"... CD sales are down. WAY down, 20% so far this year alone -- that translates into at least $300 MILLION dollars in gross revenues lost... I've been hearing it from my label folks for a while "Yeah man!
We got a top-5 track at radio, but we're selling 100,000 single downloads and only 15,000 CDs a week!" OUCH! Let's do the quick math on that: 100,000 singles might yield $60,000 to the label, whereas 100,000 CDs (old math) would have netted the label at least $600,000 -- that's half a million dollars, per title, per week, gone....when your marketing costs stay the same and your revenues get smaller, it doesn't take a rocket scientist to figure out that things aren't so good."
"... Label and distribution staffs have been cut in half as their release rosters have doubled, and quite honestly, it's making a bigger mess than the one we're already in. People are losing 
their focus, and it's really starting to affect how business gets done..."
"Forget about the old days of artist development -- bringing a band into an office to play, getting the entire staff to go to the mat for a single band, sticking with that release for 6-12 months, and reaping the rewards of watching them blow up bigtime? Not happening so much these days. Unfortunately, as much as every label would like to be about artist development, people turn into Lucy & Ethel at the chocolate factory after another half dozen new titles come out the next week..."
Read the full text of Scott's open letter after the jump and check out his New Music Tipsheet.
This past week's WSJ pretty much brought to light what we've all known for quite some time -- that CD sales are down. WAY down, 20% so far this year alone -- that translates into at least $300 MILLION dollars in gross revenues lost -- or, in music industry terms, that's a lot of hookers & blow that won't be passed around at the next Christmas party.
I've been hearing it from my label folks for a while -- "Yeah man! We got a top-5 track at radio, but we're selling 100,000 single downloads and only 15,000 CDs a week!" OUCH! Let's do the quick math on that: 100,000 singles might yield $60,000 to the label, whereas 100,000 CDs (old math) would have netted the label at least $600,000 -- that's half a million dollars, per title, per week, gone. Of course, the BAND never saw ANY of that money anyway, right? ;-) Probably not, since it was largely eaten by marketing costs. But when your marketing costs stay the same and your revenues get smaller, it doesn't take a rocket scientist to figure out that things aren't so good.
So, of course, I have had a lot of friends ask me reluctantly, "So, um, how's business?" To which I always reply, "It's great! Labels get smaller, and I get busier! I've never relied on Mariah- or Beyonce-sized artists, and the indie titles are ON FIRE these days." Well, that's only partially true -- I definitely get busier (we have never worked with such a wide range of labels before, see the CRYSTAL BALL section for a preview of what's coming), but in all honesty, busier isn't always better. We are spending more time than ever chasing projects, chasing budgets, chasing budget approvals, chasing materials, and chasing final approval before materials go live. In other words, while business is good (knock on wood), we are experiencing more "d'oh" moments than ever before, and that ain't fun.
Label and distribution staffs have been cut in half as their release rosters have doubled, and quite honestly, it's making a bigger mess than the one we're already in. People are losing their focus, and it's really starting to affect how business gets done. Even with all the tools at our disposal -- phones, fax, Blackberries, IM, and emails -- for some reason, there is a MASSIVE breakdown in communication. Folks have got to try to cut one conference call out of your life every week and turn off your IM for three hours a day (wishful thinking, right?) if you're expected to focus and complete all the work on your plate.
Forget about the old days of artist development -- bringing a band into an office to play, getting the entire staff to go to the mat for a single band, sticking with that release for 6-12 months, and reaping the rewards of watching them blow up bigtime? Not happening so much these days. Unfortunately, as much as every label would like to be about artist development, people turn into Lucy & Ethel at the chocolate factory after another half dozen new titles come out the next week, and the week after that, and the week after that.
HOWEVER, I am highly encouraged to see the continued growth of artists like COLD WAR KIDS, SILVERSUN PICKUPS, and ROCCO DELUCA, as management, label, and distribution all work in unison to keep things cooking months after their release. And yessir, FLYLEAF was on a roll before their label switched distributors. But Flyleaf's audience continues to grow regardless, just gotta keep plugging away on the road for the next 300 days.
MACCA GOES TO STARBUCKS: No new news here, but I heard more than a couple of people moan out loud about this one: "How could Capitol afford to lose him! What does it say when a COFFEE SHOP becomes a RECORD LABEL?!" People, look at the numbers and realize: How could Capitol afford to KEEP him? Between the hefty advances, the massive marketing & promotional commitment, and the larger-than-average back-end, I would not be surprised if Capitol broke even on *any* of his recent pop albums. Beats pulling a Lack and writing a Springsteen-sized check to keep an artist on board.
Let Starbucks take that risk, and let Capitol benefit from the sale of Beatles CDs. And with the CD being carried in 13,500 Starbucks outlets (+ traditional stores via Concord), Macca will probably sell more CDs than ever before, Hear Music will eke out a tidy profit (especially with a lower CPU for price & positioning by being in all those coffeeshops) , and Starbucks will sell a shit-ton more lattes and likely get naming rights and box seats for the final Wings tour. Of course, you do realize all this is not without risk -- something tells me there are a few pallets of Best Buy / Rolling Stones / Elton John exclusives collecting dust in a warehouse in Sasketchewan.
