Consolidation in the record industry

A Major Change In Their Tunes (TechNews.com)

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Two quotes I want to pull out here, though:

All music companies — large and small — are wrestling with an industry-wide depression. Music (principally CD) sales have dropped more than 30 percent over the past three years. The industry blames the falloff on illegal Internet file-sharing and bootlegged CDs, though others outside the companies said consumers have been alienated by high CD prices and a rash of uninteresting artists. Sony, for instance, lost $81 million in 2003 after reporting $188 million in operating income for 2001.

And then this one:

Five companies — Universal Music Group, EMI Group PLC, BMG, Sony and Warner — sell more than 80 percent of the industry’s music.

I’ve said it before and I’ll say it again: Put out better product and the people will buy it. Also, the current business model CDs are sold under is no longer sustainable. If a company wants to sell more CDs, it will have to cut prices as $15 – $20 is no longer (and never really was) a realistic price when the individual songs people really want are available at iTunes for $.99 a pop. It’s a matter of knowing your audience.

Here’s my take: Young fans of Britney Spears, Usher and 50Cent are internet-savvy and are more likely to be hooked into iTunes or one of the other internet-stores. The companies have to realize that. If they want to sell a physical CD from these artists, drop the price. If a ten-song Justin Timberlake album can be purchased through one of the music-download stores for a total of $10, make the CD in the store available for $8. Use this as part of a marketing pitch. It may work. If sales don’t go up after a year, figure out why.

Older fans of Steely Dan, though, are more likely to buy the whole album at a store because that’s what they have been doing their entire lives. It’s alright to price a ten-song SDan CD at $13.99 because that consumer is not going to be as savvy to the alternatives. Besides, they want ALL the songs on the album, not just the single. That’s your selling point.

As long as companies foolishly think they are going to get kids off the computer and into the record store they will lose money. You have to shift your thinking to make money.