Manage for Success: A Cloudy Crystal Ball, Newsletter #80, December 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 been peering into my rather cloudy crystal ball the last few days, attempting to guess what lies ahead for our endangered recording industry. Therefore I’m going to make some wild but reasonably informed guesses as to where I believe we’re headed. Perhaps at this time next year we’ll take a look at the scorecard to see how close or wide-of-the-mark I will have been.


The following are in no particular order of importance.


There will be a continuing consolidation within the major record label groups, with wide-ranging layoffs (particularly in A&R departments) and the likely breaking-up, dissolution, or re-sale of EMI Music.


Independent labels will find it even harder to get media attention for all but the hottest artists. Newspapers and magazines, already spilling copious black ink due to diminishing advertising income, will further reduce coverage of music and recording artists.


In addition, radio airplay will increasingly go primarily to the labels who advertise the most -- obviously the majors who have seemingly unlimited "promotion" money. Adding insult to injury, both the FCC and the Federal Trade Commission will allow Sirius and XM Radio to merge, further reducing airplay diversity and competition.


And despite a nay-saying Congress, the FCC, the majority of whose members are conservative Republicans, is likely to broaden media cross-ownership rules permitting one entity to own a television or radio station as well as a newspaper in the top twenty markets. This is especially happy news for the Tribune Corporation which owns the Los Angeles Times and two TV stations in L.A.


Sales of CDs will continue their decline with, I predict, a fall-off of 25 to 30 percent between this year and next. There will be exceptions to this, particularly for classical, jazz, and other niche genres where fidelity of sound is important. For these specialties, CDs will continue to sell close to current quantities.


I'm also concerned for the health of independent record and book retailers, with probably more than a few likely to close their doors in 2008. This will further strengthen the clout of large all-purpose big-box stores such as Wal-Mart and Best Buy, making it that much harder to sell CDs at prices for which labels can make a reasonable profit.


MySpace will paint itself into a corner by increasing demands on its "friends," thus reducing its ability and influence to promote and further artists' careers. FaceBook may fare even worse.


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I’m happy to announce that the Second Edition of "The Complete Guide To Starting A Record Company," is not only now a reality, but is doing well! The revised and updated manual is available as a printed, spiral-bound volume, and as a downloadable eBook in PDF form. Feel free to download the Introduction and read the complete Table of Contents at http://www.recordcompanystartup.com/.


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Pepsi, Amazon.com, Nokia (and probably other smart-thinking companies) will help labels by offering music as premiums for purchase of their products. Savvy indies will use their best efforts to make their music available to these companies for their promotions. Nevertheless, they'll need to accomplish this in a way that guarantees fair payment for their artists' music.


Universal will pull all of its music away from iTunes in favor of its own, wholly-controlled, music store, which is likely to be followed, at least in part, by the remaining majors.


However, and on a positive note, I don't foresee any major difficulties for Apple, whose iTunes will continue to dominate the downloadable market, and for which I see only continuing success. Industry-wide I project a probable thirty to forty percent increase in the volume of downloaded music.


On a very positive note, Congress will stop its wrangling and will enact wide-ranging legislation providing further protection for intellectual property such as music, books, films, pharmaceuticals, and other commodities. This is likely to include a new dedicated unit within the Justice Department and an intellectual property protection czar. Additional legislation may force over-the-air radio station broadcasters to pay labels for the music they broadcast, and as I've written previously, something lacking only in America.


Despite all the gloom prognosticated above, I’m basically a positive-thinking guy, and firmly believe that Independent labels who work hard, sign interesting and provocative artists, offer exciting music to the public, and who market their music with care and taste, will do well, despite an increasingly difficult and complex economy and marketplace.


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In years past I’ve offered many suggestions for things to do in December that can make your company run more smoothly in the forthcoming year. Rather than repeat them here, I’m including a URL so you may read the last such article archived on my web site.

http://www.holzmansolutions.com/articles/68-dec06.html


Please call on me for assistance should you want to discuss how to accomplish some of these tasks, or need help implementing them.


In any event, I’d like to take this opportunity to wish you a joyful Holiday Season and best wishes for a healthy and prosperous New Year.


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.