Its The Same Old Song

When sales fall six years running you have to be brave to keep faith, or have a trick up your sleeve. When the drop happens during a period of significant change many would question if the demise will be terminal for some.

The British Recorded Music Industry (BPI) report states that the combined digital and physical album sales fell 7% last year, from 128.9 million to 119.9 million. The fall is the sixth year in a row and change is dramatic as physical CDs go through what some believe is their death throws. The fact is that CD sales are declining much faster than digital sales are growing.

HMV is shows clear signs of fatigue in its latest results and is planning to close stores and impose further costs. EMI is in turmoil and appears to have the ability to press its own self destruct button. A price drop below 99p downloads may not be enough to breath life into and accelerate download sales to the level that would buck the decline in market size. Even with Simon Cowell’s X drive and music machine the result leads one to envisage that casualties are inevitable.

On a positive note BPI claim sales of digital albums this year have increased by a staggering 30% and also that the combined singles market recorded an record high of 161.8m. However the underlying trend is of sales decline and a shrinking market.

Alarmingly, sales of digital single tracks are already digital and some 98% of the overall figure. This means the physical single is already dead and growth is now done to digital alone. However, just under 25% of digital albums sales are now coming from online services and the percentage has to grow significantly to avoid disaster. So as the market goes digital and is shrinking it appears it must either sort out how to get albums back on the buying agenda or move back to a smaller singles driven market.

BPI has to continue to blame illegal downloading for the drop in sales and continuing to blame customers for the industry’s own failures isn’t exactly a positive move. It is clear that the industry needs to look to streaming services and advertising revenues and keep one step ahead of the market and not just expect the iTunes model to save it.

Music Lessons?

During a Christmas shopping expedition we went into HMV and discovered that the format has radically changed. CD Music was now at rock bottom prices, with the most expensive new hits being only around £8 and most music being available on a ‘2 for £10’ offer. The music merchandising was questionable, with narrow isles and back list on the lower gondolas ‘spine out’, whilst the eye level was devoted to a reduced ‘face out’ offer. Games, videos and accessories clearly now have the majority of floor space and music looks a very poor relative. The point was that it was hard to browse and the range was radically reduced. Ok this was just one store but it was in a major shopping mall at Canary Wharf.

The days of music stores on every High Street are long gone and now HMV carry the flag with a much reduced presence. Our music buying habits have also changed with online shopping capturing the vast majority of sales of CDs and obviously music downloads.

We now read that research by MyVouchureCodes claims, 56 % of people they surveyed believe that all music will be purchased in digital formats by 2014 and 21% believe the hardware to play CDs will no longer be available by 2015! Some 42% claim not to have purchased a CD in the past six months and 12% claim they'll never buy a CD again. This is supported somewhat by 66% claiming that they'd bought a digital music download in the last six months. In an aside, 33% believe the DVD will be obsolete by 2020, with 67% expecting all films to be downloaded or streamed over the web by the start of the next decade.

So are we seeing the demise not just of the CD but of the death of all physical music formats. Gone are Vinyl, cassettes, 8 track, mini disc and potentially now the CD.

The research interestingly conflicts with that reported earlier in the year by HP, who claimed that 64% of those surveyed prefer music on physical media and 73% said they could never see a time when they would have only digital media. This research also claimed 68% prefer photo prints to digital images and 75% would rather have a DVD than a movie stored on their PC. The significant result then was that 95% of those surveyed preferred books to ebooks.

Changes are obviously happening even within this year, but the perception of the speed of change can vary significantly.

The future of CD music looks doomed, with a clear contraction of the channel and the online instant download now competing head to head with a dispatched product. Device attention has clearly shifted from disc to MP3 and one only has to look at the myriad of docking players to see that playing device change is happening at speed. A good old friend Trev Huxley once said that music trends were dictated by car rental companies, who when they shifted their specification from Cassette to CD, killed the cassette. Recently we were offered a rental car with inbuilt iPod/Phone docking and no CD player!

As the physical music format disappears, will we want to buy a virtual collection of downloads, or simply copy and share them with friends? Streaming services are the next big thing both in film and music and online gaming is growing at a phenomenal pace. It is therefore obvious that these demand services, such as Pandora and Spotify, are going to, challenge today’s prices further, potentially question the whole current purchase model and change our ‘ownership’ culture.

We must remember that Book publishing still does not have a credible strategy or solution between the renting an ebook for free from the library and buying it from a reseller. As we have already suggested in our article last month, ‘Public Libraries: Back to the Future’ there appears one simple solution to this problem.

As ebooks become more widely adopted, will the market economics fuel further digital shift as it has in music, or do we believe that books are different?

Coffee Latte and eBook to Go Please

When Starbucks signed up Paul McCartney and others to release their latest albums through them, it was interesting and some would agrue it made sense. They then went on to their work with iTunes through Hear now. However,‘the latte to go’ company is now teaming up with Yahoo and aim to go one step further by adding free ebooks, movies news and entertainment to its in store Internet offer. It will also offer free access to sites, such as The Wall Street Journal that are currently behind pay walls.

So is the coffee shop becoming a media retailer where previously media retailers have become coffee shops? This move is about redefining who the reseller is and who has the brand and eyeballs to capture sales. Its fair to say that tomorrow anyone anywhere can sell media and ebooks and where we see supermarkets today we could see anybody tomorrow. Who has the biggest captive audience and can they make a viable proposition tomorrow?



The one reality is that the coffee market is getting crowed as more chains compete and fast food chains start to go after the same market. Starbucks WiFi is already attracting some 30 million logins a month, so extending its offer to their captive market makes commercial and loyalty building sense.

Starbucks customers will be able to access the network via their smart phones, computer or tablets, as soon as they connect. A splash page presents the various options which include entertainment, wellness, business, careers, and "my neighbourhood." With partners such as iTunes, New York Times, USA Today, Zagat and advance book copies from publishers such as HarperCollins and Penguin, the aim is to create a compelling community portal. This by itself then becomes a pull to get customers to keep coming back and to build and extend the brand.

Interestingly the content is designed to last as long as a cup of coffee and a muffin. Five to twenty minute content chunks are being sought to consume in house or they can buy the content and download it to go. The content in store can also be book marked such that it remembers where you left off next time you visit.

Starbucks makes additional revenues on taking a share of all sales.

So are coffee shops for socialising or for playing games, reading, watching movies and other more singular pursuits? Its an interesting concept but you may have to have a serious caffeine addition for it to seriously alter your lifestyle.

Three Cherries and You Win

Everyone is familiar with the ‘one armed bandit’ or slot machine. Three cherries, or three of a kind and you win, two cherries and a pear you don’t.

To many today’s the ebook download world is a one armed bandit. As the market adopts epub we can effectively put that cherry on hold and pull again.

The next row is DRM and getting a cherry here is not easy or has implications. Adobe has the cherry but the implications on the next row – the device, may be significant and if there are only cherries in the row then that stops there maybe being three pears or three of anything but cherries.

Next we have the device row. This is where we have to match up to the format and the DRM. Today we can have three pears tomorrow only cherries may prevail in the download world.

We must remember this is a one armed bandit and although they usually have three rows this one has to have four and must include the consumer. Some today will supply epub files to a service who will convert these to their own delivery and DRM. The publisher sees three cherries but the consumer sees three pears. Most one armed bandits pay out differently according to the fruit.

When the price of the device drops below $100 dollars then it is easy to see the market but today at $300 plus this is not the case. Online still offers three cherries and more flexibility as laptops shrink in size, weight, cost and wireless broadband becomes ubiquitous. Online is where today’s digital action is.

Women and Money, Makes Sense

Last week we wrote about the Oprah touch and her 48 hour offer to download Suze Orman’s book ‘Women and Money’ for free.
According to reports, more than 1.1 million copies of Orman's book were downloaded in English, and another 19,000 in Spanish. The demand has been compared in the US press to other online sensations as "The 9-11 Commission Report," and Stephen King's e-novella, "Riding the Bullet.".

The offer for "Women & Money," originally released a year ago by Spiegel & Grau, has not impacted physical sales with the book ranked No. 6 on Amazon.com and with the paper edition of "The 9-11 Commission Report," published in 2004 by W.W. Norton and Co., was a best seller for months.

This month we have also reported on the HarperCollins full book promotion and other experiments by the likes of Random House. Perhaps the market is finally wakening up to the reality that you can’t have a market without content and you certainly can’t have a one without first stimulating it. Merely making another ebook reader is a waste of time. Consumers want to have content and have some offers that compel them to try. Forget the back list and new authors the market need some oomph and as Oprah has proven people will respond to the right promotion. Will Richard and Judy now follow? Will an ‘A’ list author now take the plunge and fordge their name in history as the tipping point?

Well done Suze Orman and Oprah Winfrey for boldly showing the way.

A Good Week for Digital Music and a bad one for DRM

This week Sony BMG, which represents artists such as Bruce Springsteen, the Foo Fighters, Santana and Justin Timberlake, effectively put the final nail in DRM as we knew it in music and positioned Amazon’s digital music store as the rival to the market leader, the iTunes.

Sony are the last major label to release their catalogue to be available in MP3 format and DRM free. It is a great day for music, artists and potentially a bad day for pirates. It effectively kills off those cumbersome and consumer unfriendly DRM systems which drove many to the pirates. Although music still has the problem of ‘music for free’ one of the major issues is now disappearing fast.

The move also heralds the industry’s moves to create an effective rival to iTunes. It is almost inevitable the audiobook publishers will wake up smell the coffee and do the same both as DRM in this media does is not consumer friendly and also to create an effective alternative to Audible.
If we are asked why audiobooks have failed to really take off as predicted the answers are tied to DRM, Audible’s dominance and propriatry stands and book club model. True there are other issues such as price points but if the audio book publishers accept MP3 and no DRM then they may enjoy a larger slice, from a larger cake. Currently Random House are leading the way with their 3music trials and although Penguin got jittery and pulled out, logic will prevail.

Can you hear me, Mother?

We argued in “Brave New World” that the audio book would lead the digital revolution. The consumer experience was the same, MP3 technology was available and being used by all and the experience was complimentary and not substitution to reading. There are real obstacles; Audible’s proprietary DRM, their book club commercial model, their exclusive iTunes relationship, the lack of effective standardized DRM, etc. It is also clear, that market demand can’t be created in a vacuum and today there is certainly a vacuum of digital audio content.

So it was disheartening to hear news that, at the Association of Authors’ Agents recent AGM, there was disquiet raised at the perceived low levels of royalties being offered by publishers for digital downloads of audiobooks. The question should not be one of increasing individual percentages, but one of how we all maximize the opportunity and grow the pot for all. The adversarial stance on percentage points does nothing to getting more titles into the market, changing the stranglehold of some on the channel or sorting out the question of DRM.

Why does everyone want more out of the digital pie before it has even been established? The publisher is often seen as wanting to sell and distribute direct, cut others out and enjoy greater margin. The retailers wants to do it, but don’t have the infrastructure or Internet visibility to deliver. The author wants a greater slice before the pie is even mixed, let alone baked.

Why can’t everyone work together to establish the market based on today’s model and channels?

After all, it is better to have the same share of a bigger pie than a bigger share of a smaller one. Volume is the key and in a market segment where prices are perceived as high, volume must be the way forward.