/record labels survive? Difficult to say unless they change their business model and and invest in high quality music by artists.


As always comments are welcome.

4 Comments:

Blogger oakleyses said...

ugg boots, uggs on sale, burberry outlet, longchamp outlet, nike air max, christian louboutin uk, oakley sunglasses, louis vuitton outlet, louis vuitton outlet, tory burch outlet, longchamp outlet, michael kors outlet online, ray ban sunglasses, oakley sunglasses, louis vuitton, tiffany and co, jordan shoes, uggs outlet, prada outlet, cheap oakley sunglasses, oakley sunglasses wholesale, ray ban sunglasses, gucci handbags, replica watches, oakley sunglasses, replica watches, nike free, ray ban sunglasses, tiffany jewelry, michael kors outlet online, michael kors outlet, michael kors outlet online, polo ralph lauren outlet online, ugg boots, christian louboutin, nike outlet, burberry handbags, louis vuitton outlet, chanel handbags, michael kors outlet online, louis vuitton, polo outlet, nike air max, longchamp outlet, michael kors outlet, uggs outlet, kate spade outlet

11:50 PM, February 02, 2016  
Blogger oakleyses said...

lululemon canada, true religion outlet, new balance, coach outlet store online, nike blazer pas cher, jordan pas cher, kate spade, ralph lauren uk, north face, true religion outlet, air max, nike roshe, polo lacoste, sac vanessa bruno, coach outlet, converse pas cher, nike air max uk, nike air max uk, hollister uk, oakley pas cher, replica handbags, burberry pas cher, hollister pas cher, nike air max, louboutin pas cher, mulberry uk, nike free uk, timberland pas cher, longchamp pas cher, coach purses, ray ban pas cher, nike tn, true religion outlet, nike roshe run uk, sac longchamp pas cher, abercrombie and fitch uk, michael kors, sac hermes, ray ban uk, nike free run, polo ralph lauren, guess pas cher, vans pas cher, nike air force, michael kors outlet, michael kors pas cher, north face uk, hogan outlet, true religion jeans, michael kors

11:54 PM, February 02, 2016  
Blogger oakleyses said...

soccer shoes, north face outlet, p90x workout, louboutin, wedding dresses, celine handbags, nike roshe run, nike huaraches, timberland boots, mont blanc pens, iphone 6 plus cases, beats by dre, abercrombie and fitch, babyliss, vans outlet, bottega veneta, iphone 6 cases, nike trainers uk, new balance shoes, hollister, oakley, iphone 6s cases, lululemon, longchamp uk, iphone 5s cases, ghd hair, mcm handbags, mac cosmetics, hollister clothing, soccer jerseys, ralph lauren, giuseppe zanotti outlet, chi flat iron, nike air max, insanity workout, s6 case, nfl jerseys, hermes belt, ipad cases, reebok outlet, instyler, iphone cases, ferragamo shoes, iphone 6s plus cases, asics running shoes, valentino shoes, jimmy choo outlet, baseball bats, herve leger, north face outlet

11:55 PM, February 02, 2016  
Blogger oakleyses said...

ugg uk, pandora charms, canada goose outlet, moncler, canada goose, canada goose jackets, marc jacobs, barbour, juicy couture outlet, pandora jewelry, moncler outlet, wedding dresses, ugg,uggs,uggs canada, hollister, moncler, moncler outlet, louis vuitton, canada goose outlet, supra shoes, louis vuitton, converse, montre pas cher, nike air max, thomas sabo, pandora jewelry, canada goose uk, canada goose, louis vuitton, toms shoes, pandora uk, vans, ugg pas cher, moncler, louis vuitton, ugg, doke gabbana, canada goose outlet, links of london, ray ban, gucci, moncler uk, barbour uk, hollister, swarovski, converse outlet, swarovski crystal, lancel, canada goose, doudoune moncler, moncler, karen millen uk

11:57 PM, February 02, 2016  

Post a Comment

<< Home