Freefall or Opportunity Knocks?
When it comes to Sales in the music industry, as Elton John once sang, "... it's a sad, sad, situation / And it's getting more and more absurd." The decline is sharp, and no one seems to be able to keep the wolves at bay. It is harder and harder for artists and record companies to count on the new release album being a mass medium. In the Ethan Smith article referenced above artsits manager Jeff Rabhan is quoted as saying:
"Sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than an income stream... It's the vehicle that drives the tour, the merchandise, building the brand, and that's it. There's no money."
To me, this just highlights the conundrum that will plague the industry once they become just owners of back catalog - they still have to depend on artist managers with this philosophy to approve license requests. The Business Affairs depts. at labels are smoking crack - GET RID OF THE ARTIST CONSENT CLAUSES IN ARTIST CONTRACTS. It does not serve the labels' interest, and if this quote is representative of the new attitude of the artist manager community, then screw them. They've obviously abdicated their responsibility to maximize the artist's multiple revenue streams as provided by the record label.
THE OPPORTUNITY - YES, THERE IS AN OPPORTUNITY
The Top five music accounts: Wal-Mart, Best Buy, Target, Transworld, and Apple's iTunes account for approximately 65% of the market for recorded music. 65%!!! Over 800 record stores closed in 2006 - over 800!!! CD sales still represent over 85 percent of all music sold (legally). Some might look at those figures and shed more than a few tears. Some might look at it and cheer on the decline of the major labels.
Not me. Call me the cockeyed optimist. I walk through drugstores that stock greeting cards, ice cream, and home video titles. I walk through supermarkets stocking HBA merchandise, books, Starbucks kiosks, and home video titles. I walk through specialty retail chains that work with companies to design customized music playlists to be piped into their stores. The one thing missing in all of these types of stores is a coherent strategy to sell pre-recorded music titles. Why would I think there is a market for music at these stores? Here's why: the common denominator between mass merch accounts and the supermarket/drug accounts is that these companies never want you to leave the store. Otherwise, why so many merchandise categories? Why so many aisles? The consumer has dictated to retail: "I want to make one stop whenever possible to pick up basic food, drug, HBA, and entertainment products." And the consumer is boss.
In my local A&P there's a dump bin of various music titles - some even current hits - located after the registers. That's right, after I've whipped out my credit card, bagged my groceries, and done a jig to make sure my toddler doesn't throw a tantrum on the check-out line - that's when I'm ready to browse through a bin of mixed CD titles. Are they out of their freaking mind?!?!?! If that's the music merchandising strategy chain-wide, then someone deserves to be fired.
I walked through a very clean, very nice Super Stop & Shop today. There is a nice, wide-aisled Book section in the store, where magazines and home video titles are also positioned. Where's the tunes?
Two things come into mind here:
- Commercial music titles are just too damned expensive for most chains to make a decent profit on selling them, and can't sell them through at full price when mass merch. accounts are selling them as loss leaders.
- Most commercial music titles lack distinction, and these stores, when they do merchandise music, stock too many titles for one to break through the clutter in a consumer's store visit. Think about your local supermarket or drug chain. If you don't have a specific need for a product, then if it's not on an endcap do you see it?
So what if brands like this took a more comprehensive approach, a more lifestyle-oriented approach, to the pre-recorded music category? Why not go the private-label compilation route? The brand could create attractive packaging, possibly get certain accounts to co-op the product in exchange for placement of a product coupon in the packaging, develop a limited series of titles for sale. Is it a bigger commitment to the category? Certainly. But it's also a smarter strategy than going at the category half-assed with no distinction in the marketplace. Whole Foods seems to be doing alright with the limited commercial CD title strategy, but they are an exception.
What's even more amazing is that chains like this have hundreds, if not thousands of stores. Even a product test of private-label CDs in a portion of a chain's stores might be enough to convince a chain of the concept.
