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Topic: In an iTunes age, do we need the record store?
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Tom Petrov
Five Guys Lover
Posts: 1121
From: El Paso, TX
Registered: Jan 2003
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posted 12-16-2011 05:14 PM
Here is another good article.
Labels Like 2011's CD Numbers...Except The One On The Bottom Line
By Ed Christman, New York
Label executives may gnash their teeth about the razor-thin profit margins they derive from the $5 CD being sold in corrugated fixtures and at speed tables in Walmart and Best Buy. But they like the sales bump that this year's new popular consumer item is giving the industry.
Indeed, some label sales and distribution executives credit the $5 CD with reclaiming floor space previously lost to other product lines in big-box stores. Some even predict the $5 CD will help extend the life of CDs at such retailers.
While budget CDs and cut-out titles have long sold for $5 and less, Walmart's expanding rollout of $5 CDs beginning in January proved key to revitalizing sales. In the last five years, CD sales have declined 18%-20% annually, and in first-quarter 2011, CD sales were down 12.8%, according to Nielsen SoundScan. Since the end of the first quarter, CD sales are down only 1.9%, for an overall decline of 5.1% for the format year to date.
On the negative side, sources speculate that even though all album sales are up 2% this year, dollar volume is almost certainly down.
Titles placed in the $5 bucket range from deep catalog albums to hit releases nearing the end of their initial run. With the latter titles, labels are using the $5 price point as a liquidating strategy to avoid returns when sales slow.
Along with the location provided by the high-profile bins, one sales executive says the program with Walmart is succeeding because it provides "an impulse purchase based on the surprise of seeing well-known titles at a low price."
After Walmart started finding success with the $5 CD, Best Buy jumped in with its Treasure Bin, and sources say Target is considering getting into the $5 CD market. "It's getting stores to carry titles that they normally wouldn't have in stock," the head of sales for an East Coast-based major label says. "You see a title that normally will sell 20 copies a week jumping to 400 copies."
The head of sales for a West Coast-based major adds that consumers are clearly embracing the lower pricing. "That has given all of us optimism about the physical format," he says. "It shows that we still have a physical business, even though the mainstream press seems delighted to report the CD is done."
The West Coast executive says his label's sales are about 55% digital, 45% physical. But digital sales aren't eclipsing physical sales with the same speed the CD enjoyed when it topped the cassette, or even as quickly as the cassette did when it supplanted vinyl, he adds.
The downside is the reduced margin. "It still costs as much to make a $5 CD as it does to make a new one," the executive says.
Indeed, one major-label distribution executive says he's not a fan of the $5 CD because of the slim margin. "We do it with titles that make sense but are getting pressure to do it more," he says. "We are all supporting a bad initiative that is not helping the industry." He argues that the increased floor space is actually a false triumph, and that the $5 CD is eating into overall music space in big boxes, leaving manufacturers with "less space devoted to music where we can make money," he says. "I personally think it is bad news, because it is a race to the bottom. None of the suppliers win in that kind of race."
However, the growth of simultaneously released deluxe editions with higher price points, complete-catalog boxed sets and extravagantly packaged reissues of classic albums are helping the industry counterbalance the low margins on $5 CDs as well as the overall downward pressure that the CD has experienced in the last five years.
As a result of the increased demand for both budget and deluxe product, the industry came into the holiday selling season facing a problem it hasn't had to deal with in years: CD manufacturing is at maximum capacity.
"With everyone at capacity because of the $5 CD," the distribution executive says, "we can't get the titles we make money on manufactured."
Labels Like 2011's CD Numbers
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Tom Petrov
Five Guys Lover
Posts: 1121
From: El Paso, TX
Registered: Jan 2003
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posted 12-16-2011 11:27 PM
quote: Mike Blakesley
most current CD buyers would stop buying "albums" and cherry-pick their favorites -- or not buy music at all.
I don't agree with you. I think music lovers will find a way to get their music online, they just won't give up on music. At the end of the day, I don't think anyone really knows when, or what will happen if or when CDs are done.
And yet here is another article, looks like everyone is trying to write about this topic. This one is the best to date IMO.
The disc versus the download: is the CD really set to disappear?
You can download a huge music library without ever leaving home, but reports of the compact disc’s demise have been greatly exaggerated, writes BRIAN BOYD
IT WAS INEVITABLE. The report went like this. By the end of next year the major record labels are planning to have abandoned the CD and replaced it with downloads and streams through iTunes and similar music services. That’s because the CD is an anachronism from a pre-online era, according to the online music magazine Side-Line. CDs won’t disappear completely, the report continued, but the format will occupy as small a niche as vinyl does now. Its end not only makes economic sense, as downloads are cheaper than a physical product to provide, but is also in tune with how we consume music in these days of the smartphone and the tablet.
The story was widely blogged and tweeted, and almost everyone accepted that technological progress had lapped the physical CD and that we were going to live our cultural life happily ever after in the cloud.
There’s just one problem with the Side-Line story: it’s wrong. At first it looked solid: more and more people are opting for downloads, and CDs have the drawback, when they don’t sell as well as expected, of leaving retailers and record labels with return and storage costs. Downloads, on the other hand, incur no packaging, transport or storage costs and minimal distribution costs.
Music stores have been giving CDs less and less floor space in recent years, as video games are now the big sellers on the high street. More people are getting their music from iTunes and other digital services, and a whole generation of music consumers each own hundreds of albums but have never touched a CD.
After Side-Line published its story, people started to wonder about magazines, books and films. Surely, the argument ran, if it’s cheaper, easier and more convenient to acquire music, books and films online, we’re looking at the end not only of the CD but also of physical copies of books and films as well.
BUT WHAT IF THE END is not nigh for the CD? And what if that means our cultural future will not be entirely digital? Side-Line contacted three major labels – Universal, EMI and Sony – about its story, but all declined to comment. That probably fuelled a grassy-knoll theory that the majors had privately decided to kill off the CD next year but didn’t want the news to be reported too soon.
This week, at least, it was easy to find music-industry people who will talk about the future of the compact disc. The International Federation of the Phonographic Industry represents the interests of the recording industry worldwide, and CD sales are its lifeblood. “This story was first written back in October, and as far as I can see it hasn’t gained any credibility at all,” says Adrian Strain, the federation’s director of communications. “CDs still account for more than 60 per cent of industry revenues globally – more than 70 per cent in some markets, such as Germany – and there is still healthy consumer demand for the physical product. This is despite the rapid growth we have seen in the industry’s digital revenues.”
Gennaro Castlado, a spokesman for HMV, says, “I don’t think we should write off the CD just yet, as there are still a huge number of people who like the idea of owning and collecting music in physical formats, especially when they can make their own digital copies to get the best of both worlds. There will be a viable market for CDs for quite a while to come.”
Universal, the world’s biggest record label, says it has no intention of stopping production of CDs, pointing out that discs have made up 72 per cent of album sales in the UK and Ireland this year. If you look at last week’s Irish album chart, you will find that the number-one album, Christmas by Michael Bublé, sold 10,610 copies, of which only 654 were digital copies.
DOMINO RECORDS, HOME to artists such as Arctic Monkeys and King Creosote, is one of the biggest independent labels. Its director, John Dyer, says, “I’ve just been looking at the digital sales for Susan Boyle. They amount to 0.5 per cent of her total sales. The other 99.5 per cent is for CD sales. What you get with a lot of these stories about new technology killing off old formats is an incredibly American- and UK-centric view of the world. I know of certain European territories where the people are just culturally averse to using their credit card online to buy a download. Spain, to take just one example, doesn’t really go for the digital format.”
Susan Boyle illustrates where the story about the supposed demise of the CD was right. The people who buy her music tend not to use smartphones or iTunes. The same is broadly true for classical recordings and for country music and rock’n’roll, all of which appeal to an older, CD-buying audience.
With more contemporary genres, the gap between digital and physical sales is narrowing. Over the next few years, CDs will become less important in sales of pop, hip hop, urban, and r’n’b, as teenage music fans are already used to the one-click model of getting music.
Age alone isn’t the defining factor. Certain types of consumers demand the physical album, book or film. They enjoy the tactile sensation, the artwork and the way the objects are presented. People also like to look at and organise their collections, not just move them around a desktop with a mouse.
The CD-is-dead theory also assumes that people can afford high-speed broadband or that they can easily spend €500 on new devices. The drift to digital will continue because of its convenience and its generally more competitive prices. But the CD is safe for now. A large section of us, for whatever reason – economic, social or personal taste – will always prefer the tangible product.
Why CDs still rock
They look great Granted, they are made of unlovely plastic, but they are shiny and, even after three decades, look futuristic. And the music they hold is read by lasers. Which is still very Tomorrow’s World.
The sonic experience Yes, audiophile anoraks might think music should be listened to only on a beach at midnight surrounded by scented candles and only on vinyl. But, for the rest of us, the CD does the job just fine.
You can freeze them Apparently, if you put your CDs into a freezer for a few days the result is superior sound quality. It can also remove scratches.
The album sleeves Never as big as with vinyl, but with a CD at least there’s a bit of art to it. Downloads have made the album cover almost invisible.
Arts and crafts You can make sculptures from them. I once made a beautiful shiny fish from a Westlife CD.
Disc versus the Download
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