“Warner Music Group, the world’s third-largest music company, on Thursday posted a fall in quarterly profit, hurt by an industry-wide slump in sales as more fans choose to buy songs online rather than physical albums,” Yinka Adegoke reports for Reuters.
“Warner’s net profit fell to $5 million, or 3 cents a share in its fiscal fourth quarter, from $12 million, or 8 cents a share, a year ago,” Adegoke reports.
“Sales of digital music at Warner were up 25 percent at $130 million during the quarter but this could not make up for the short-fall in CD sales,” Adegoke reports.
MacDailyNews Take: Because, thanks to Apple, music fans now get to choose the songs they want to buy and are no longer stuck buying them bundled with filler on an overpriced plastic disc. Welcome to the brave new world of consumer choice, Middlebronfman. The days (decades, actually) of artificially-inflated profits are over. You’ll actually have to do some work now. Imagine that.
Adegoke continues, “U.S. album sales are down 14 percent year on year, according to data from Nielsen SoundScan, as more fans choose to buy music as individual songs through online stores such as Apple Inc’s iTunes, or resort to using free file-sharing services to get music.”
MacDailyNews Take: And the more the music cartels withhold their music (or higher-quality, DRM-free music) from iTunes in misguided (and, quite possibly, illegal) attempts to break Apple’s dominance, more people will resort to using free file-sharing services, as opposed to — sorry to dash the hopes and dreams of coke-addled cartel dinosaurs the world over — signing up for unending music subscription services.
Adegoke continues, “Warner Music stock is down nearly 70 percent since the start of the year as evidence of a faster-than-expected deterioration in music sales has become more clear to investors.”
MacDailyNews Take: Gee, that’s too bad, huh? Offer your music in higher quality, DRM-free form via Apple’s iTunes Store, Warner et al., and you’ll sell more music. Here comes the ground guys, pull up before it’s too late.
A good example of an artist doing it their own way, and maintaining control of the product and the money is Sarah Atereth. She formed her own label to produce and sell her album. Available on iTunes and on her own website http://www.thesarah.com. One of the few independent artists charting in top ten on Billboard.
Here is what I don’t understand. If you take iTunes, Amazon, and other download services and sold other items directed toward the fans of an artist wouldn’t that make up the difference?
Here is an example: Let’s say I’m a huge Dave Mathews fan (because, well I am) and the label I buy the music from via iTunes also offered a special package in which there were exclusive video interviews, special album art, and maybee a special pass to do a meet and great after a show (limited availabilty, while supplies last). And lets say the charged another $10 for that package. (maybe some other cool merchendise thrown it too) then as a big fan I would love to get that stuff for an extra $10.
Correct me if I’m wrong but in this senario are not iTunes and Amazon places where they could potentialy make MORE pofit then physical media?
@Chaz
You are being a little ignorant here. Apple wants to set pricing across the board:
a) At a price point that people will pay instead of going to a bit torrent site
b) So it is much less confusing for the customer.
Keep in mind, labels don’t have the high mark-ups they need on physical CDs (such as the costs for the CD itself, artwork, shipping, packaging, inventory, etc.. Inventory itself is very, very costly). Basically, if margins are 40% on a wholesale album price of (Walmart pays a distribution company $7.00 for an album. The distribution company may make 30% or let’s say $2 per album. The label sells to the distribution company for $5.00 and has a 40% margin included. Let’s say the label makes $2 with the other $3 going to the cost of the CD, artwork, marketing, operating expenses etc..) At $5.00 on a 10 song album, the label makes revenue of $0.50 per song and a profit of $0.20/song. On iTunes Apple gets about $0.20 per song while the labels get $0.80 or $8.00 per album. The big difference is that the overhead for digital music is 1/50 the cost for physical CDs. The labels pocket almost all revenue from iTunes.
The REAL battle, is that because people aren’t re-purchasing their music but instead just ripping their CD’s, AND they can but just one or two songs from an album, physical sales are down and the industry has little or no plan or idea how to handle the situation. As well, they think that they should just raise digital download prices and people will still pay. Unfortunately, anything over $0.99 per song will simply result in people sharing music via P2P. That results in the re-emergence of DRM. DRM costs money and alienates hardware crippling the growth of music.
Labels are lost with little good direction, scared, and greedy. Not a good combination.
We’ve long advocated Apple adding a subscription model if it makes financial sense. One such example:
“Now, for the limited amount of people for which a music subscription service would be welcome, we say, by all means, Apple should offer it – if it makes business sense (i.e. development and operational costs are less than profit potential).”
http://macdailynews.com/index.php/weblog/comments/13418/
Hey MacSmiley, what do you mean twice? Some grizzled old folk have endured Albums, 8 track, cassette, CDs, and in some cases DVDs of live concert performances. And how many have went through VHS, LaserDisc, DVD, and are now starting on Blu-Ray or HD? The upgrade/ rebuy cycle is the only reason that the evil twin **AAs are pushing new formats.
In the case of cassettes, how many people have purchased multiple copies of a cassette after the sound deteriorated after being played so much?
We have MORE than paid the price for the opportunity of listening to our favorite song, or yes, even album.
Even software companies are reasonable to replace media if it becomes damaged if you can provide proof of purchase, or registration, or a serial number. Back in the day, many would even let you side grade if you switched platforms. Just try taking a scratched album, or worn out cassette and ask to trade up to a CD….. OK, you can, for the full retail price of the CD.
Unreal, MW = fear As in what the labels are feeling How does MDN do it? Telepathic AI?
Right on.
CD: $18 for one hour (or much less) of audio
DVD: $18-25 for 2-3 hours of movie plus add ons (outtakes, commentaries….)
But let’s not forget what else is going on here.
Music is born of creativity. You can’t contractually obligate a musician to create good music. It doesn’t work that way. Handel produced The Messiah in one day but only wrote one other piece that year.
Expecting artists to churn out a steady stream of excellent music is unrealistic – and it’s symptomatic of the label’s greed.
I’ve hard on the labels (all the labels Major and Minor (aka so called Indie)) for their constant pushing of crap like Brittney and JayZ and the rest of the no talent crowd down the throats of the music buying public, while great independent artists like Gypsy Soul, Jen Bye, The Demon Brothers, Gatja, Soul Driver, Vertigo Road and the list goes on and on, just keep doing their thing and releasing great music.
There is one newer band that that is breaking the Brittney and Gangster Rapper model. Evanescence is a Goth type band that kids world wide have fallen in love with their music. Their Label is Wind-up Records, while I believe all Labels do a disservice to the artists they sign. It is refreshing to see a label promote someone with talent and artistry in their work and not just the lip syncing bubble head Brittney look alike. If you never seen Evanescence perform I highly recommend buying one of their Live Videos from iTunes.
All record labels still stink in my opinion but in reading about Wind-up I think they have smarts to know who is buttering their bread. And, they don’t seem to be interested in tell the retailers how to retail.
A few years ago PBS broadcasted a nice piece on how the CD killed the music by bringing in a ton of money with people replacing their LP collections with CD’s, which brought the labels untold wealth, which in turn attracted all the blood-sucking suits. The suits took over music, with their big egos & small minds taking over the creative side, and that’s how we have such crappy music today.
Perhaps as the money leaves the labels, the looser suits will as well, and creativity will return. That’s at least my happy thought for the day.
Sorry to burst some bubbles, but the vast majority of music put out today is recycled crap.
If I hear G-C-Em-D one more time in some retarded new ‘hit’ I think I’m going to puke.
It’s in song after song after song after song and it’s in every last genre from rap to worship music.
I *was* buying music regularly but most creativity has dried up, so I’m back to repurchasing all the older stuff on CDs.
Well, in fact, those of you who don’t seem to know music history prior to, say 1950 have forgotten how the album developed in the first place. The album in concept really goes back to the idea of a symphony or other piece of classical work that is more than one “song”.
When music first appeared on Victrolas, Gramaphones, and other players, you could fit 2-1/2 to 3 minutes on a 10 inch disc, and about 4-1/2 minutes on a 12-inch disc. This was long enough for a waltz, or a short movement, but not for entire works.
So the concept of the “album” was invented. They would take 4 or 5 discs (8 or 10 sides each with a movement) and bundle them in an album (like a photo album, with each page being a paper sleeve holding an individual record). This is why we call it an album in the first place!
So not to totally disagree with MDN’s previous take about albums being artificial constructs to sell music, because in many ways most albums are just that. BUT there has, for hundreds of years, been a “long-form” conceptual music unit, the symphony.
But just as in the classical days, there were songs, there were “suites”, and there were symphonies. Not every song belonged to a larger construct. And even then, many people prefer to hear their favorite movement, not the whole symphony. The “single”, as it were.
Now the record companies of course got greedy, realizing quickly that “albums” were much more profitable to sell than singles, even in the bulky days of 78 RPMs. Because to sell a single, you have to have a good song. To sell a whole album… you still only have to have one good song, and some good artwork or name recognition of the artist.
Today’s albums are sometimes valid conceptual pieces, sometimes a collection of songs, and sometimes a couple of hits and a bunch of filler. But as always, the consumer will ultimately decide what they want to pay for.
The record companies have been crying foul at every turn – they decried radio when stations started playing records over the air, insisting that if people could just listen to their music for free it would kill record sales. (Of course, after embracing the notion that radio might actually PROMOTE record sales, they did a 180-degree about face and started paying DJ’s under the table to play their records that weren’t quite good enough but they needed to sell)
They complained that cassette tapes would kill them, because everyone would just record their albums and pass them around. They fought viciously to keep cassettes out of consumer hands. The RIAA demanded (and eventually got) a fee from every blank cassette sold. They fought viciously against the mini-disc, fearing the “cassette” with full digital quality. They wanted to keep it out of consumer hands (pros only, please!) or at least cripple it in some way (eventually the copy-protect was enabled, meaning you couldn’t copy one mini-disc to another).
The CD-R was an even bigger threat, as the consumer was essentially able to make the same product at the same quality as the record companies. When the prices of CD-R’s came down to under $1, it really showed the true nature of the business. If the material cost was, say $1, how much of that $15 or $18 CD is going to the artist? Pennies, you say? Then where is the other $13-16 going? Consumers became cognizant (possibly for the first time) of the business side of things. Transparency in the model exposed their greed.
Finally, with the advent of easily available high-speed internet, the record companies cried foul again. As always, instead of finding a way to embrace new technology, compete, and make money from new ideas, they have showed the same reaction as they have throughout the last 100 years. “This is bad, how can we stop it?”
But you can’t put the genie back in the bottle. And dinosaurs no longer roam the earth. Get used to it, Middlebronfman. You and your ilk are on the endangered species list. Your place in the food chain is no longer necessary. Evolve or die. Frankly, most of us don’t care. I’d rather save the penguins any day.
Maybe if they sold music that was worth listening to, more people would buy it. Even most of the older bands who have made great music in the past (like Smashing Pumpkins) have been releasing crap lately. Is it because of label intervention maybe?
Nicely put, blucaso. Right on.
Here’s something those lazy executives aren’t thinking of…how about using Itunes to promote your product actively rather than passively. You own the rights to thousands of bands. How did concert bands survive before you guys came along? What if you used ITunes to not only promote local concerts but also sell video’s of those concerts as well? I may only pay $10 for a sound only album but I might be willing to pay $15 for video reproduction of a live concert and guess what since most concerts are a compilation of a band’s or artist’s most popular stuff you’re selling would add more value to the consumer. There were people who used to live to tour with the Grateful dead. I’m sure there are people out there that would buy a video compilation of the stones last 5 concerts. The record execs seem to be more willing to be the band shuffling the deck chairs as the Titanic sinks rather than come up with creative ideas and producing real talent. Maybe this its why American Idol has been so popular over the last few years. Light bulb anyone???
I agree with MusicIsMyGirlfriend.
It is difficult to explore new music with iTunes. Often I purchase a song to find that I don’t like it. 30 second snippets is not enough to check out a song. A subscription service would fix that. Or maybe some other way.
@Danno Bonano
Don’t think I’m being ignorant. You’ve got “vendors” doing unnatural things to try to break Apple. Truth be told, the whole music thing is still in it’s infancy. If you don’t think so, take a look at M$ sitting there trying to muscle in. They see Billions of players to be sold.
I’d much rather they work all ends of the pipe line, Musicians, Music Producers, Customers to build a formidable base. Some of the lessons everyone is talking about will not be learned just by saying so. Let the Music Distributors set some prices higher, see if the songs sell or people steal it. You are seeing unnatural acts because they don’t believe what Apple is saying.
Remember MS was really good at making nice throughout the chain until they acheived dominance. Man they schmoozed IBM to it’s death. It’s a lesson I learned, and I hope Apple takes note also.
Unnatural acts. Like Meatloaf?
You can’t totaly blame the record companies for crap music. It’s up to the artist to write the music.
I’m either going to buy a high quality DRM-Free single or I am going to steal a high quality DRM-Free single.
The record companies can decide which one I will do.
But the days of having me over the barrel, while nailing me like I’m the Homecoming Queen, are over. Tough sh*t if you don’t like it.