Of course, Wal-Mart doesn’t produce music or for that matter even manufacture it, but it has sure become active in selling something that the other four majors are having a hard time selling – CDs.
The Eagles album Long Road Out of Eden sold over three million plus CDs through Wal-Mart alone (figured corrected from earlier edition)
Journey had a successful arrangement.
AC/DC is next to sign a deal with the retailing giant. But this deal was brokered by the group's label SonyBMG and it stands to alienate other retailers because only Wal-Mart will carry the next AC/DC album.
Make no mistake about it Wal-Mart is not a friend of the music business or for 99% of the musicians out there. It’s a piranha with sharp teeth looking to rip into any prey – a fearsome predator.
While everyone is waxing eloquent about Wal-Mart’s CD selling ability, it is lost in the fine print that Wal-Mart is also considering cutting back on the number of CDs they sell.
CD sales in general have fallen almost 17% so far this year. Things are not getting any better because consumers continue to make the transition to digital downloads.
Wal-Mart is the second largest music seller – 21% of the nation’s music.
iTunes is number one with 30%.
I’d rather be iTunes than Wal-Mart because iTunes is cooperating with the inevitable --- the eventual 100% digital distribution of music.
Wal-Mart is still hanging on to hard goods and through sheer muscle alone – doing very well.
But as the major labels have discovered, the CD business is dying. That’s a problem for the labels that still reap in excess of 80% of their revenue from CDs.
Wal-Mart tried to get the major labels to reduce the price of CDs to between $5 and $12 – at most. The labels wouldn’t go there. I've written anecdotally about my experience with the next generation that indicates (to me, anyway) that a $5 CD would be a blockbuster. There is not enough profit in it for the labels so they reluctantly cut CD prices only when they feel they must.
So now Wal-Mart is tinkering with the idea of weeding out the music they don’t need to sell.
Still, the record industry derives the major part of its revenue from a product that is tanking exponentially year after year.
The labels must now turn to biting the bullet and reinventing themselves.
Sit down before you read the next line, please. And please don't read this while you're driving.
The labels should become the new radio.
Cut out the middleman – go directly to the consumer. No towers, no transmitters. Just podcasts of their content. Deriving revenue from advertising partnerships and selling merchandise big time.
The labels seem to be through with radio anyway. Why else would they try to punish their former partners by seeking to lift radio's performance tax exemption.
And radio stations don’t seem to care about music, either. Just ask any young person (you know, the people who consume the most music).
Stations play a limited list of songs over and over again – less variety.
So, Wal-Mart, you’ve been warned.
You may be able to dictate the price of product from manufacturers in China, but you can’t dictate the next generation’s thirst for music variety.
Record labels, this is not a problem – it’s an opportunity.
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