New bands - don’t get fleeced. Lately, there have been a new crop of internet “marketing” companies specializing in online music promotion. A major selling point of these services has been to outline the decline in CD sales - Down almost 20% in Q1 2007, down 4.5% overall in 2006 while digital downloads have grown 65% since 2005. Sounds impressive, yes?

Now the reality check - CD sales still count for 90% overall. So, don’t discount the impact of physical product.

The drop in album sales and rise in the purchase of individual tracks highlights the popularity of a la carte music selection, whereby music fans can choose to purchase just to two or three songs from an entire album rather than buying every track. From the perspective of the music industry, however, these track-by-track purchases create a significant revenue shortfall: where in the past those consumers would have generated revenue equivalent to an entire album’s worth of sales, now they only offer a small percentage of that revenue. The trend may signal a fundamental shift for the music industry, away from album-based marketing and sales and into a system driven by the sales of individual tracks, promoted aggressively in online communities and services.

This is what scares the hell out of me. Yes, I know the album format is dead but if the biz further transitions into a singles-based medium, individual acts will lose out.

Who wins?

Labels.

Why?

Big-ass Catalogs

Labels will make out like bandits on the Long Tail rule.

What to look for:

Indie Label Consolidation - The grand MERGING of record labels catalogs.

Big box retailers have still cornered the market on CD sales. (Best Buy, Target, Wal-Mart) CDs sold in these stores sell at worse margins than anything else in their stores with the exception of milk. However, they happen to dominate quite a bit of floor space. What’s gonna happen when they need that space for something else? I’d say the removal of CDs - maybe even DVDs next - but I won’t get ahead of myself here.

This would lead to a HUGE - and I mean HUGE - drop in product sales. CDs will then have become loss leaders and practically disposable.

For me, I pray for the day this happens and the bottom falls out of the market. Seriously. Music should be free. It’s a sales enticement NOT A SALE.

http://www.aarontrubic.com/free-music-philosophy-case-study/

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