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What's wrong with the record business?

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What's wrong with the record business?

Postby ekahob » Tue Oct 12, 2004 7:08 am

What's wrong with the record business? Here are a few things.
Please note that they apply mostly to the major labels.

Promotional CD's. They are available in all major metropolitan areas in the used bins of "mom & pop" stores and on the web through ebay. The artist pays for these CD's and then they are given away freely to promote them.

Promotional costs. Is it really necessary to spend $500,000 on a music video? These and other costs usually get charged back to the artist (recouped) but if the artist doesn't sell enough records, the artist gets nothing and the label doesn't recoup.

Pricing. Why does the soundtrack to a movie cost more than the DVD movie? Why does a concert soundtrack cost more than the concert on DVD?

File sharing. While they are not responsible for creating this problem, they are responsible for not exploiting the technology to their benefit and for the manner in which they are trying to stop it.

I'll post some of my solutions after a few of you weigh-in.
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Postby Panorama » Tue Oct 12, 2004 7:23 am

You should be able to listen to the entire album on an artist web site before you pay for the cd or download.
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Postby MikeP » Tue Oct 12, 2004 7:44 am

Good topic! I'll admit that I'm slightly ignorant to the finer details and current affairs of record labels and CD retailers these days, but just a few observations:

Promo CDs - as much as I love Amoeba Records out here in California (the last bastion of record stores out here it seems), I gotta admit that they are flagrant offenders when it comes to reselling promo CDs. Damn shame that the artist has to eat it here.

Pricing - as if that DVD/CD cost flip-flop isn't enough, CDs are still too #@!% expensive! I draw the line at $14.99 for domestic CDs, and even that should be more like $11.99. But Virgin and Tower proferring CDs at their full suggested retail of $18.99 and beyond is a disgrace. Remember that bankruptcy, Tower? Guess overpricing didn't pay off, huh.

Some questions I've had:
-Where did all the used CD stores go?
-How much does file sharing & downloading contribute to the demise of used and new record stores?
-Why aren't more artists abandoning the big labels (contracts aside)?
-Why can't a reasonably well-known artist go it alone on the internet and do reasonably well? How 'bout some success stories?

I'd love to get some insider insight into what's happening and where things are headed? I'm sure Jason Fiber might have some good observations from his many years in the industry.
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Postby Darkwave » Tue Oct 12, 2004 7:54 am

I remember reading a few years ago about the RIAA wanting to ban record shops from selling used cds.
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Postby fritzb » Tue Oct 12, 2004 11:28 am

Yeah, these are all good questions.

In Europe it is quite common to listen to CDs before buying them. I remember spending hours in this little out-of-the-way Paris CD boutique listening to all kinds of cool stuff. I told the clerk what kind of music I was interested in and he just fed me stacks of CDs to check out. Like many used CD stores here in the US, the CD stores in Europe only have empty cases in the racks. You pull the cases and go up to the counter to listen to and/or buy them. [:)]

As for the used CD business, yeah the RIAA tried to kill it. Idiots like Garth Brooks tried to say it was costing them all kinds of money. The truth is they don't really want to <B>sell[/b] us anything. They want to lease it to us. If they could sell CDs that would self-destruct after so many plays, they would. You may remember the short-lived DIVX DVD format, which did just that! [}:)]
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Postby Grunch » Tue Oct 12, 2004 11:40 am

If the RIAA had its way, we would buy the CD, then also pay for each song on the disc each time we listen to it. We'd receive a monthly bill for the luxury of playing the CD we paid for.

IMO, a huge problem with the music industry, labels and radio stations combined, is their absolute ignorance of good music and the their betrayal of many artists they actually signed. Does a new CD by Justin Timberlake really even need promotion? Face it, those that find his music to their taste will buy it whether it is promoted or not, yet they'll spend millions promoting their hand-picked stable of fluff and ignore many up and coming artists they signed and recorded, and then push the Timberlake and Britney tracks down listeners throats at the expense of the other bands never getting a single spin on a radio station. Good music has never been hard to come by, it has always stared the music industry in the face, but the corporate execs choose to program the new Sheryl Crow track into a death groove until we are all in a zombie state reciting the chorus line, if we had the lack of judgment to flip on the radio in the first place. The music business ignores the true heart of their business, the listeners, and gives them little or no credit. Do they really believe most of us go out and buy a CD, program track three to play for 3 months, then say, hey, now let's try track seven. Perhaps the bulk of radio listeners prefer being spoon-fed music, and the mentality is simply 'it must be good if the radio plays it'. Think of the plethora of superb artists floundering to make a living, while the execs chompt their steak and drink their perrier through their nostrils, they can just smell success. I, for one, believe the state of the music industry is their own doing. They can look to cast blame on the 'downloading evildoers' and a fickle public, but honestly, they need a big mirror and a major look at their own downfall. The music industry is in a shambles and they look as always to blame the buyers. Perhaps they should listen to a broader audience and realize the process begins with them. I've got my music, thank God I don't have to ever turn on a radio to hear music. I can listen to what I want, when I want, how I want, and the major labels and stations can all close up shop and go home to mama for all I care. Too bad more artists aren't finding ways to totally bypass the labels with the internet and do their own thing, as they envisioned it in the first place, and listeners could pay fair prices to purchase or download direct from the artist, plus they could offer rare and bonus material, the possibilities are endless for them. If I could give the artist 100% of the money for their CD, and none to any label, that would be nice.
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Postby SwampThing » Tue Oct 12, 2004 1:02 pm

My eyes are not so good anymore. How about using some paragraphs. [:D]
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Postby savethewave » Tue Oct 12, 2004 2:08 pm

There's more than a few things wrong with the recording industry.

Could there be a more out-of-touch group of people? The RIAA doesn't have a clue; their marketing approach to selling new artists seems to still be stuck in the AM radio of the 1960's. The execs in charge don't have any idea how to use the same digital technology that my 12-year-old son can to make a flawless digital copy of a CD he just bought in the store.

Then, their attempt to regulate the sale of used CDs. I got news for you RIAA types, if I bought something, I can damn well do what I like with it, including re-sell it. Is Sears going to come after my narrow white ass because I sold one of their Kenmore dishwashers at a garage sale? Buy an f-ing clue, RIAA!

Next, let's look at the price of recordings.
In 1982, a CD player was $1200.00, and CDs were $17.00.

Today, a CD player is less than $60, but CDs are still $17.

Why the discrepancy?

In the 80's, CDs were made in either Germany or Japan, put into those cardboard longboxes so they could sit in LP racks, and shipped out to the US, at a cost of about $9.00 per unit. Of the sale, the major label artists got about one dollar in royalties per unit sold.

LP records, which are by far the most expensive to produce, only had a $9.98 list price at most for a single LP. It's expensive to print up a big 12 1/4" color LP cover!

Today, CDs are made right here in the US, at a total manufacturing cost of less than 75 cents per unit. The profit margins are huge, because major label artists are still only getting around one dollar in royalties. Hmmm. Where is all that extra cream being skimmed off the top going?

People are sick of these prices for crappy albums that only have one good song on them. So, they go to I-tunes, or wherever and download songs, or worse for the record companies, share music for free.

This is why the RIAA are desperately trying to close the barn door long after the horse has gone. Profits are down over 20 percent. Good.

The RIAA is like the big bully who has terrorized the neighborhood for years, and finally had his face pushed into a muddy puddle by the little kid who has finally had enough.
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Postby ekahob » Wed Oct 13, 2004 12:29 am

Lots of good points here.

Grunch: You took the words right out of my mouth.

<font size="4">Swampthing: You must be over 40 too. I can barely read CD inserts now so I really miss big album covers. I hope you can read this!</font>

savethewave: There's no arguing the physical costs of CD production are minimal now. The problem lies with other label spending. Promotional costs are high. They need big hits to finance the flops - and there are a lot of flops.

Mike P.
There are still a lot of used CD stores in New York City.
I don't think there is anyway to tell the impact of file sharing. Yes it has hurt sales. It has also helped sales by getting people into music they might not have discovered.
Artist aren't abandoning the major labels because they see them as a way to make a lot of money fast. I haven't read the book by Semisonic's drummer Jacob Slichter <a href="http://www.amazon.com/exec/obidos/ASIN/0767914708/ericacticecom">So You Wanna Be a Rock & Roll Star: How I Machine-Gunned a Roomful of Record Executives and Other True Tales from a Drummer's Life </a>
I'd like to hear some success stories of artists that have gone it alone too. Hanson might be one but they had already made it through the majors.

Many of you mentioned used CD's. The Coconuts chain sells used CD's in the same bins as the new ones. Why? Because they make more money on the used ones.

Here are some of my possible solutions and further comments

Promo CDs: The labels need to be smart about them and send the only to legitimate promotional sources. CD's should be sent without the artwork to discourage resale. Labels need to get digital and email the songs to retailers for in-store play or host them on secure servers for downloading by the retailers and promoters.

Promotional costs. Franz Ferdinand's excellent video for "Take Me Out" is an example of how a video can be done without spending a lot. Artists need to find new creative people who are willing to work with them instead of working with the high paid video director "stars" that they keep using over and over.

Pricing. Labels have dabbled with lower prices on some new artists. Franz Ferdinand could be had for $8.99 when it first came out but if CD's cost $6.99 I'd be buying 4 times as many as I do now. That price point makes the downloading and burning music more of a hassle than it's worth (at least for me anyway). I also want the artwork <font size="1">(even though I can't read it anymore)</font> I like what some labels are doing by providing DVD's or bonus CD's. This is smart thinking.

More points:
The lack of quality music and poor artist development has also hurt the business. Artists like Bruce Springsteen and R.E.M. would have been dropped by their labels after their second albums if they came out today.

The public's fickle nature is also a problem. Fan loyalty is rare these days. The kids move on quickly.

The record business profited greatly when CD's came out. People repurchased music on CD that they had on vinyl. New technologies like DVD-audio and SACD have not be adopted by the masses. Catalog sales have shrunk.
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Postby Otters Walk Among Us » Wed Oct 13, 2004 1:08 am

I'm not sure what your definition of a success story is, but I suppose Ani DiFranco would qualify. Perhaps Fugazi / Dischord Records as well, it's certainly not a money machine, but Ian has been able to hold true to his beliefs and stay in business for 20 years.

As far as promo CDs go, it's very true that labels send out too many, but it's not a huge expense compared to other marketing and advertising (not to mention radio payola-not-payola). Also, sales of promo CDs cut into a album's overall sales far less than you'd think. If 5,000 promo copies of a major-label release ending up in used stores make an significant effect in a release's sales total, then that release isn't a hit to a major label anyway. People that buy their music at the mall, big box stores, and Wal-Mart aren't in the local indie store browsing through the used bins anyway.

The used CD stores have disappeared for a variety of reasons. The RIAA would have you believe it's due to file sharing, but that's only a part of it. It does have a significant effect in towns where the bulk of music buyers are college students, but the growth of video games, DVDs, even cell phones and associated nonsense means that disposable income is spread around even more. Basically, kids don't buy and listen to as much music as they used to.

I could and probably should expand, but enough rambling, I should get back to work.
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Postby Lazlo Nibble » Wed Oct 13, 2004 4:43 pm

[quote][i]Originally posted by MikeP[/i]
<br>-Where did all the used CD stores go?[/quote]
Whereabouts do you live, Mike? I can only speak for the Bay Area and Phoenix, but both places seem to have as many used CD stores as they ever had. Rasputin Music (SFBA) and Zia Record Exchange (PHX) are both big local chains that seem to be doing well. And of course, as you alluded to, there's Amoeba: both SFBA stores are packed to the rafters with customers at all hours of the day, and they always have piles of inbound used stock.

(I refuse to condemn Amoeba's promo resale policies. One of my best scores there was a promo of the unreleased second Young American Primitive CD. In the dollar bin.)
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Postby SwampThing » Thu Oct 14, 2004 2:20 am

Somewhat related to this thread, Wal-Mart is using it's muscle to lower CD prices. I personally will not step into a Wal-Mart, even if I could get a CD for 8.99.

http://www.rollingstone.com/news/story/ ... 6.0.11.847

From this article:
This breakdown of the cost of a typical major-label release by the independent market-research firm Almighty Institute of Music Retail shows where the money goes for a new album with a list price of $15.99.

$0.17 Musicians' unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties
$0.80 Retail profit
$0.90 Distribution
$1.60 Artists' royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead
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Postby devildog » Thu Oct 14, 2004 2:58 am

[quote][i]Originally posted by Lazlo Nibble[/i]
<br>[quote][i]Originally posted by MikeP[/i]
<br>-Where did all the used CD stores go?[/quote]
Whereabouts do you live, Mike? I can only speak for the Bay Area and Phoenix, but both places seem to have as many used CD stores as they ever had. Rasputin Music (SFBA) and Zia Record Exchange (PHX) are both big local chains that seem to be doing well. And of course, as you alluded to, there's Amoeba: both SFBA stores are packed to the rafters with customers at all hours of the day, and they always have piles of inbound used stock.

(I refuse to condemn Amoeba's promo resale policies. One of my best scores there was a promo of the unreleased second Young American Primitive CD. In the dollar bin.)
[/quote]

I think certain areas have really suffered with cd shops closing down. Here in Austin, many shops have closed for good. Even the venerable Tower (which I did not care for anyway.) Records closed here. San Antonio also experienced many shops closing for good.

I have been to Phoenix, Minneapolis, Denver, and Omaha. It seems these cities are doing well for keeping cd shops open. I have been to the ZIA shop in Tempe and it was busy. Recently, I was in LA and it seemed there were plenty of used shops when I looked through the Yellow Pages at my hotel. I know that in the mid-80s, Greenwich Village (NYC) was an epicenter for small indie shops. The last time I was there in 2001, it seemed a shadow of it's former self.

Not sure why certain cities have experienced such a decline in cd shops while others continue to thrive. I suppose the demographics are key, although you would think in the Live Music capitol of the USA-Austin-cd shops would thrive here? Go figure?
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Postby MikeP » Thu Oct 14, 2004 3:28 am

[quote][i]Originally posted by Lazlo Nibble[/i]
<br>[quote][i]Originally posted by MikeP[/i]
<br>-Where did all the used CD stores go?[/quote]
Whereabouts do you live, Mike? I can only speak for the Bay Area and Phoenix, but both places seem to have as many used CD stores as they ever had. Rasputin Music (SFBA) and Zia Record Exchange (PHX) are both big local chains that seem to be doing well. And of course, as you alluded to, there's Amoeba: both SFBA stores are packed to the rafters with customers at all hours of the day, and they always have piles of inbound used stock.

(I refuse to condemn Amoeba's promo resale policies. One of my best scores there was a promo of the unreleased second Young American Primitive CD. In the dollar bin.)
[/quote]

I live in Orange County (yes, behind the "Orange Curtain"[:D]), and I've witnessed nearly a dozen stores close up shop (MobyDisc, SecondSpin, Discount Records, most Wherehouse locations) in the last few years. There's hardly anything left, but I will admit that the L.A. Amoeba store mostly compensates for the losses ... it's just not close enough to be convenient.

The Bay Area is a blast -- between the Amoeba & Rasputin stores and cool little dives like Aquarius, it's become a biannual pilgrimage for me!
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Postby Ollie Stench » Thu Oct 14, 2004 4:45 am

Aimee Mann (sp?) from Til Tuesday makes more money running her own label and selling at gigs and online than she did on a major label, even though she's selling 1/10th the volume.

Penelope Houston from The Avengers does the same thing, taking it a step further and selling burned copies of her back catalog.

Those are 2 success stories I've heard of.
-----------
I remember when cds first came out and they were around $20 per disc. LPs were still about $8.00 each. The RIAA promised that when the cost of manufacturing cds came down after the format took off, the cost of a cd would be the same as an LP. In a roundabout way they were right, but instead of a CD costing &8.00 a new LP is about $12.00. Lying bastards!
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