Manage for Success: Current News, Newsletter #94, February 2009


"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 2009 by Keith Holzman, Solutions Unlimited. All rights reserved.


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I know you'll all be disappointed that I've got no sage advice to offer this month (says he with tongue firmly in cheek,) but I do want to bring to your attention some recent items of note.


The major labels continue to suffer big losses. Sony Corp., parent and now sole owner of SonyBMG, suffered a 95 percent drop in earnings in the last quarter of 2008. Its music division's earnings slipped 41 percent, which is a 22 percent drop in revenue from the previous year. SonyBMG's market share of digital album and song sales dropped 28.6 percent since the time of the two labels merger to 22.5 percent per SoundScan.


Warner Music Group eked out a profit in its last quarter (the period ending December 31) even though its revenue dropped 11 percent and its income fell 34 percent. The slight profit was due to the sale of its shares of Front Line Management to Live Nation. (More on that shortly.) A small high was that their digital revenue was up 2 percent over the same quarter in 2007. In fact digital music accounted for almost 21 percent of global recorded music revenue and over 31 percent in the U.S.


EMI had a poor time of it, losing about $222 million dollars during the six month period ending September 30th, and it shed some 1500 employees.


Meanwhile the Universal Music Group remains the leader in terms of market share at 31.5 percent.


Here's some more bad news. Album sales in the U.S. dropped another 12 percent in January. And since the industry's peak year of 2000, album sales dropped more than 516 million units, a 54.6 percent decline per Digital Music News.


In addition to a significant drop in sales of CDs, there's little positive news on the horizon. In fact, Borders Books is expected to devote even less space than they do now to stocking of CDs and DVDs. Although Borders represents only about a 2 percent share of the U.S. music market, its proposed inventory reduction will take its toll in that other music retailers are likely to emulate that action.


The big get bigger -- Live Nation and Ticketmaster have announced their intention to merge their companies. If the merger is approved by regulators -- a big question mark with the new Obama administration in Washington -- it could "reshape the music and live entertainment business" per a February 9th article in the New York Times. The merger would create a company with "almost $6 billion in revenue and a dominant position up and down the music supply chain: control of major concert halls, ticketing, and artist management."


On another dismal note, SiriusXM appears ready to declare bankruptcy. It lost a lot in the process of merging the two satellite broadcasters, but even more in getting their costly infrastructure launched. Both EchoStar and DirectTV are expected to try to acquire them. The big just want to get bigger!


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If you need sage advice on how to make your label successful, then let me help you as I've helped so many other firms "manage for success." Email me at <mailto:keith@holzmansolutions.com> so we can discuss how I can improve your business.


In addition, I recommend my book "The Complete Guide To Starting A Record Company," The Second Edition can be ordered as a downloadable eBook in PDF form, or as a printed, spiral-bound volume. Read the complete Table of Contents and download the Introduction at <http://www.recordcompanystartup.com/>.


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Despite the sizable reduction in album sales, noted above, live performance revenues continue to be where the money is. Madonna is the reigning queen having generated more than $242 million in box office revenue, even though she had only the 50th best-selling album. She was followed by Bon Jovi with more than $157 million, and Bruce Springsteen, just behind with a bit more than $156 million. Here are the numbers as stated in a Billboard article of February 12th. It seems that for superstar acts, contrary to years past, live performances don't always seem to have a significant impact on sales of CD or downloads.


1. Madonna: $242,176,466

2. Bon Jovi: $157,177,766

3. Bruce Springsteen: $156,327,964

4. The Police: $109,976,894

5. Celine Dion: $99,171,237

6. Kenny Chesney: $90,823,990

7. Neil Diamond: $82,174,000

8. Rascall Flatts: $63,522,160

9. Jonas Brothers: $62,638,814

10. Coldplay: $62,175,555

11. The Eagles: $61,132,213

12. Lil Wayne: $57,441,334

13. AC/DC: $56,505,296

14. Michael Buble: $50,257,364

15. Miley Cyrus: $48,920,806

16. Taylor Swift: $45,588,730

17. Journey: $44,787,328

18. Billy Joel: $44,581,010

19. Mary J. Blige: $43,472,850

20. Kanye West: $42,552,402


Despite RealNetworks experiencing heavy losses last quarter, their Rhapsody subscription service (a joint partnership with MTV Networks) gained 29 percent more subscribers in the last year reaching a total of 775,000. According to Digital Music News. Rhapsody's revenues increased 8 percent to almost $44 million.


Subscription services would still appear to be marginal in terms of users and profits, although rumors abound that Apple's iTunes may offer such a service sometime later this year. I suspect that's more wishful thinking from consumers than a matter of future reality.


Nokia, the Finnish phone manufacturer is expected to launch their "Comes With Music" plan in the U.S. later this month. This will provide free downloads to buyers of their new model 5800 phone, nick-named "The Tube."


Also during the last week, the powerful Legal Affairs Committee of the European Parliament gave the go-ahead to extend the copyright term for music recordings to 95 years. However, according to a February 13th item on Billboard.biz, David Lammy, the U.K.'s Minister of State for Intellectual Property has stated his government's position on term extension by refusing to accept the EU committee's recommendation. "While the U.K. believes that performers should be protected throughout their lifetime, a period of 95 years goes beyond what is needed to achieve this aim," said Lammy.

On a more positive note, so-called Social Media Networks continue to have a major influence on music buyers. Every day I see newspaper and online articles about the impact of Facebook, MySpace, Twitter, etc. Monthly visits for January show Facebook in the lead with more than 1,191 million visits (that's about 1.2 billion!,) followed by MySpace with 810 million, Twitter with 54 million, and LinkedIn with more than 42 million. I wonder where people find the time! And let's not forget the importance of certain music blogs, of which there seem to be a great many.


Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.

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Copyright 2009 by Keith Holzman, Solutions Unlimited. All rights reserved.