Martin Orford August 2009

debrewguy wrote: Dean wrote: BigBoss wrote: the label does the grunt work of selling an album, they make money, the artist makes money, if the album is downloaded instead of stolen, then the label goes out of business (SPV) and the artists retire (Martin).  simple economics, no grey areas. It is the simple economics that people are perhaps unaware of, or maybe just ignoring.   The financial models for small labels are different to those of the large labels. When sales decrease income decreases, the larger labels can affect profit by adjusting their overheads, cutting staff,  promoting their big sellers and cutting losses on the less popular artists, reducing their roster, not signing risk acts and limiting their exposure.   Smaller labels cannot do this - a proportional decrease in their income affects them disproportionately, they do not have any leeway in reducing costs, a slump in sales affects not just their profit, but their ability to pay royalties and creditors, it also reduces their ability to in investing in new releases.   So while music fans gripe and complain about "the majors" it is "the minors" who are suffering more, and in our narrow (niche) genre, most of our artists are with the smaller labels. So commercial enterprises that put out music should be subsidized ? Can we include DIminished 5th Records then (http://www.diminishedfifthrecords.com/main.htm#) ? The minor labels also compete with video games, PCs, laptop, cell phones, home theater and other entertainment options available now that weren't really around or as prominent 10 years ago. Add to that the many vanity releases, andagain the local acts that now can self-release their product.

In conclusion, the music business is a very tough business to be in.  And depending on who you ask it is made even tougher as a result of illegal downloading, but also the thousands of other entertainment options available to the consumer; not to mention the millions of people living paycheck to paycheck or without a paycheck who can't afford to spend money on anything but the necessities of life.

o.k. , if I may reserve the following questions to those who I seem to be in disagreement with (meaning if you've been on my side, please refrain from answering these posts)

1) are illegal downloads the one and only , i.e. the sole reason for the decline in CD sales ?
yes or no



Edited by debrewguy - October 02 2009 at 15:10

It's become a throw away society....excluding people who still invest in these items. Even kids are trained in Vodafone/AT&T to sell upgrades after 6 months. Attention span on music is the same. Most people lose interest quickley.

Edited by Chris S - October 02 2009 at 15:27

Chris S wrote: the artist suffers.....

Again, studies show they don't.

Teaflax wrote: Dean wrote: The bottom line is that a lot of artists in our niche market do not earn a penny from CD sales. Oh, I'm sure they can make it up with the revenue from their sales of 8-tracks and 78s. "Small band through record label sells 10 000 CDs"< "small band sells 1 000 copies directly to fans".

• Using my previous example, the royalty revenue from 10,000 CDs would be $14,000;
• Divide that revenue by the 1,000 direct sales requires a $14/CD profit for your equation to balance;
• The manufacturing costs for low production runs of CDs is more expensive than for high-volume runs, so the manufacturing costs are slightly higher than my previous example, bit to make this a little "fairer" to your argument, I'll assume the same price, i.e. $2/CD
• Add to that the cost of postage, lets say $1 and the selling price would have to be $17 per CD.
• you have used "<", which means you think the retail prce of direct sales should be >$17 per CD.
• The average selling price of direct to fan CDs is between $7 and $10
• At $7/CD the band needs to sell 3,500 CDs to equate to 10,000 record label sells;
• That's a ratio of 3 to 1, not 10 to 1.

debrewguy wrote: o.k. , if I may reserve the following questions to those who I seem to be in disagreement with (meaning if you've been on my side, please refrain from answering these posts) 1) are illegal downloads the one and only , i.e. the sole reason for the decline in CD sales ? yes or no

Edited by Dean - October 02 2009 at 17:35

debrewguy wrote: Chris S wrote: It's become a throw away society....excluding people who still invest in these items. Even kids are trained in Vodafone/AT&T to sell upgrades after 6 months. Attention span on music is the same. Most people lose interest quickley.   example: Viva La Vida - IMO it had the attention demand of a flying gnat. So it can work both ways especially with NEW material. the artist needs to ' drag' you in.   Illegal downloads? they are illegal....the artist suffers.....you know the guys who actually deliver the art is it possible they face competition from entertainment outside of music ? i.e same pie, less for each /// as for the guys who actually deliver the art ... artists have suffered before ... not always deserveingly ... at the hands of scum bag promoters, thug managers, record label creative accounting departments .... and for some of those who feel a sense of entitlement - the music listener who does not buy their music ...  Attention span ... is usually based on the length of time that keeps a person's attention. If you have a million songs to listen to, is it unusual that you don't want to bother with the merely O.K. ? If you know there's a thousand great songs, is it unusual that you want to listen to as many as you can, which may mean that you don't keep playing the same song over & over again ?

Good points.......but give me 1 x Hergest Ridge ( Whichever part x 1000 listens) to 1000 " Great " songs anyday that form part of the mainstream, not meaning they are not great of course. I was merely saying the artist needs to catapult you into the slipstream not the mainstream Why becuase the slipstream is special

Dean wrote: debrewguy wrote: o.k. , if I may reserve the following questions to those who I seem to be in disagreement with (meaning if you've been on my side, please refrain from answering these posts) 1) are illegal downloads the one and only , i.e. the sole reason for the decline in CD sales ? yes or no No.   But where you are leading is irrelevant, (or a smoke screen), that declining sales are also caused buy sales of X-Boxes and Probiotic Yogurt and Sun-spots does not make the effect of P2P any different or any less - just because I side against one cause does not mean that I am ignoring (or blind to) the other causes.

 Dean< i'm trying not to imagine what entertainment that you get from pro-biotic yogurt, or sun spots, and i won't go there.

The comparison is entertainment dollars. The reason is that music is part of a person's discretionary purchases . If I budget $100 for live gigs in one year, and I buy a ticket to a mega event that costs me $100 ... how many other concerts will I see that year ? And yes, that happens often. That is a big obstacle for the smaller & newer acts to overcome. Hopefully, at least in North America, the Stones / U2 / ACDC / Eagles et al platinum priced  shows are near their end, as many reports indicate that these shows just aren't selling out anymore. Reading the Lefsetz letter, it's an eye opener how many promoters are giving 90% off tickets to regular industry contacts just to fill out the venue.
as quoted from http://www.ticketnews.com/Concert-industry-posts-record-year-in-2008-but-trials-lie-ahead-in-New-Year12831708
"Billboard Boxscore also reported worldwide concert industry grosses of approximately $4 billion in 2008, an increase of 13 percent from the previous year."

CDs - Say I budget $100 a year for music purchases. Since the advent of new technology that allows small professional studios to be set up for $10-15000 , and the resulting lowering of recording costs, many local and regional bands that could not afford to put out an album are now doing so. Even the most basic techie can use Garage Band to record themselves. Pro Tools anyone ? SO now, you've got even the smallest city with an active music scene finding itself with a pile of bands all putting out stuff. I keep mentioning a half dozen local bands that I support. That's 6 albums that I'm not going to be buying from the bigger acts, and in my case, it means that groups like IQ & Pendragon are farther  down the list on my budget. Not because their music is not worth paying for, or good, great or bad. But because I'm still looking to buy other groups' releases ahead of theirs.

DVDs - weren't around in 1985. And the sales really started to boom in the mid to late 90s. Another place to spend my money on entertainment. I used to work with this guy who no longer bought CDs. Why ? Because buying a CD like Rush's Rush in RIo gave him all the songs he wanted. He could watch it or just listen to it. Add to that, you can buy TV series, movies, concerts. On DVD. Most that were never available on VHS.  And even at that, last year DVD sales were down 5.5%. They only hit ... 22.4 ... billion USD.
PCs - yes, that is an entertainment option. If my income stays the same, and I buy a newly introduced product ... am I able to spend that same money elsewhere ? So ... if I choose to buy a $400 computer, instead of the Beatles Mono Remasters at $200, I am making a conscious decision to buy one thing over another. Same equation if you like - replace it with 20 CDs.
as quoted from http://www.variety.com/article/VR1117998174.html?categoryid=20&cs=1
According to the Digital Entertainment Group, DVD sales slumped 9% last year, bringing overall homevideo spending down 5.5% to $22.4 billion. The DVD decline is greater than recent industry forecasts: Late-year tallies by vid analysts showed sales of the older disc format lagging 5% to 7%.

The news was cheerier on the next-gen front: According to DEG, Blu-ray spending came close to year-end forecasts of $750 million. That reps a threefold increase, and was in line with late-year figures (Daily Variety, Jan. 6).

Rental spending was flat at $7.5 billion for the year."

Computer & Video Games - again, assuming that the music listener's income has not increased (which inflation stats in most of the western world seem to show only the rich coming out ahead with time), does he buy as many CDs ? If I buy a $200 Wii, then get 2 games at $20 each, will I be able to turn around and use this same money to buy music with ? Doesn't mean I'm not buying any. But chances are I'm not going to buy as much. Why ? Because my discretionary budget remained the same.
in the first 8 months they were out : U.S. , Japan & Western Europeen sales totaled -  9 million Wiis, 8.9million  Xbox units and 3.7million PS3s. (respective prices at that time - Wii - $249 ; $300-$400 for the Xbox 360 and $599 for the PS3,)
http://www.ft.com/cms/s/0/51df0c84-6154-11dc-bf25-0000779fd2ac.html?nclick_check=1

Tech gadgets - IPods, IPhones, Blackberries - yes, don't you know, many casual music consumers will choose to use their discretionary funds on one of these, to the detriment of the music industry. Not out of any ill will. Just a matter of a few more slices dividing the pie.
as quoted from http://www.macobserver.com/stockwatch/2008/11/05.3.shtml for 2008.

iPhone Sales

As for the iPhone, Apple's 10K filing reveal that the company recognized some US$1.8 billion in revenue related to the iPhone during the fiscal year. Apple uses a subscription revenue model that it has said is required by the SEC due to revenue sharing and subsidies received from most of Apple's carrier partners.

In reality, Apple took in more than $4 billion in actual cash flow from the iPhone during the September quarter alone. The rest of that money will be reflected in future quarterly filings as the two-year subscription accounting system plays out.

So, while I only passed Accounting 101 in college, I can still figure out the fact that your income does not grow just so you can keep buying the same amount of CDs at the same time as buying consumer items that were not available even 10 years ago.

We forget that the casual music listener does not live for owning the latest album of some group that they've never heard of. They don't get a thrill from discovering an unknown act.

And to clarify things - I know that 1) illegal downloads are illegal. I have not argued to remove legal sanctions against them; 2) Illegal downloads are wrong. Again, I have not said that they were; 3) they cannot be defended by some sort of morality tale of industry abuse or poverty. And nowhere have I said that this constitutes a valid defense. 4) so in essence I have not condoned nor promoted illegal downloads as part of my arguement.

My point is simply that there are a  number of factors that have contributed to the precipitous decline in music sales. My point is also that efforts to fight against illegal downloads have not even managed to stall the drop in CD sales. My point is that they cannot. Technological advances mean that someone somewhere will find a way around it. Remember DRM ? Read about the RIAA's suing people ? About Napster, Kazaa, Pirate Bay being shut down ? Notice that CD sales kept plummeting . PC & Video game sales are reaching new highs, though both may have peaked. But laptops and smart phones are still relatively new products that are just getting to the point where price drops are arriving. But now we are about to have access to HQ video streaming that you can feed to your TV. Music too, so once you find a number of great web radio stations or podcasts, wouldn't it be nice to her it through your home theater set up instead of your PC speakers. SO there will be a new generation of entertainment options to spend money on. On top of the ones already out there. And unless there's a drastic change in income distribution, most people's pay cheques will not be rising to meet the increased variety of purchasing options.
Music is not food. It is not shelter. It is entertainment. It is a passion for some. For most, it is just one of the things that they have the choice of getting from a range of sources. And these days, the CD is not the end all or be all. Nor will downloads save the day. That came too late. And the labels still screwed that up by insisting on high prices from the get go. And the attraction of the album for most is long gone. $20 for 1 great song & ten crappy ones doesn't sell anymore. Sucks to be a prog band , but the emphasis is back on songs. And believe me, there's enough great stuff out there that 99% of music listeners won't bother taking too many chances on long shot maybe I might like it searches. There will always be people that insist on a physical product for music. LPs are still selling. But no one is making millions off of LP sales. Ipods are no longer a necessity. Because once you have one 4GB mega player, why do you need another one. And once it's full, most people aren't rushing out to buy more new music.

MY point is that time & effort is better spent trying to find a way to get paid in today's reality. Some groups are able to do it. DO you prefer to study success or complain about failure ?

Because the old days aren't coming back. Even if Martin or Nick become benevolent king poobahs of the world.

Subscription models are one of the next steps. Spotify may work because this time the major labels have gotten a financial interest in the company. SO it means that services like it have to show success before they get access to the music they need to draw paying customers in.
And that will mean getting a little money from a lot of people. Which will mean the same for bands, assuming the majors don't play the game as per usual.  That will also mean that bands will need to work to earn their fanbase. That is already the case. Again, some bands are able to do so. And this despite all the heart rending stories as to how musicians are not able to be successful because of illegal downloads. Maybe they didn't get the memo.

So if discretionary income does not rise, and more slices are cut in the pie, would anyone find it surprising that the current music industry model is set to die ? Whether or not illegal downloads are wiped out.

Again, this is not to condone, promote, or defend illegal downloads, whether in their legal or moral status. That has been addressed as the law is quite clear.

 This is to point out that other competitors for the consumer dollar have come out in the last decade. But the consumer still just has the same amount of dollars ... and he doesn't look at his budget and go "hmm, I now spend X dollars on music, but now there's this other thing that has just come out that I'd like to buy, but I only have so much money ... guess I'll cut back somewhere else so I can keep buying music".

Fred Eaglesmith