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Six Giant Music Retailers Will Try Online Sales Together
PingXao writes "The New York Times is reporting that several music retailers are banding together to test online sales. Sad to see the article's author flat-out claim that '... a proliferation of free music-swapping services on the Internet has led to a decline in CD sales.' The retailers are starting to get a clue but still have a long way to go as evidenced by 'Recording companies make the music...' and 'We are in the customer relationship business.'"
6 Retailers Plan Venture to Sell Music on the Web
By LAURA M. HOLSON
LOS ANGELES, Jan. 26 -- Six of the largest music retailers plan to announce on Monday that they are joining forces to sell music that can be downloaded from the Web.
The retailing group, called Echo, consists of Best Buy, the nation's No. 1 electronics retailer; Tower Records; the Virgin Entertainment Group; Wherehouse Entertainment; Hastings Entertainment; and Trans World Entertainment, which operates the FYE store chain. The six retail companies will each own an equity stake in Echo that together will make them majority owners.
The new effort is motivated in part by the two-year decline in compact disc sales that has forced recording companies to cut costs and lay off employees and has damaged music retailers, too. Wherehouse Entertainment, for one, announced last week that it was filing for bankruptcy protection from its creditors, in part because of lackluster CD sales. And earlier this month, Best Buy announced that it would close 107 stores.
Like the recording companies, music retailers are searching for new sources of revenue. Vinyl albums and cassette tapes have nearly disappeared in recent years, leaving retailers with the CD as their main option for selling music. But a proliferation of free music-swapping services on the Internet has led to a decline in CD sales. According to Nielsen SoundScan, which tracks album sales, 681 million were sold in 2002, down from 785 million in 2000.
"Obviously, there has been a lot of talk in the last three years and there have been a lot of failures," said Dan Hart, the chief executive of Echo, referring to earlier attempts by legitimate Web sites to sell music online. "But we see this as an inflection point. Retailers are saying, `This is the time to do it.' "
Mr. Hart said that Echo hoped to get licenses from the recording companies to distribute their music through the retail chains' own Web sites. In November, the Universal Music Group, which is owned by Vivendi Universal, began to distribute 43,000 of its songs through major retail and music Web sites, like Best Buy and Circuit City, for 99 cents a song or $9.99 an album. That total has since grown to 60,000.
Liquid Audio, a company that has developed technology meant to allow the secure sale of music online, has rights to 350,000 songs for downloading, but also has deep financial problems. The company agreed last week to sell some of its assets to the music distributor Anderson Merchandisers for $3.2 million as part of its liquidation.
Anderson, which is the music distributor for Wal-Mart Stores, also wants to be a distributor of downloadable music in retail outlets. That could eventually put Anderson in competition with Echo, but Mr. Hart said Echo was not opposed to working with Anderson.
In fact, Mr. Hart said he expected the pressures facing all parts of the music businesses -- including distributors, retailers and recording companies -- to motivate them all to work together to find a viable alternative to piracy. "People are saying, `Let's make it work on a real level,' " he said.
Such cooperation in online music ventures would have been unthinkable two years ago as retailers and music companies were at odds about how to best approach online music sales. More than a years ago, music labels embarked on their own online efforts, but so far they have received less than rave reviews.
Now, though, the music companies and the retailers need each other more than ever. Recording companies make the music, but it is retailers who know their customers. "Retail has always been about more than simply selling CD's," said Jerry Comstock, the chief executive of Wherehouse Entertainment. "We are in the customer relationship business."
Under Echo's plan, once the group received the necessary licenses, the partners would market their services together and separately. Efforts might include promotions like "Buy a compact disc, get a free download." The retailers could also enable customers to download music in stores using portable devices, like the Apple iPod. "No one has really marketed these services," Mr. Hart of Echo said.
But some analysts suggest that no matter how much creative and marketing muscle is behind such efforts, they will not catch on unless the music is priced right. The average cost of a compact disc, according to the Recording Industry Association of America, the lobbying group which represents recording companies, is $14.21. Many critics say that is expensive when compared with other media, like DVD's, which offer loads of extra features and programming.
"Any opportunity retailers have to find additional revenue in a time of falling sales is a positive," said Michael Nathanson, an analyst at Sanford C. Bernstein. "Yet we continue to think that pricing has to come down to get pirates off of the free sites and onto legitimate ones."
"BSD: Free as in speech. Linux: Free as in beer. Windows 10: Free as in herpes." --Man On Pink Corner in #52607549.
You must be new here.
The submitter just assumed you've kept up with the recent revelations that sales PER ALBUM increased. The losses are a direct result of the companies releasing less albums.
Never confuse volume with power.
...Because on one hand, the amount of actually release went DOWN. So yes, if you put out less stuff, chances are you will sell less. It's been on /. with the RIAA numbers fuding articles of prior months after the hacking attempts.
If p2p programs are causing less sales, it's probably not from the overt "They are stealing music" reasons.
As somebody noted above, more than likely, people aren't falling into the one song album trap anymore and are becoming better shoppers for their dollar. People go and try out a few songs of an upcoming album, realize it's SHIT and then don't buy it. Caveat Emptor taking to the digital age.
I'm sure many of us download a few albums, find one that really speaks to you and rush out to buy it. I've done it many times and I'm sure many, many people have done the same thing. I'm betting for some artists, the p2p trading has generated them more buzz than if they had to have a record company pay to promote them.
My advice to the RIAA would be to maybe invest in finding better musicians and making cd production and distribution cheaper than it is now so cds can be 9.99 instead of 18.99, while still giving the artist his same meager cut :[.
Raunchy
Do you really think artists like Eminem are better than _crap_ unsigned artists, because they are just so genuinely talented? I would suggest it has more to do with the millions put into cramming those artists down our throats through every conceivable media channel. And the discussion of signed/unsigned is a bit reductionist - most people who choose music as a profession are at least on small/independent record labels. Check out all the "crap" on Alternative Tentacles, Anticon, (in the past)subpop, who brought us the bands that defined most/all rock music since 1991... i could go on.
In all matters of opinion, our adversaries are insane. -Oscar Wilde
There is a convincing piece by Damien Cave on Salon.com titled "File Sharing: Innocent Until Proven Guilty" which argues that there is no proven correlation between downloaded music and the decline in CD sales. He continues to argue in "File Sharing: Guilty As Charged?" that a good deal of the 'sky is falling' rhetoric created by the record companies and the RIAA is based on supposition and self-interest. In addition, the article "RIAA's Statistics Don't Add Up To Piracy" analyzes the RIAA's own statistics and argues that they do not support the RIAA's conclusion that downloaded music is the cause for the decline in CD sales. In this detailed analysis, George Ziemann argues that the record industry released 11,900 fewer titles in 2000 than it released in 1999, a 25% decrease, yet the total number of units shipped decreased only 10.3% and the dollar value of these units fell by only 4.1%. It seems that the RIAA is misinterpreting its own statistics.
Also, the record companies just settled a price fixing suit in which they admitted they were overcharging consumers. This point seems to be overlooked by the RIAA in its attempt to place all blame for the woes of the music business at the feet of mp3's. Is it possible that the decrease in CD sales is related to the conspiracy by the major record labels to inflate prices?
We are in the customer relationship business
u lt.htm
What buisness is not?
If you bought a CD in the last few years, get your $20.00 from the Compact Disc Minimum Advertised Price Antitrust Litigation Settlement. Click the red text on the lefthttp://www.musiccdsettlement.com/english/defa
I don't know much about the roots of Led Zepplin and Eminem, but I am a huge Beatles fan. And I'll tell you this, record companies had a lot to do with us not getting the Beatles sooner.
They received countless rejections, including the one from Decca that famously said "We don't like their sound, and guitar music is on the way out". And once they did make it big, Capitol Records still felt they needed to rearrange their albums to make them more palatable to the American public.
The biggest reasons for The Beatles making it big was their pure, raw talent, plus their strong drive to be the toppermost of the poppermost because they believed they were the "best fucking group in the god-damned world". And Brian Epstein definitely had a lot to do with their breaking through to superstardom too.
They quote two numbers for record sales, showing a decline in sales by 13% from 2000 to 2002, and claim that it is all because of illegal file sharing. Why do people believe this? There is a simpler explanation: it's the economy, stupid. People have less money to spend. I do not participate in file sharing, but I have also not bought a new CD in over a year because I don't have the damn cash! Perhaps some people buy fewer CDs because of file swapping, perhaps some people buy more, but nobody knows the general trend. There have been no unbiased studies.
The sad fact is that the New York Times parroted the alleged reason for sales loss without some kind of disclaimer, such as "Music companies claim that a proliferation of file-swapping...". They are a reputable news organization, they should know better than to parrot facts given by a trade organization. I heard this same thing on CBS news yesterday, but I wasn't surprised. It was typical of CBS quality journalism. However, this was most certainly sub-par for the Times.
From the editorial: The NET Act works in two ways: In general, violations are punishable by one year in prison, if the total value of the files exceeds $1,000; or, if the value tops $2,500, not more than five years in prison. Also, if someone logs on to a file-trading network and shares even one MP3 file without permission in "expectation" that others will do the same, full criminal penalties kick in automatically.
Why is that sad? It's probably true to a degree.
It's only one factor, and it's laying the blame with consumers, when the industry itself, and the economy in general can be blamed just as well.
Over the last 3 years, the record companies have decreased the number of titles available by IIRC 30%. The remaining 70% largely sucks. And the economic climate isn't what it used to be. And the record companies have been shooting themselves in the foot by labeling their customers criminals.
is "making" the music the creative process of arranging notes and lyrics, or the physical process of manufacturing the CD?
Copyright law recognizes three steps in the process of making a record:
So they have created a product. But somebody still needs to create a demand for the product, and promotion is traditionally the job of a label.
Will I retire or break 10K?
To be more blunt. A CD comes with 74 minutes of audio only content, with possibly a little extra photographic or artwork on the case. For the same amount, you can buy a DVD with 90-120 minutes of AV content, plus typically anywhere from 5-20 minutes of extra, behind the scenes, get to know the creative artist footage, interviews, promos, etc.
Bottom LINE. The labels are not providing the same amount of Bang For the Buck value in their products as the studios.
"You never want a serious crisis to go to waste." - Rahm Emanuel
There are lots of people who really do that, though. For me, it's a little of both, but either way the RIAA is ultimately better off for it.
It would take several hands to count the number of artists that I've discovered (and purchased music from) due to finding the MP3s on my friends/family's computers.
Examples:
And, of course, we can't forget price fixing and the uncalculatable affect of independent music now being freely available on the internet to compete with mainstream music.
Music Retailers Team Up
To Form Internet Venture
By NICK WINGFIELD
Staff Reporter of THE WALL STREET JOURNAL
A half-dozen major music retailers, reeling from a slowdown in CD sales, have formed a new company that plans to offer songs for downloading from the Internet.
Best Buy Co., Hastings Entertainment Inc., MTS Inc.'s Tower Records, Trans World Entertainment Corp., Virgin Entertainment Group Inc. and Wherehouse Music Inc. said they have founded Echo Inc., a consortium developing a service that will let each of the retailers distribute music on the Internet under their respective brand names. Echo will immediately seek to negotiate music licenses from major and independent record labels, according to the company's chief executive, Dan Hart.
The consortium represents an effort to answer the explosion of music piracy through Internet file-sharing services and compact-disc copying that retailers and music companies blame for an estimated 9% drop in CD sales last year. Retailers also are seeing competition from the major recording companies that release most popular music, which have formed separate ventures, MusicNet and pressplay, for downloading music.
In forming their own consortium from scratch, the retailers are effectively betting that they can get better terms by collectively licensing music from recording companies, rather than cutting deals individually with the labels. Executives involved with Echo, which is majority-owned by the retailers, said they hoped to have more control over their relationship with consumers than they would by obtaining music through MusicNet or pressplay.
"It's clear that retail stores are threatened by digital distribution," says P.J. McNealy, a digital-media analyst at research firm Gartner Inc. The thinking behind the consortium "may be there's strength in numbers."
It isn't clear whether Echo can begin to remedy the retailers' troubles, though. Wherehouse, for instance, filed for Chapter 11 bankruptcy protection last week, while Best Buy has said it will close more than 100 of its Musicland stores.
Echo will need to license music from the recording companies, a process likely to take months. Once they begin offering music to consumers for a fee, Echo must still compete against free Internet services like KaZaA and Morpheus. Commercial music services on the Internet have been hobbled by spotty song selection and early limits on CD recording, though the services have improved gradually in both regards.
The industry is littered with startup music services that failed: In fact, Echo's predecessor, Echo Networks Inc., folded early last year, when it decided it couldn't obtain music licenses on favorable enough terms to support a business. Mr. Hart says he believes the new Echo can be more successful by piggybacking on the existing marketing muscle of retailers.
"The marginal cost of putting digital advertisements in circulars is so much lower than for an independent company that wanted to go out and purchase those partnerships," says Mr. Hart, who declined to say how much the retailers invested in the company.
In a similar effort, Anderson Merchandisers LP, one of the leading distributors of music and other media, said Friday that it would pay $3.2 million to acquire the assets of software company Liquid Audio Inc., in a bid to help retailers establish downloading services.
Pushing their own Internet services may not help retailers build more foot-traffic in stores. But Kevin Ertell, senior vice president of Tower Records' online operations, says the store hopes to offer its version of the Echo service through kiosks in retail locations. "I think the in-store experience is going to be really important," Mr. Ertell says.
Write to Nick Wingfield at <address removed>
Updated January 27, 2003 12:19 a.m. EST
Woopty Doo Basil, what does it all mean?!
IMHO, CD sales are slumping due to many factors:
1) the economy
2) record prices increased from $10 to nearly $20 in the past 10 years. most people's salaries sure as hell didn't double. however the last report I read said that CEO salaries went up 4300% in the past decade. that's criminal.
3) less venues to hear live music. Lounge Axe is gone, and the alderman is trying to close down the Fireside Bowl. DAMN.
4) less songs on the air -- radio stations are too controlled by playlists that market to certain buying groups. the result is that less artists and less songs get played. also the fact that MTV has more garbage on the air and hardly any music. who the hell cares about a bunch of priviledged kids who drive around in a mobile home or live in some fabulous loft for 6 months.
5) the death of napster. at napster's height, record sales actually INCREASED. that's because more people were exposed to more music than they would have heard otherwise
6) college stations are underfunded more than ever (see #1) and are more likely to play music via internet streaming than via the airwaves in the future -- if they're even still funded. too bad internet streaming sounds like underwater music. I'd rather not listen.
7) record companies stopped selling singles, accounting for an 11% loss in sales. hmmm, isn't that number awfully close to their projected loss?
8) record labels continue to market britney/christina/shakira/shania/nsync to a population that doesn't give a rat's ass for advertising soundtrack music
so basically the record companies are making up whatever bullshit stories they can in order to put pressure on congress and the courts. the end result is that the groups who hold power are shooting themselves in the foot -- and preventing younger artists from getting the shot they deserve.
(just read rolling stone. springsteen the top artist of the year? maybe in the eyes of the cast of the sopranos. cool article on my friend Ted Leo though)
The entertainment industry's attempt to lock everything under DRM may be trumped by legislation that has yet to be passed. The bill tries to restore fair use rights to those who legally acquired a work of non-analog art by allowing the circumvention of DRM by the owner of the work. Quite a pleasant shock, I hope this bill (or something very similar) gets passed.
hrm. then again. maybe not.
CD's suck... 15-20 bucks for 1 or 2 highly promoted tracks you hear ad-neauseum on the radio. The other tracks are generally dreck and its hard to find the un-promoted gems becasue you cannot easily preview tracks not widely played. IE my idea of sampling music is not sitting at a store wearing indestructo crappy unadjustable sound headphones with a line behind me... or worse yet standing in line waiting. I much preffer kicked back at home or driving in my car with my sound system on my time.
The RIAA quite simply has got to find another buisness paradigm, one not predicated on a measure of physcial control over distributed media. Digital material simply does not work by the same rules as more physical based mediums and that is a good thing. Digital is the reality just the same as 8 track beat the Record, Cassette beat 8 track and CD beat cassete. Fluid digital will beat restricted CD digital. Remember capatilisim is a consumer driven marketplace thus one way or another the consumer will eventually win.
I don't ask you to be me. I only ask you not expect me to be you.