Manage for Success: Scary Data, Newsletter #99, July 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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Before reading further, I suggest you sit down and relax over a nice cold beer, or better still, something stronger!


Last month Nielsen released its 2009 Data Presentation, State of the Industry, which included Album Sales Trend Numbers for 2008 and a few prior years. I find the statistics to be quite scary for the future of our industry, since they're almost all negative.


The number of transactions of music purchases in 2008 reached 1.5 billion, up slightly from 2007. Overall album sales (which includes Track Equivalent Albums) dropped 8.5% from 2007, while total album sales (non-digital) were off 14%.


One of the few positives -- more than 1 billion digital tracks were sold -- a new record that represents an increase of 27% over 2007! Of these 2008 tracks, Digital albums represented sales of more than 65 million, up 32% from 2007.


28 digital tracks sold more than two million units last year, compared to 19 tracks in 2007, while 71 digital tracks sold more than 1 million.


Here's an interesting statistic: more than 450,000 different physical albums sold at least one copy over the Internet during 2008, compared to 390,000 the previous year -- the Long Tail theory at work.


But here's more scary data: according to the report, there were about 105,000 new releases in the U.S. during 2008, up from about 80,000 in 2007 and 75,774 in 2006. This is a huge jump. Of the 105,000 titles, about half were digital-only releases. However, these 50,000 digital titles were responsible for only about 1.8% of sales of all new release albums sold in 2008. The quantity of actual "physical" titles was up about 3% from the previous year.


Album sale of new titles equaled 149 million units in 2008, down 17% from 2007. This was about 150 million fewer (basically half!) the sales of new releases in 2001, just seven years earlier.


Further, in 2008 only about 950 titles sold 25,000 or more units, and these 950 titles accounted for 153 million sales, or about 82% of all new release titles.


Up until 2008, the sales from new releases distributed by Indies had been consistent -- about 37 million -- even though the number of titles increased drastically. In 2008, Indie new release sales dropped 27% to 27 million sales.


And according to a NARM bulletin, Nielsen’s data indicates that digital music now represents 40% of total music purchases compared to just 8% in 2005. It’s projected that it will be 50% by the end of 2010.


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As you see from these newsletters, I try to keep current on all matters affecting our industry. So if you need advice on how to make your label successful, let me help you as I've helped so many others "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  building your own label, I offer my book "The Complete Guide To Starting A Record Company," The Second Edition can be ordered as a printed, spiral-bound volume, or as a downloadable eBook in PDF form. Updates are available to buyers of the book.


You can read the complete Table of Contents and download the Introduction at <http://www.recordcompanystartup.com/>.


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Still with me? Let’s take a look at the data for the second quarter and first half of this year as reported by Billboard in a July 11 article: "U.S. recorded music sales were hit with an unwelcome double whammy in the second quarter, as slowing growth in digital album sales added to the misery of an accelerating decline in CD sales."


For the sixth months ending June 28th, combined U.S. sales of albums and track-equivalent albums were 235.8 million units, down 8.9% from 258.9 million during the first six months of 2008. That was a steeper decline than 2008 over 2007 which had total sales of 271.6 million -- a decline of 4.7%.


CD sales for the second quarter were 65.2 million units -- off 22.2% from 83.9 million in 2008. That's worse than the 20.2% drop in the first quarter.


Digital album sales grew just 14.9% in the second quarter, to 18.5 million units from 15.9 last year. Digital track sales for the first half were up 13% to 613 million units from 542.6 in 2008. Parenthetically, the growth of 2008 over 2007 was 30%.


Sales of current albums (those within 18 months of release) are weak -- off 17.3% to 95.4 million units during the first half compared to 115.4 during the first half of 2008. Catalog albums were off 11.4%


Current titles represent 54.7% of sales, with catalog at 45.3%.


As regards genre, Latin album sales were off 33% at 9 million units, R&B (including hip-hop) was off 18.5% at 32.3 million, Rock was off 10% at 60 million, while Country was off only 2.8% at 20.5 million.


Non-traditional retailers were the only bright spot. Their sales were up 6.5% during the first half, mostly attributable to digital download stores. Chains (Transworld, Best Buy, Borders, etc.) were down 20.9%, while mass merchants (Wal-Mart and Target) were off 22%. Indie retailers were down 16%.


As for market share, UMG remains in first place at 31.5% of market, followed by Sony (25.5%,)

WMG (20.9%,) Indies (13.5,) and EMI (8.6%.)


Still sitting up, or have all these numbers been too much for you? Yes I know what they say about statistics, but it's important to analyze these numbers so you can make intelligent and considered decisions for your label. Without such knowledge you're really flying blind.


** My thanks to Billboard, NARM, Digital Music News, and various other on-line sources from which the above data were derived.


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.