Strong yet modest album sales combined with successful digital and ring tone download numbers make a hit for Akon's 'Konvicted.' Sure enough, the album opened big, but in a way that reflected the tenuous transitional state of the record business. “Konvicted” sold more than 283,000 copies in its first week — enough to start at No. 2 on the Billboard chart. On top of that were the album’s two singles, which at digital music services like iTunes together sold more than 244,000 copies that week. And a week later, snippets of the same songs captured two of the top three spots on a new chart tracking sales of ring tones, selling 269,000 of them combined.
As a recording that has sold modestly, but in an array of forms, Akon’s music illustrates the new definition of a hit in pop music — instead of racking up sales of half a million CD’s or more in the first week, it arrives with solid if less impressive sales, but with several revenue streams.
It is an example of the business model that the retrenching music industry is embracing as sales of the CD, its mainstay product for two decades, slowly decay.
As a result, the big record companies, whose fortunes are still overwhelmingly tied to CD sales, are taking a far more expansive view of how to carve out pieces of the music economy, which by some estimates runs as high as $75 billion, including recording sales, music publishing, concert ticket and merchandise sales and other sources of revenue.
Lately, the major labels have in effect tried to move into the talent management business by demanding that new artists seeking record contracts give their label a cut of concert earnings or T-shirt and merchandise revenue — areas that had once been outside the labels’ bailiwick.
“They’re all starting to ask for the same things,” said Theo Sedlmayr, an entertainment lawyer based in New York who represents acts like 50 Cent .
As a recording that has sold modestly, but in an array of forms, Akon’s music illustrates the new definition of a hit in pop music — instead of racking up sales of half a million CD’s or more in the first week, it arrives with solid if less impressive sales, but with several revenue streams.
It is an example of the business model that the retrenching music industry is embracing as sales of the CD, its mainstay product for two decades, slowly decay.
As a result, the big record companies, whose fortunes are still overwhelmingly tied to CD sales, are taking a far more expansive view of how to carve out pieces of the music economy, which by some estimates runs as high as $75 billion, including recording sales, music publishing, concert ticket and merchandise sales and other sources of revenue.
Lately, the major labels have in effect tried to move into the talent management business by demanding that new artists seeking record contracts give their label a cut of concert earnings or T-shirt and merchandise revenue — areas that had once been outside the labels’ bailiwick.
“They’re all starting to ask for the same things,” said Theo Sedlmayr, an entertainment lawyer based in New York who represents acts like 50 Cent .
There has also been a scramble to squeeze revenue from other unconventional sources, including amateur videos posted to YouTube that incorporate copyrighted songs. Universal Music threatened to withhold its huge music catalog from Microsoft’s new digital music service unless it received a royalty of more than $1 on each sale of the technology giant’s Zune portable music player.
The labels are hoping that these moves will help put the industry back on track after a slide in overall sales in five of the last six years. But amid the holiday shopping season, which typically accounts for a third or more of the industry’s annual sales, many are not sure whether to be cheered or disenchanted by the new order of business.
With some holiday sales still to be made and tabulated, album sales are down almost 5 percent this year, according to Nielsen SoundScan data. Sales at digital music services like iTunes continue to rise, but the pace of the increase has slowed compared with last year.
The labels are hoping that these moves will help put the industry back on track after a slide in overall sales in five of the last six years. But amid the holiday shopping season, which typically accounts for a third or more of the industry’s annual sales, many are not sure whether to be cheered or disenchanted by the new order of business.
With some holiday sales still to be made and tabulated, album sales are down almost 5 percent this year, according to Nielsen SoundScan data. Sales at digital music services like iTunes continue to rise, but the pace of the increase has slowed compared with last year.
Still, if every 10 individual tracks sold online are counted as albums, overall recorded music sales are off only about 0.7 percent this year. While that is far from last year’s 4 percent drop, it represents a decline from early summer, when overall sales were running ahead of last year.
All that indicates how sales of downloaded individual songs are eroding the underpinnings of the CD and remixing the industry’s economics. More and more, music companies are looking toward sales of bite-size units — individual songs typically sell for 99 cents — instead of full albums that may cost $15 at record shops. Barring a late surge in CD sales, more digital tracks than CD’s will be sold in the United States for the first time this year.
Sales of digital singles and ring tones now represent “more than a Band-Aid,” said Steve Rifkind, president of the SRC record label, which released Akon’s album through a partnership with Universal, a Vivendi company that is the industry’s largest. But “it’s not going to offset people taking music” through illicit file-sharing online or burning CD’s for friends, he said.
CD sales are still the single biggest source of revenue, and the picture there is mixed. The EMI Group of Britain, third largest of the four major record corporations, said in reporting its half-year results in November that recorded-music sales declined more than 5 percent, though a drop in CD sales and net prices had been “slightly” offset by digital revenue. The Warner Music Group, the No. 4 company, said that over all, recorded music sales for the fiscal year rose almost 3 percent, to $3 billion, and that digital revenue had more than offset the drop from CD’s.
Yet digital song sales are not fueling a recovery as quickly as some thought — in fact, sales have been sputtering. After rising 150 percent last year, sales of digital downloads have increased less than half as much this year.
Some executives suggest that early adopters of iPods and similar devices may have dabbled with paid downloads enough to drive sales initially, but now tend to fill them with music from their existing CD collections or copy from friends rather that stock up on new song purchases.
Still, investors appear to be valuing the big music companies more than they did in the first years of the slide. Doug Morris, Universal Music’s chairman, said “the big picture of digital music trumps the fears of piracy — that’s why the companies are becoming more valuable.”
Analysts, though, note that shifting toward a mostly digital — and potentially more profitable — business remains very tough. Richard Greenfield, who tracks music sales at Pali Research, projects the industry to be flat over all for the next two years.
This decline has been spurred by a series of factors, like illicit file-sharing online, CD burning, high prices and competition from products like DVD’s and video games. Many retailers and music executives also attribute the industry’s sluggishness to a lack of high-wattage talent.
The industry has “a lot of bands that people care about for five minutes and then move on,” said Joe Nardone Jr., owner of the Gallery of Sound chain, with 10 stores in northeastern Pennsylvania.
Consumer fickleness has become evident on the Billboard charts, where the old blockbuster album appears to be a dying breed. More songs have come and gone from the No. 1 place on the magazine’s national album sales chart this year than in any other year since the industry began computerized tracking of sales in 1991. Analysts say that reflects the lackluster staying power even among songs in demand.
Most recently, “Kingdom Come,” a hotly anticipated CD from the briefly retired rap superstar Jay-Z , sold a healthy 680,000 copies in its first week — then slid 79 percent last week, its second week on the charts. In recent weeks, acts including Diddy, Danity Kane and Ludacris briefly held sway at No. 1 before plummeting. In July, Johnny Cash reached the top place for the first time in 37 years, with a posthumous CD. It sold just 88,000 copies, the lowest total for a No. 1 debut in SoundScan history.
But as the sales of albums drop, the major labels are still adopting strategies to squeeze more revenue though that may mean settling for $2.50 ring tones instead of CD’s priced at six times that. Indeed, acts with towering singles regularly generate more money from downloads or ring tone sales than from their comparatively slow-selling CDs these days — as the rapper Jibbs did with “Chain Hang Low.”
Mr. Rifkind, the SRC executive, said, “I find myself, when I’m signing a record deal now, asking, ‘Can this sell as a ring tone?’ ”
But ring tones, which have been projected to generate $600 million in nationwide sales this year, are only part of the puzzle. Many executives are now betting that even more money can be generated with a wider range of individual products tied to the same recording, especially in digitally advanced markets. In Asia , where sales of music to mobile phones outpace CD sales in some places, labels may offer more than 400 different items in connection with a specific album, including ring-back tones — snippets of music that play to callers while they wait for their call to go through — or “color call” tones, background songs that play while someone talks on the phone.
To show the promise of digital sales for individual albums, Warner Music executives provided cost-analysis data from a successful hip-hop record released in the last 12 months. The information was disclosed on condition that the performer not be identified in The New York Times.
According to the data, sales of the CD accounted for roughly 74 percent of domestic revenue the company took in from the project, or roughly $17 million. But sales of an array of digital products added almost $6 million — about two-thirds of that came from ring tones of hit singles. The figure also included roughly $330,000 from mobile phone games related to the performer and $94,000 in sales of cellphone “wallpaper,” or screen backgrounds.
Yet the industry as a whole still remains uncertain — and in the meantime must try to promote digital sales at the same time it seeks to preserve the CD and brick-and-mortar retail shops.
Mr. Nardone, for one, said the industry must consider lowering CD prices to allow retailers to compete with Apple’s industry-leading iTunes service, where full-length digital albums typically sell for $9.99. That is less than his wholesale cost for CD’s. Sales at his chain are running about 9 percent behind last year, he said.
“Everybody’s still hoping for the best,” Mr. Nardone said. “But the best ain’t what it used to be.”
Sales of digital singles and ring tones now represent “more than a Band-Aid,” said Steve Rifkind, president of the SRC record label, which released Akon’s album through a partnership with Universal, a Vivendi company that is the industry’s largest. But “it’s not going to offset people taking music” through illicit file-sharing online or burning CD’s for friends, he said.
CD sales are still the single biggest source of revenue, and the picture there is mixed. The EMI Group of Britain, third largest of the four major record corporations, said in reporting its half-year results in November that recorded-music sales declined more than 5 percent, though a drop in CD sales and net prices had been “slightly” offset by digital revenue. The Warner Music Group, the No. 4 company, said that over all, recorded music sales for the fiscal year rose almost 3 percent, to $3 billion, and that digital revenue had more than offset the drop from CD’s.
Yet digital song sales are not fueling a recovery as quickly as some thought — in fact, sales have been sputtering. After rising 150 percent last year, sales of digital downloads have increased less than half as much this year.
Some executives suggest that early adopters of iPods and similar devices may have dabbled with paid downloads enough to drive sales initially, but now tend to fill them with music from their existing CD collections or copy from friends rather that stock up on new song purchases.
Still, investors appear to be valuing the big music companies more than they did in the first years of the slide. Doug Morris, Universal Music’s chairman, said “the big picture of digital music trumps the fears of piracy — that’s why the companies are becoming more valuable.”
Analysts, though, note that shifting toward a mostly digital — and potentially more profitable — business remains very tough. Richard Greenfield, who tracks music sales at Pali Research, projects the industry to be flat over all for the next two years.
This decline has been spurred by a series of factors, like illicit file-sharing online, CD burning, high prices and competition from products like DVD’s and video games. Many retailers and music executives also attribute the industry’s sluggishness to a lack of high-wattage talent.
The industry has “a lot of bands that people care about for five minutes and then move on,” said Joe Nardone Jr., owner of the Gallery of Sound chain, with 10 stores in northeastern Pennsylvania.
Consumer fickleness has become evident on the Billboard charts, where the old blockbuster album appears to be a dying breed. More songs have come and gone from the No. 1 place on the magazine’s national album sales chart this year than in any other year since the industry began computerized tracking of sales in 1991. Analysts say that reflects the lackluster staying power even among songs in demand.
Most recently, “Kingdom Come,” a hotly anticipated CD from the briefly retired rap superstar Jay-Z , sold a healthy 680,000 copies in its first week — then slid 79 percent last week, its second week on the charts. In recent weeks, acts including Diddy, Danity Kane and Ludacris briefly held sway at No. 1 before plummeting. In July, Johnny Cash reached the top place for the first time in 37 years, with a posthumous CD. It sold just 88,000 copies, the lowest total for a No. 1 debut in SoundScan history.
But as the sales of albums drop, the major labels are still adopting strategies to squeeze more revenue though that may mean settling for $2.50 ring tones instead of CD’s priced at six times that. Indeed, acts with towering singles regularly generate more money from downloads or ring tone sales than from their comparatively slow-selling CDs these days — as the rapper Jibbs did with “Chain Hang Low.”
Mr. Rifkind, the SRC executive, said, “I find myself, when I’m signing a record deal now, asking, ‘Can this sell as a ring tone?’ ”
But ring tones, which have been projected to generate $600 million in nationwide sales this year, are only part of the puzzle. Many executives are now betting that even more money can be generated with a wider range of individual products tied to the same recording, especially in digitally advanced markets. In Asia , where sales of music to mobile phones outpace CD sales in some places, labels may offer more than 400 different items in connection with a specific album, including ring-back tones — snippets of music that play to callers while they wait for their call to go through — or “color call” tones, background songs that play while someone talks on the phone.
To show the promise of digital sales for individual albums, Warner Music executives provided cost-analysis data from a successful hip-hop record released in the last 12 months. The information was disclosed on condition that the performer not be identified in The New York Times.
According to the data, sales of the CD accounted for roughly 74 percent of domestic revenue the company took in from the project, or roughly $17 million. But sales of an array of digital products added almost $6 million — about two-thirds of that came from ring tones of hit singles. The figure also included roughly $330,000 from mobile phone games related to the performer and $94,000 in sales of cellphone “wallpaper,” or screen backgrounds.
Yet the industry as a whole still remains uncertain — and in the meantime must try to promote digital sales at the same time it seeks to preserve the CD and brick-and-mortar retail shops.
Mr. Nardone, for one, said the industry must consider lowering CD prices to allow retailers to compete with Apple’s industry-leading iTunes service, where full-length digital albums typically sell for $9.99. That is less than his wholesale cost for CD’s. Sales at his chain are running about 9 percent behind last year, he said.
“Everybody’s still hoping for the best,” Mr. Nardone said. “But the best ain’t what it used to be.”
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