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U.S. CD Sales Down 7% - Downloads Skyrocket Print E-mail
Friday, 06 January 2006
Compact Disc sales slumped again in 2005 at a level of seven percent, according to recently released reports from industry groups. Sales through the week ending December 25, 2005 were at a little over 600,000,000 units, down from a SoundScan number of nearly 651,000,000 from 2004. Downloadable music boomed in 2005, increasing to 332 million tracks. That is up from 134 million tracks in 2004. These numbers are further proof that the incredibly stubborn music industry has literally no grip on how to sell its products in any form of a premium format. The music industry as a whole chose to have a format war over high-resolution audio formats like SACD and DVD-Audio, which increased audio quality, added surround sound and, in the case of DVD-Audio, offered the chance to deliver video content on a $16 disc to consumers who are increasingly video-driven. Thanks to being scuttled by the major labels, very few A-list titles were ever released on these formats and consumers were forced to be in the analog domain, using as many as nine cables to connect one player. Consumer confusion was as good as the labels could do. Consumer apathy more accurately describes the results of the industry’s weak attempts at selling premium goods.

And why should the music industry sell premium goods? Why should they even have to try to sell at all, you ask? Historically, their blood brother in the world of media, terrestrial FM radio, gave them all the free promotion and advertising they needed. That is, until after consolidation, when big radio companies started suggesting that if labels wanted to get airplay for their new artists, they might need to buy “independent” promotion through companies owned by radio station conglomerates. The long-standing marriage between radio and records immediately hit the skids.

Even if radio wasn’t the spouse it always used to be, labels always have their mistress on the side – MTV and its music videos – or do they? Generation X (now in their thirties and watching more “Barney” and “Dora the Explorer” than Duran Duran videos these days) immediately fell in love with the idea of music and video with the launch of MTV. But today’s kids are Internet babies who don’t love music video like Gen X. Labels loved the idea of music videos, because for a few hundred thousand (soon to be a few million a few years down the road) dollars, they could craft stars, super groups and boy bands that looked as good as they could play. It wasn’t a decade before the labels took it too far, resulting in the likes of New Kids on the Block, the Spice Girls and Backstreet Boys. Soon bands across entire major labels couldn’t play a drum fill or a guitar solo, but their faces were plastered on the front of People and Seventeen magazines. Nobody suggested they spend less time with their publicists or lunching at the Ivy, Mr. Chow or Nobu and more time taking some lessons. They just stole a beat or a melody from James Brown or Parliament and cranked out another paper-thin hit.

Now with downloadable music booming, the arrogance and the widespread ignorance of the music industry are catching up with the business of music. The days of selling 30 billion dollars worth of music a year are long gone. Since the late 1990s, you couldn’t find a label executive who wouldn’t get very animated about how Napster was the sole cause of the business maladies. Nobody, other than the actual music consumers, was noticing that the CD is a tired media format that isn’t worth $16 anymore and that Napster has reinvented itself by 2005.

What the labels have accomplished by their wise lineage of decisions is to revert back to the business of selling singles like they did in the 1950s. They have truly killed the goose that laid the golden egg. For all of the pompous statements, the RIAA John Doe lawsuits and the lack of attention to the quality or the format that the industry sells, the simple fact is, there isn’t one record executive who can even hope to carry Steven Jobs’ briefcase to work for him. And after reinventing the personal computer (more than once), reigning supreme in the world of Hollywood movies, Jobs has found a way to monetize both the hardware and software needed to sell music to today’s Generation Y kids, not to mention the older demographics who also love iTunes and iPods. The problem is, by embracing downloadable music with such enthusiasm, the labels may never be able to get back to what made them great, which was selling albums. My advice to the music industry is to formally ask Steven Jobs to gas up the Gulfstream 5 and fly in to see the major label heads and consult with them about how they can add value to an album, much like Jobs does with his entry-level G5 desktop computer or his 20-inch LCD monitors (priced at $1,995 and $799 respectively – many hundreds of dollars over the best comparable PCs running Windows). And, instead of arguing with him or allowing the gutless entertainment lawyers to worry about antitrust, actually listen to what he has to say. If the majors stay the course much like another losing battle I can think of in the Middle East, expect to see continued failure. Failure that sees record sales slip away until the only way anyone wants to buy music is for pennies per song.

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