Tune biz humming retail blues
By Justin Oppelaar
NEW YORK (Variety) - A stalling U.S. economy, the end of minimum-pricing agreements and revolutionary changes in how consumers get their music all contributed to a generally tepid holiday season for music sales.
The slide, which spawned more than a few grinches among the music industry elite, is also being closely observed by the entertainment biz as a whole amid fears that such a dip augurs leaner times for the entire sector as consumers rein in discretionary spending.
Still, a few music industry players managed to snatch victory from the jaws of defeat, grabbing unprecedented market share with a cache of proven blockbuster pop acts both new and old.
'Christmas has been fairly soft this year industrywide compared to last,' said Ron Spaulding, senior VP of sales at Warner Music Group's Elektra imprint. 'With interest rates on the rise and the market coming down, consumers seem to be getting cautious.'
Music sales for the week ended Dec. 17 were up 16% from the prior week as gift-buying ramped up, but they were down nearly 12% from the same week a year earlier, according to data compiled by SoundScan.
There was a bit of a recovery as last-minute buyers flocked to CD bins. For the week ended Dec. 24, the top 200 albums registered sales of 20.4 million vs. 19 million in 1999. According to SoundScan data, 57 albums registered sales of more than 100,000 units, a rise from 53 a year earlier.
For the first time in almost a decade, holiday shoppers faced the specter of a possible recession on the horizon. Consumer confidence declined for the third straight month in December, hitting its lowest level in two years, and just 17% of those surveyed expected the situation to get better over the next six months.
The hesitancy among consumers has not been lost on record company execs, who relied on proven acts to pay the bills during the holidays. The Beatles' hits compilation '1,' for example, sold 4.6 million copies in six weeks.
'The problem at Christmastime is that the pace of new releases has slowed dramatically,' Spaulding said. 'You have a handful of records that are driving most of the holiday sales.'
The names of those records -- and the bankable talent behind them -- are familiar to just about anyone who has turned on a radio in the past year, particularly if they have kids in the house. Releases from the Backstreet Boys, 'N Sync and Britney Spears all enjoyed a healthy bump in sales over the holiday run, as parents hustled to satisfy the demands of their teen-act-crazy offspring.
The dominance of those groups on the record racks made it a very merry Christmas indeed for at least one label -- Zomba Recording division Jive Records. Jive, the BMG-distributed indie label that is home to all three of the multiplatinum acts above, has been represented four times in many of the top 20s of the last several months.
Part of that presence, said Jive's senior VP of national sales Bob Anderson, should be credited to the fact that the label's artists expand the size of the music market as a whole by drawing new buyers into the market.
'We have had the good fortune to make records that have appealed to younger purchasers,' Anderson said. 'These kids are getting involved in music for the first time in their lives, and at earlier and earlier ages.'
But music retailers and members of the industry aren't quite as enthusiastic about having just three or four megahits to market to holiday shoppers. Hilary Rosen, president and CEO of the RIAA, told Daily Variety there's a definite concern 'that the big numbers in album sales are connected to too few acts.'
Scott Levin, director of marketing of audio products for national retail chain Musicland, said it's tough to keep consumers in the stores with only a small slate of perennial blockbusters.
'For us, it's absolutely release schedule-related,' said Levin, who sees the holiday take coming in flat to slightly below the year before. 'There just aren't any of the barn-burning releases out there that draw new customers in. Without them, we can't even talk to the customers and get them interested in buying more catalog.'
Capitol Records senior VP of sales Joe McFadden agrees.
'Sales of the top 10 releases are basically flat from a year ago,' he said. 'What is driving things down is items 11 to 100. You're just not seeing as many multiple purchases as you did before.'
In the top 100 albums charts for weeks ending Dec. 17 and 24, only five were debuts -- and only one of those made it into the Top 10, according to SoundScan data. That's far fewer than average for the year. For example, in the week of Oct. 8, when Radiohead's 'Kid A' opened at No. 1, the top 100 contained 10 debuts, including three in the top 10.
Ironically, the single best-performing newbie on retailers' racks this season is a record full of songs recorded more than 30 years ago: The Beatles' '1,' a collection of all the Fab Four's 27 U.S. and U.K. No. 1 hits.
McFadden of Capitol Records, the EMI unit that has put out the bulk of the Beatles' releases over the years, said the success of '1' is due in large part to the fact that, unlike disks by Spears or 'N Sync, the Beatles' music bridges the gap between contemporary music fans and their parents.
'The Beatles record covers all demographics,' he noted. 'This year, you have a lot of big pop records, but you're missing a whole group of affluent record buyers on the other side of the fence.'
Surprisingly, despite all the hubbub over Napster and its status as a threat to traditional music sales during the past year, industry, execs say the renegade file-sharing service doesn't appear to have had a noticeable effect on sales over the holidays.
'We know that we're getting a savvier buyer now' because of the proliferation of music and music-related information online, says Jive's Anderson. 'But in terms of what effect that's gonna have on sales, it gets a little bit more abstract.'
Musicland's Levin discounted the possibility that CDs might be given less often as gifts because Napster users already downloaded the same tracks free.
One recent development that has been a palpable drain at the till for music retailers, Levin said, is the revocation of the industry's policy of minimum advertised pricing, or MAP.
Under MAP, record companies gave retailers money to subsidize their advertising efforts, provided the retailers didn't advertise prices below a certain level. But the Federal Trade Commission brought MAP to an end in May, allowing retailers to advertise whatever prices they liked.
Some chains, Best Buy being the most prominent, began advertising new releases at or even below wholesale cost to get consumers into stores to buy bigger-ticket items like DVD players or stereos.
That creates a problem for record retailers and labels, because the pricing schemes make consumers even less likely to buy records from the back catalog -- a major source of revenue with few expenses for the industry, said Capitol's McFadden.
'If you are the average consumer and you can buy the hottest, latest thing for 10 or 11 bucks, what's that going to do for the Eagles' 'Greatest Hits' that's sitting on the shelves for $18 or $19?' he asked.
Musicland's Levin said that, short of the economy staging a dramatic comeback over the next few weeks, the best hope for an improvement in the overall music-sales environment is for the labels to realize the promise of the strong slate of new releases tentatively scheduled to bow in the first quarter. Among them are new records by the Dave Matthews Band, Janet Jackson and rappers DMX and Method Man.
'We have to get some really compelling stuff in front of consumers -- stuff that will make them say, 'Wow, I have to buy that,'' he said. 'We haven't seen a whole lot of that lately.'
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