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Tuesday, September 18

Future of Music Conference Retail Panel

Hi All.
I 'm listening in to the retail music panel at the FoM Policy Summit.
Let's Get Physical: The State of Retail in the Digital Age

Tom Quirk-RealNetworks/Rhapsody moderator
Mike Dreese-Newbury Comics
Josh Madell-Other Music/Antietam
Franz Nicolay-The Hold Steady/Anti-Social Music
Sean O'Connell-MusicAllies

Introductions:

Tim: Please introduce yourselves and tell us what were your first and last records purchased.

Josh-First Record: Grease Soundtrack. Last one: Staple Singers digitally
Sean-First: Another Brick in the Wall single.
Mike-First: Hogan's Heroes singalong and Herman's Hermits GH. Most recent: The Bravery
Franz-First: Alvin and Chipmunk Sing Beatles; Last: Culture Shock
Tim: First: Neil Diamond-Live; Last: Kevin Coyne

What does the music store of the future look like?

Josh: For OM, not radically different. Focus on music we love based on their taste in music. Mailorder, downloads, show promotion. Get good music into as many hands as possible.
Doing less business than 5 years ago selling CDs, but still have active and invested clientele. Business driven by weekly NR email. Download store doing well.

Sean: Not a lot of record stores in 2020. Stores that are relevant will be curators working to niche. Trusted brands and forward thinkers. And appealing to lifestyle. Vinyl buyers "uber-collectors."

Mike: No music stores in 2020 unless collectible only, like 78 store. No physical manufacture of CD in 13 years. 5-7 years as deeply penetrating product. Music sales at Newbury below 50% for first time. Acquiring loads of legacy products for mailorder fulfillment. 4-5 years from now will see end of record store as we know it.

big concern when artist/manufacturer will stop releasing music as physical format.

Franz: Agree. Curatorial aspect to point toward music you don't know. Aspect of artifact is important. Will be market for cds if people are now collecting 8 tracks.

As musician, don't expect money from physical retail sails other than merch table at shows. Retail is more of a promotional thing. Nice to have record featured & do in stores to have access to fans but sales aren't important. Royalty checks are limited in grand scheme of day to day living.

What is you online presence?

Josh: 5-7 years for mail order. Convenience in NYC and hard to find nationally and globally. Distribution for underground music better in last 10 years.
Just launched online store built on weekly email updates. Customers who've signed onto mailing list and get recommendations on 10-15 releases per week for physical. Online store is very curated all hand-picked catering to real music collector in high quality 320kb files without DRM. Lots of label support. Very curated & broken up into little sub-genres, label profiles, interesting NR, based around taste & picks. Labels seems happy & built on existing biz without huge monetary investment.

Mike: Will have shipped millionth package in next month. #3 media seller on Amazon. Acquiring loads of legacy material. Buying up entire catalogs to corner market. Custom/exclusive lifestyle products. Signed artist booklets on street date at 100,000 this year alone. Pint glass series incl. Elvin, Mariyln Manson, South Park. Toy business is huge: one of the strongest accounts in the country for that market. First availability for the web is huge. 95,000 emails a week all opt-in. NOT curated.

Franz: Not using web in any great extent because of fulfillment issues. Too busy. Rely on label or Merch Direct to handle that. Face to face at shows.

Starbucks, etc
Sean: Not competitive because of so few titles.

Mike: Great. Tower Records was best thing to happen to them when it came in. What doesn't kill you makes you stronger. Starbucks curates to their customers very well. Applaud anybody trying to expose customers to music. Most CDs aren't sold in records stores. Sold w/toothpaste and Rubbermaid at stores.

Exclusives:

Josh: Huge. Customers very knowledgeable and savvy. Music isn't dying. Customers are aware. Even just one bonus track is huge. More than anything it's the music. Bonus disc or extra track on download. Or have release early or exclusive live tracks. Customers very aware and it drives music. Labels pre-releasing digitally, like new Beirut record one month early b/c it will be out there anyway.

Sean: Package bonus material w/album only purchase. Ratio of full album vs. singles sampling is significant now. Adding live tracks to help as add-ons.

Mike: If we can get exclusives, we like them. Larger the artist and more organized the fan base the bigger it is. Labels looking at stores as customer and not the customer as the customer, so giving different versions to different retailers can serve to alienate fans additionally. Started w/Best Buy. As bait and switch w/various extra track add-ons. Trying to get signature or value add that doesn't affect the music itself. Otherwise milking brand value while pissing on people who got you there in the first place. Sometimes go public to retaliate. Made Stones product 17.99 because they gave Best Buy exclusive video. Industry is reaping what it sowed-rebates now have trickled down to indie retail. Wal-Mart and Best Buy have forced diminution of price. With co-op and rebates price goes down to $7. Co-op ad dollars down but rebates up.

Tim: Artists have to churn out more product...

Franz: Pressure for more and more tracks and versions. Acoustic versions and covers for overseas licensing or digital release. Re-release packaged w/DVD. Making up for overall sales drop by scavenging true fans to repurchase same record over and over. Artist loses control of emphasis placed on particular things. Acoustic "Live at Fingerprints" CD and printed 500-1000 and was supposed to be a small thing but got huge emphasis w/ads and such and was considered their new album when it wasn't.

Mike: Gatekeepers are gone even as artists. Just the way it is.

Franz: Even when artists do try to control it, say new album IS the new artistic statement, you still have to prepare 8 additional songs. How do you focus on what is The Release.

Tim: Is there any such thing as limited addition any more? No because of digital.

Sean: Artists and label benefit more when they can sell directly to their fans. Concert sales and bootleg series only available from artist website. Exclusive merch to fans. Cutting up for retailers is counterproductive to artists.

Franz: We're under no impression that what we're selling is The Songs. We live day to day by finding other ways to put gas in the tank. Subscription model makes sense. Recorded version is not monetarily valuable piece of information then the point is getting people to come out to shows and get their cash that way.

Sean: For artists that remove middle men and go to selling directly and owning own copyrights is lucrative after initial set up. Not sure subscription model will work. Ruckus free subscription service in college has contests. Music giveaways get no interest but iPod giveaway is gets huge response.

Tim: Is music not special any more?

Mike: Music wasn't sacred to him growing up and probably wasn't ever for most. Songs are worth a ton but only depending upon what your level is in the ecosystem: licensing, video games, etc. Not necessarily through record deal but through other avenues.

Franz: To clarify, music is worth a lot more as piece of intellectual property but not really as physical piece.

Mike: Music is being monetized hugely, but only at highest levels and at Wal-Mart.

Josh: Just got huge check for commercial licensing for TV. Biggest single payday. Tiny indie bands who were never able to make more money there is not opportunity through media.

"Taking a chance" on music is now gone. Nobody buys because of cover or a hunch. Today you go do research first before you go to store and buy. Doesn't make it bad or good. Some record take more time than 30 second click.

Sean: Life is different. Cable, Internet, commuting. Life is fragmented. "Thin slicing" will vanish without record stores. Impulse or near impulse buying and hunch buying will be gone.

Franz: The way we bought music will go away but way more people are consuming music than ever. Top heaviness is gone. 3,000,000 sellers are gone.

Mike: But bigger artists could actually be making even more with licensing.

Tim: Music available for streaming increases sales 3-5x than over 30 second samples and downloads. Streaming causes wider variety.

Sean: That service is "free." What is value in subscription model. Why care about the music then? Could have affect on other parts of the business if is goes the wrong way. Horizon in Greenville, SC is now record store/cafe/wine bar. Teamed up w/public radio. Does in-stores that feels a lot like a concert and station creates 30 minute special out of it. New model and leases out the restaurant. Has turned business around and created a scene in an otherwise sterile place.

Audience question: What is thought on labels trying to add value w/online ringtones, etc. Is it helping retail?

Franz: Sounds like its fighting last battle instead of preparing for the next one.

Mike: Bonus download via Myspace page. Everybody wants "account status." Tethered things will fail first time around. Labels and artists are trying to turn fans into account status. Ticketmaster and LiveNation will fail because fans want access to all tickets. Fans want access to everything and artist needs to control huge percentage of it. How do artists get the rights to pass to a store to build a t-shirt? Needs to be a sound exchange for rights. Tethered models are about turning fans into account status that you can then add onto like Amazon's one click. Not there yet but going that way.

Sean: Question is back dated. Artist management companies and artist will be in that business. Not the labels. Managers and merch will be the thing. Painful in the beginning but must tether the added value to their fans directly.

Mike: Artist has to invest in technology.

Question: Josh-Distribution for underground has been getting better, does that bode well for certain types of music? Are fans who are purchasing downloads vs. product is that just an age thing or is it a style or type of fan?

Josh: When opened, tourists would come in and buy hundreds of dollars of stuff. Happens less now. Better distribution and information now so less of that. Difference between buyers is only anecdotal but they cater to an older clientele for the most part. Downloaders are definitely younger but doesn't know demographics. Digital store costs for back catalog is much smaller so easier to support small labels.

Sean: Artists will be in physical biz for a long time. New West's sales are 50% tour! Physical sales on road are fantastic because it's something tangible to take away.

Mike: Newbury did 72 artist signings in 3 days.

Question: Reasons to make CDs-dj's and at shows. Will there be a substitute at shows? $5 code bought at shows. MP3s to radio?

Franz: Radio seems logical. As a music fan I wouldn't want to walk away with digits on a slip of paper. Fetishistic and back up storage will keep cds around.

Sean: Very little opportunity for radio airplay. A million other ways to do marketing besides radio. Can be serviced digitally but still put people on planes to go play MDs songs at big city stations. Effect is that big even if chance to get played is tiny.

Why did this turn into a radio tech panel?

Josh: A tech question and we're not tech experts. Labels are promoing digitally to retail now w/code and download. One of biggest drawbacks is lack of artwork. At some point there will be available package that opens when listening like checking out gatefold LP. Perhaps will be able to download at concert tons of extra stuff.

Mike: As an artist, it's sad. There's no latency to ownership. You no longer get the immediate gratification you have. Changes relationship. Fans crave artist DNA. Signed stuff doesn't resonate in the same way.

Question: Top heavy days are done. Many artists making little money but nobody making huge money. With regard to distribution, what do you say? Proponent of getting rid of it entirely.

Franz: Distribution means many different things. Myspace or file sharing would also count. Previous band was never represented in stores but Napster, etc helped raise awareness hugely.

Sean: CIMS and Junketboy allow you to go direct. Very selective and based on demand. No focus in most distribution. Must build demand and have somebody handle the sales function. Artists doing it themselves must make huge investment of time and capital. Get rid of distributors and go direct to cool retailers.

Mike: As an artist, build your brand. Go tour! Half way through collapse of broken system...

Thanks Mike!

Editorial note: I was on a panel 3 years ago with Mike Dreese. On that panel he said there would be no physical retail in 5 years. Thankfully that horizon keeps creeping out I guess.

1 comment:

Be nice!