Manage for Success: The Devaluation of Music, Newsletter #74, June 2007


"Manage for Success" is a free monthly newsletter for record label executives who want to operate their companies efficiently and successfully. It's published by Keith Holzman of Solutions Unlimited, a management consultant, troubleshooter, and trusted advisor, and is based on his many years as a senior executive in the music industry.


Copyright 2007 by Keith Holzman, Solutions Unlimited. All rights reserved.


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I've become greatly concerned that music is no longer considered to be magical, and I suspect I'm not alone in this belief. Music has become a mere commodity and is not valued for the exciting, emotional experience it's capable of creating. A number of things happened recently that have confirmed this realization.


When I was growing up, it took a number of weeks' allowance for me to afford to buy an album -- bought as a stack of five or six 78s in those days -- of whatever music I was into at the time. As I grew older, buying music became a regular habit, if not an illness. Music has always filled my life in one way or another. When I was not working in the theatre (my original choice for a career) I had a standing invitation from the senior record executive at Doubleday Bookstores in New York to sell records in the music department at whichever of their Manhattan locations I was needed. I think I spent most of my salary there buying LPs at wholesale prices.


At my brother's urging I eventually chose the record business for my career and joined him at Elektra. Over the years I've continued to spend a lot of money purchasing music in the currently prevailing format. My home is filled with row upon row of LPs and CDs, almost all of which were paid for with cold, hard cash, although some have been gifts from friends in the industry. That's after I've given away countless cartons of music to libraries in the Los Angeles area.


Music has an incomparable value to me -- as inspiration, pure melodic enjoyment, intellectual exercise (there's nothing quite like analyzing the structure of a Bach fugue to invigorate your mind) and as the background to just plain living.


But what I see happening today is mind-numbing and extremely dangerous to our industry.


Commercial music has become a tool for businesses to use as a come-on to something else. For example. It's just been announced that Adidas, the giant sport shoe manufacturer, is planning a summer download promotion. Though plans were not finalized, according to a June 8 piece in Digital Music News,

<http://www.digitalmusicnews.com/stories/060707adidas/view > "the concept will involve download giveaways on a customized Adidas microsite, and various advertising tie-ins related to the destination." Here's music being devalued for the benefit of selling sneakers!


An article by Lars Brandle in the June 9 issue of Billboard

<http://www.billboard.biz/bbbiz/search/article_display.jsp?vnu_content_id=1003592618 >

discusses a clash over "covermounts" in the U.K. These are free CDs that are attached to covers of magazines, and more recently, newspapers. "The issue has long been the subject of debate between labels and retailers here, while trade body the Music Managers Forum has been particularly vocal about its negative aspects.


"'How ludicrous it is that the music industry are shouting about illegal downloading,' Music Managers Forum chairman Jazz Summers asks, "but they're giving [music] away for free on the cover of a paper? It's the same thing."


The Billboard article discloses that, on a recent Sunday, the national Mail gave away 3 million copies of Mike Oldfield's "Tubular Bells" as part of the newspaper. Free, but for the purchase of something to wrap your garbage in!


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I'm no A&R man, but I love music and would like to see record labels thrive. Therefore I advise my clients how they can run their companies efficiently and profitably. I've developed many ways for them to increase income while keeping costs under control, always tailored to their specific operating style and function.


Let me help you as I've helped so many other labels "manage for success." Email me at <mailto:keith@holzmansolutions.com> so we can discuss how I can improve your business.


Should you be thinking of starting your own label, I suggest you get my book "The Complete Guide To Starting A Record Company" which can be ordered as a downloadable eBook in PDF form, or as a printed, spiral-bound volume. Download the Introduction and read the complete Table of Contents at <http://www.recordcompanystartup.com/>.


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I read quite a few news stories last week about a deal that Warner Music Group is making with Lala.com that will allow anyone to listen to WMG music for free. Robert Levine, in The New York Times on June 5, <
http://www.nytimes.com/2007/06/05/business/media/05music.html >

writes that Lala "will make the vast majority of albums in the Warner Music catalog available at its site as audio 'streams,' which can be heard online but not downloaded. Although listening to those streams will be free for consumers, Lala.com will pay Warner a royalty each time a user listens to a song."


You may remember Lala as the site where fans can trade their used CDs for a fee, further devaluing the CD, and the music it contains.


Let's not forget about big-box chains like Wal-Mart and Best Buy that sell CDs at bargain, loss-leader, prices in order to generate traffic in their stores. These prices are usually at or below their cost, making it a lot tougher for other music retailers, who need to sell CDs at higher prices, in order to stay in business.


Then there's radio. Stations that exist primarily for playing music pay only for performance rights -- at annual fees set by ASCAP, BMI, and SESAC. They do not pay for specific songs or compositions, and more important, they do not pay record labels for use of the recorded masters. This is something that prevails only in the U.S. In almost all other nations in the world, radio stations pay record labels for use of their music.


To me, music is an emotional, and thought-provoking experience, and I hate seeing how it's become devalued.


I'm curious how others in the record business perceive what I believe is an extremely serious trend that threatens our entire industry. I invite your comments and opinions, and if there are enough provocative responses, I'll compile them for a future newsletter.


Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.


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Copyright 2007 by Keith Holzman, Solutions Unlimited. All rights reserved.