Tension grows between labels and digital radio

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"Just as important, however, is where those dollars are spent. The emergence of the big box retailers such as Wal-Mart (now the leading music retailer in North America) has had a major impact on pricing and back catalog sales. The pricing pressure remains evident as sales by volume are up in Canada in 2005, yet revenues have declined.

The back catalog issue, which focuses on the limited number of CDs sold at stores like Wal-Mart may be even more important than is commonly realized. The impact cannot be understated - in an industry that relied on 25 to 40 percent of revenue from sales of older works, the disappearance of those works from the shelves of the dominant retail channel must hurt industry revenues.

The impact of this development becomes even more important when you consider the Statscan data on new releases. Today' s report indicates that new releases declined by 16.5 percent between 2003 and 1998, approaching the 20.5 percent revenue decline. The lack of new releases should stand out as a critical development as the reduced product undoubtedly reduces revenues, particularly at big box retailers who carry virtually nothing but new releases."

http://www.michaelgeist.ca/index.php?option=com_content&task=view&id=990&Itemid=89&nsub=
http://www.statcan.ca/Daily/English/051026/d051026a.htm

"A recent Economist article reported that an internal music-label study found that between two thirds and three quarters of recent sales declines had nothing to do with Internet music downloads."

and

"The shift in music retail merchandising and marketing has also had an enormous impact on CD sales. The Recording Industry Association of America, CRIA's U.S. counterpart, reports that the dominant retail chains are now big-box retailers such as Wal-Mart.

In Canada, Wal-Mart and Costco now account for 25 per cent of the music retail marketplace, while in the U.S., Wal-Mart, Target and BestBuy are responsible for over half of all CDs sold.

This shift affects the music industry in two ways. First, while traditional record stores carry 50,000 or more titles, Wal-Mart focuses primarily on new releases, featuring only 1,500 to 5,000 titles. The decreasing availability of older titles hurts an industry that traditionally depends upon catalogue sales for 25 to 40 per cent of its retail music revenue.

Second, Wal-Mart has placed new price pressures on the retail pricing of CDs ? capping retail pricing in the United States at $9.72 (U.S.) per CD. The pricing pressure has had a dramatic impact on the revenue generated from each CD sale. According to CRIA's own numbers, revenue from the average CD this year is $10.72, down 10.7 per cent from $12.00 per CD in 1999. The bottom line impact has been to shave $47.8 million in revenue for sales in 2004 (through October) when compared with the same unit sales in 1999. The per-CD decline in revenue in those ten months alone is equal to 16 per cent of the total drop in revenue for the entire 1999-2003 sales period."

http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1101682208233&call_pageid=971794782442&col=971886476975

Posted by: Edward Meyers   Posted on: 01/16/06 You are currently: a Guest | Members login | Terms of Use

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