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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
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?
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.
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: