How the Music Industry Is About To Change

The bad news is in -- as it has been almost every year since 2000.

Album sales in the U.S. are down year to year 13% and that includes digital revenue according to Nielsen SoundScan.

That’s a decline for eight of the last nine years for record sales.

It’s an ugly scene.

Sales down and that’s with 40% of music purchases coming from online sales – notably iTunes.

It never occurred to the label executives that you can’t make a customer buy what they don’t want to buy. And consumers don’t want to buy what they can get for free.

And they especially don’t want to buy albums – whatever these days.

Downloads sold 1.16 billion songs individually (or cherry-picked, as I like to say) – that’s up 8.3%.

But before you get too excited, that 8.3% increase must be compared with a 27% increase posted last year compared to 2007. So when is a lot not good enough – when analyzing downloaded music sales.

SoundScan does some pretty creative “research” by combining album sales with what it calls "track equivalent albums” -- 10 separate song downloads as the equivalent of a single album purchase. Even with that monkeying around, sales fell by 8.5%.

In my opinion, 2009 was another year without the next Beatles or a new genre the equivalent of rap or hip-hop. No killer music trend is predictable because record labels are into cutting costs and not going out and finding new artists, new music and new genres.

But the lesson is never learned.

It’s not nice to screw with the consumer – especially today, when consumers have so many choices.

Obviously, consumers spend lots of money on albums and downloads and Apple apps and monthly cell phone fees and on and on. But the record industry wants to rebound from its nine-year slide the old fashioned way -- dictating what they think consumers should buy.

The labels are old school but now Apple is the new record industry.

And in a few weeks, there will be another way to push music to consumers on Apple's cool new tablet device (announcement expected January 27). When Steve Jobs conned the labels into thinking he was going to help stamp out illegal downloading of music back in the Napster days, they never dreamed that they were creating a monster.

That “monster” sold lots of what he wanted to sell – iPods, then iPhones and soon tablets. In the record industry today, music is no longer the star. It is the fuel that drives the sale of devices – iPods, iPhones, iTablets, smart phones, etc. And the new gatekeeper is this mysterious genius named Steve Jobs.

You could never have created a music maven like Jobs – only the record labels could in their shortsightedness, their unwillingness to buy Napster and be a player in the digital world or their inability to see what the consumer wants.

They are not alone.

Netflix did a deal with the devil – I mean, Warner Brothers – to allow Netflix to have access to a wider variety of movies online. Currently, if you rent a Netflix DVD you have about 100,000 titles to choose from. Rent a movie online and you have only about 17,000 choices.

Now, with the new deal that presumably the other studios will emulate, Netflix will have a ton of content, but wait …

Because that’s what a renter will have to do -- wait!

They will now have to wait 28 days to access new movies so as to reduce the appeal of Netflix when compared to buying a DVD. That's how Warner Brothers wants it and damn the consumer.

Like holding back their releases to Netflix is going to sell more DVDs.

In other words, Netflix gets a lot of new titles for online distribution --- after all 70% Netflix customers rent older titles and that is a big part of it's deal with Warner Brothers. But to put a time delay for Netflix customers so Warner Brothers can think it will sell more DVDs is compromising Netflix.

And they are driving Netflix customers to competitor Blockbuster to rent the DVD if that's what it takes.

What a lousy deal.

More content at the expense of new titles – at least for 28 days.

Of course consumers are independent and they may decide to watch fewer movies using these outlets. After all, Apple may have something to say about all this in the next few weeks. The Apple tablet could have a nice ten-inch screen very suitable for watching movies direct from the iTunes store. That’s why ignoring the consumer is a loser of an idea.

If Apple makes a tablet that allows a consumer to read books, periodicals, scan the Internet, listen to music and view videos, watch TV shows, movies and/or offer streaming music using monthly subscription plans then both Netflix and Blockbuster are headed out of business.

And that brings me back to where I started – the record industry.

You need look no further than a desperate, outdated industry trying to force its will on consumers to see how it is all going to turn out.

Even these powerful people couldn’t muscle consumers into buying whatever it is they are selling.

And then Apple comes along again and puts everything consumers want into their hands at a reasonable price to enjoy on a very cool portable device.

And that’s how the music industry is going to change as well.

Apple will be the enabler. And artists can go directly to an ever-increasing audience of tablet owners but in the end the magic is no longer in the music (as the Lovin' Spoonful used to tell us).

The magic is the tablet.

The music is what fills the tablet.

Artists, arrangers, writers and producers will soon be able to bypass the labels like never before getting direct access to that mass audience.

And the music will exist to service the electronics industry -- not the other way around.

For those of you who would prefer to get Jerry's daily posts by email for FREE, please click here. Then look for a verifying email from FeedBurner to start service.
Thanks for forwarding my pieces to your friends and linking to your websites and boards.