New Music Tip Sheet - The key word is SMARTER

Thanks to Scott Perry and the New Music Tip Sheet for the insights into the label woes at the end of 2006.

None of it is really a suprise but this line struck us:"Labels are working a lot smarter, profiting from smaller total unit sales – whether it be through regional development, tiered marketing, or just plain spending their ad dollars in the right place, labels and distributors are very aware of the current environment."

So you mean that working smarter pays off? Wow... who would have guessed?

Here is the whole article:

A MILLION LITTLE PIECES

Howdy folks – I just got back from 30 label meetings in 5 days in New York City last week, and I have to say, this holiday season is going to signal the MASSIVE upheaval in our industry that we have all seen coming for quite some time.

I can’t say that anything discussed was a real surprise, but the EXTREMITY of change was definitely a shock. There was not a single meeting in which the words RETURNS and RE-ORGS didn’t come up. That’s not to say that every label I talked to is in danger of facing layoffs or eating returned product, but those were the two biggest concerns facing the retail side of the business these days. The other big lesson: THERE IS NO MIDDLE GROUND.

First, let’s start with RETURNS: when it comes to traditional algorhythms regarding initial shipments and sales forecasts, all bets are off – try to benchmark a release against similar artists or a previous release’s sales these days, and it’s pretty much a guessing game. Even when you throw in expectations based on airplay, impressions, touring, press, ringtone sales, etc., traditional forecasting models don’t hold ground in today’s world.

There’s a lot of sphincter-tightening in label-land these days, as folks hope and pray that traditional models based on first-day and first-week numbers justify the number of CDs shipped + the marketing dollars spent to get those units out there. If a CD’s sales come in well below expectations, a project can be killed immediately, as chains call to return pallets of CDs that were once meant to hit the floor to replenish sold copies.

Blame file trading, single download sales, high CD prices, shitty releases, etc., one thing is certain – CDs just ain’t selling in the mass numbers they used to; like I said, no surprise, but the severity of this fact this season is going to have a pronounced effect on the industry in the coming months.

Take the Tower effect out of the picture, and you still have lower CD sales and higher returns among the bigger accounts. Didja look at the Black Friday sales circulars? Did they dedicate a whole page to new CDs? Hell no! Maybe you’d find a Janet, Mayer, or Keith Urban CD priced at $5.99, but the real driver for the big stores were $1000 plasma TVs and $5 Batman DVDs!

Just as bad as returns are the number of co-op solicitations the chains are sending to labels: “Hey man, write us a check for $10,000 and we’ll mark your CD down another dollar!” La-di-frickin’-da, people – a dollar off ain’t gonna change a kid’s mind when buying a CD, but if you use that co-op to POSITION or actually MARKET the record, that would help.

And with lower CD sales come the RE-ORGS, layoffs, whatever you want to call it – but by March of 2007, the label / distribution landscape will look a lot different. Traditional sales gigs have been transitioning from brick & mortar to digital for some time, with many companies having reps that call on a single account, whether it be Amazon, iTunes, Verizon, etc. But distributors are learning it’s just as important to help their labels MARKET their releases as it is to push units out there. And those distributors that have not hipped to this already will be shifting gears very soon.

Speaking of digital, a lot of folks tell me that even with the slide in CD sales, the overall business will be down by barely 1% if you include digital sales and ringtones. That’s fantastic, but I really do wonder -- where do researchers get pie-in-the-sky ringtone growth through 2010, when, quite frankly, the user experience in buying a ringtone for your phone is quite shitty, overpriced, and easily replaceable by sideloading an MP3 snippet from a third party website to most mobile devices? Just sayin’.

Another lesson reinforced this past week: THERE AIN’T NO MIDDLE GROUND. How the hell do you develop an artist these days to go from indie darlings to superstars? Is it even possible? On one side of the planet, you have the Jay-Z’s and the Christina’s of the world. On the other, you have the Arctic Monkeys and the Midlakes of the world. And in between, there ain’t much.

Yeah, we can all marvel at the constant sales for perennial red-state rockers like Hinder and Nickelback, wonder just how did Blue October and The Fray get to be so big, we can give Death Cab for Cutie and Clap Your Hands gold stars for breaking out of the indie underground, but how do you *really* get a band from 50,000 to 5 million these days?

All the traditional pillars of broadcast marketing have been shattered into a million little pieces, and somehow we all have to live in this new world. Radio, press, retail, and TV just don’t come together like they used to in order to build a groundswell that turns a baby band into a megastar anymore. Last week's news of MTV and Yahoo separately developing even smaller, specialized online brand channels signals an even more narrowcast world than ever before.

Let’s face it, a band like Bush would never be as big as they were if they were just starting today – but with the advent of blogs and sites like YouTube and MySpace, you can definitely get a lot more band/fan interaction, and help an artist make a healthy living off of a smaller audience.

Enough of the spooky stuff – what POSITIVE things did I learn from these meetings?

1) Labels are working a lot smarter, profiting from smaller total unit sales – whether it be through regional development, tiered marketing, or just plain spending their ad dollars in the right place, labels and distributors are very aware of the current environment and are adjusting accordingly. That’s not to say they aren’t facing frustrations associated with smaller budgets (and smaller staffs), but they’re all working harder to reach the right audiences, wherever they may be. Diversificiation is also starting to work, as labels of various sizes reap the benefits of new revenue streams, whether they be digital, management, publishing, marketing, etc.

2) There’s a TON of great music coming out in 2007 – between new releases by Bloc Party, Clap Your Hands, Arcade Fire, El P, Patty Griffin, Fall Out Boy, Norah Jones, Bright Eyes, Kings of Leon, AIR, and tons more, next year is gonna be great for good music, even if nobody’s putting out a damn thing in January (except for Lily Allen, The Shins, and a handful of other titles – c’mon people, January needs love too!). Look for a bunch of these dates to be posted onto the CRYSTAL BALL section of the Tipsheet soon – in case you can’t tell, I’m a little busy these days.

and

3) The touring business is alive and well – I was lucky enough to score a ticket to My Morning Jacket at Roseland (thanks, Brad!), and as always, they blew me away. Sold out show, 2 hours of rock, a set list that read like a greatest hits, and a crowd singing along to every song – beautiful stuff. Can’t wait to see who’s on tap for Coachella and Bonnaroo next year.