Music Retail Can Be Saved – If We Act Fast
Music retail can be saved.
The way to save it is to encourage more outlets to open up. We're not talking about starting more digital download stores like Amazon MP3, Wal-Mart, or the up-and-coming Google Music. No, we're talking about allowing more independent outlets to emerge.
To save music retail, as many niche sites as possible need to be allowed to open, experiment, and ultimately fail too. That way, we can learn from their mistakes.
And more stores will be in front of more fans.
Due to the decline in sales of recorded music, many stores have closed up.
Thus, every year, there will be fewer physical stores in front of fans. Because of this, sales will decline further. Less music retail outlets equals less music sales.
By fostering an ecosystem of independent music retailers and putting more stores in front of more fans, it's possible to save music retail from its demise.
This argument comes from Jay Frank, the SVP of music strategy at CMT.
History Repeats Itself
Reviewing the numbers from last year, he found that only 5% of internet users download music legally and 9% of them downloaded it illegally. This means: "Over 85% of US internet users do not download music legally or otherwise."
More interesting still, is that while 15% market penetration is significant for music downloaders, the figure is comparable to that record sales downturn that occurred in 1949. Back then, the number of fans actively purchasing records fell to 15%.
History repeats itself. The major labels would have you believe that the decline in sales of recorded music that we're experiencing is unique to our times and due to the proliferation of file sharing, but that's simply not true. We've been here before.
In order for music retail to survive, Frank thinks we need to act fast.
In tandem with encouraging more retail outlets to open up, he says that we need to encourage more streaming services. "While only 15% of the internet is currently downloading, at least 40% are streaming music regularly and legally," he writes. "The music business still appears to be in the CD to download transition while the consumer is clearly in the download to streaming transition."
This is an important point.
Saving Music Retail
While the major labels are increasingly becoming digital download providers, not physical media retailers, fans have pushed Grooveshark to become the eighth most popular rising search term in the US. As the labels shift their strategy away from the CD, fans have become to shift away from the MP3. Clearly, fans are ready for Spotify, but even after a decade in transition, the labels aren't prepared.
To get the over 85% of US internet users that do not download music legally or otherwise to buy or stream it online, there needs to be more places to buy and stream it online. Also, efforts to raise awareness for these sites and services need to be increased. "Rallying behind a legal marketing concept and properly funding it should pay dividends," he argues. "Marketing clearly drives sales."
The only music services that have more brand awareness than pirate sites right now are iTunes and Pandora. The rest, most fans have never heard of. To them, they don't exist. But they've heard of LimeWire, The Pirate Bay, and BitTorrent.
Music retail sells music. There needs to be more stores and legal services in front more of fans. Otherwise, music sales will stagnate and continue to fall.
To review:
- We need to market music again.
- Give fans more places to buy it.
- And let them stream music too.
That's how can we save music retail.
The premise of this article is ridiculous.
Why do you think all of the niche record stores have closed? Because nobody was buying!
Why would you promote a distribution system that has already died of natural causes?
-Mark
Partners In Rhyme Inc
http://www.partnersinrhyme.com
No Mark, the niche indie record stores failed because massive retailers like HMV grew and took over the market. Now HMV is failing and it’s time for the indie retailers to take the market back. If it happens, it will be awesome.
The indie stores closed because several factors hit them all at once:
-Demand shifted so the price a consumer was willing to pay declined from $15 to $10
-The real estate boom drove up rents
So, the price per square foot increased, while the revenue & profit per square foot decreased. This is occurring BEFORE you take into account any decline in sales. No business can survive in that environment.
My point is the business can’t survive if we just concentrate on just big retailers having huge market shares. We need an ecosystem with hundreds of retailers having .1% of the business. They can sell downloads. They can stream music and pay for it. Doesn’t matter, but without it, a recovery is unlikely.
Music sales needs music outlets. If we don’t foster those businesses, then we can only blame ourselves.
Jay, you make a valid argument. It’s also important to point out that, during the last decade, labels and distributors were so addicted to first-week scans that top-selling releases were deeply discounted at the big box stores — oftentimes below the wholesale price. Indie accounts and music-focused retailers such as Tower suffered because they were in the business of earning profits through the sale of music, not as a loss-leader to sell refrigerators, TV’s, etc. These retailers were simply unable to compete with the pricing offered by Best Buy, WalMart, and Target. Now that the big box stores have such limited selection and look to be possibly phasing out music altogether, there’s absolutely an opportunity for indie retail to thrive. I don’t think that it will be what it was in the past — rather, it will need to focus on exclusive content, deluxe packaging, live in-store performances that are streamed online where fans can purchase one-time only merch items, etc.
Now the only trick is to line up the funding.
I think you may like this piece:
https://www.hypebot.com/hypebot/2010/09/the-end-and-beginning-of-music-as-a-loss-leader.html
Much of what you talk about, I address.
Thanks for the comment.
Too many niche retailers got away with bad customer service and jacked-up prices, and too few consumers know what it feels like to spend time in a really GOOD record store. Consumers may only be willing to spend $1 per track as a commodity, but they’re happy to spend more for real artifacts — items that celebrate and reward fandom. Some towns and neighborhoods can incubate those kinds of places: I remember spending hours every week at Wuxtry and Schoolkids when I lived in Athens. And last I checked, Amoeba’s doing fine in SF. It requires entrepreneurs with passion and dedication — and a healthy tolerance for risk.
Hey Kyle,
Thanks for sending this to me. I missed it the first time around. You nailed it!
Best,
Niels
Niels Schroeter
Surfdog, Inc. / DKM
1126 South Coast Highway 101
Encinitas, CA 92024
(424)240-5250 Primary
(760)944-8000 Surfdog Office
niels@surfdog.com
Please note the best way to reach me by phone — (424)240-5250 will connect you to wherever I am (office, mobile, home, etc.).
Wow – that graphic is a blast from the past. I remember working with John on that MP3 book when I was at Musicmatch.
To quote the Dead Kennedys: “Could be they’ve put out one too many lousy records?”