Jay Frank from CMT loves music, has a nimble and analytical mind, and always has an interesting take on the industry.
No wonder he was such a formidable competitor. (I got to know Jay when we were friendly rivals in the mid-2000′s; Jay running industry relations for Yahoo Music, while I did the same for AOL Music.)
Today, Jay posted a compelling analysis of the recording industry’s recent woes, and also a gameplan for growth.
I urge you to read the whole piece here on his FUTUREHIT.DNA blog.
Jay hits a couple of points hard:
There is only one thing that sells music. That’s music retail. File trading is an easy scapegoat for industry ills, but the lack of legal outlets that are in front of casual music fans is clearly the primary culprit.
…Accepting that the issue is actually to engage in encouraging overall downloading behaviour, there’s three relatively simple tactics the industry must embrace that actually have overlapping philosophies.
1- ENCOURAGE MORE RETAIL OUTLETS – iTunes may own the market, but the way to grow the market is just like it used to be: foster independent retail. The success of niche sites like Beatport shows that these sites can be profitable. But as long as label groups demand onerous terms of startups, these indie outlets will never see the light of day. Ask for reasonable terms and watch sales increase with volume.
2-ENCOURAGE MORE STREAMING OUTLETS – While only 15% of the internet is currently downloading, at least 40% are streaming music regularly and legally. The music business still appears to be in the CD to download transition while the consumer is clearly in the download to streaming transition. Streaming may be low dollars, but there’s massive potential in high volume. Spotify’s difficulty in launching in the US highlights the same problem as above. Onerous terms are preventing new revenue streams. Ask for reasonable terms and watch royalties increase with volume.
3-MARKET MUSIC AGAIN – The music biz got out of the 1949 funk by marketing “High-fidelity”. Rallying behind a legal marketing concept and properly funding it should pay dividends. Marketing clearly drives sales. As an example, while download sales have flattened this year, the sales slowdown has more to do with the diversification of products in iTunes than anything else. Space devoted to music is now focused on apps, movies and TV shows. Less marketing equals less sales. Marketing does drive sales and can’t be left in the dust.
Final Take: I think Jay is onto something here, and makes insightful points. Think about how dull the physical music retail store has become for most Americans. If you have been in a Best Buy, Wal-Mart or Target recently, the dearth of creativity and energy is palpable. These retailers pale compared to Tower Records or Virgin Megastores. I have often wondered how much healthier the business might be if there were even ten cities in the U.S. with Amoeba Music-type physical stores.
Next, let’s think about the Digital Music retail scene. While many consumers are happy with iTunes, iTunes is in several businesses besides music. Is there really a second high-profile digital choice on fans’ lips? What if there were a real viable competitor to iTunes creating excitement and innovating around digital music? Perhaps that competitor is already here in the form of streaming-based companies like RDIO, Mog, Rhapsody, etc. Will a combination of a smart phone explosion and new label thinking finally invigorate these models? Perhaps it will take label desperation to take the risks needed to fuel a rebound. Maybe we will see Spotify, or a surprise from Amazon (or even Pandora) generate some energy as the business bounces off the bottom.
But today, diminished retail outlets, diminished excitement, and diminshed sales leave everyone waiting for some kind of prescription to jolt this patient back to to life.
