I'll post a link to this today since tomorrow's posts are going to be dedicated to only physical formats. (So much talk about digital and mobile, yet CDs are still king and vinyl is making a sort of comeback. Yes, tomorrow will be Physical Friday.)

An NPD memo reportedly has iTunes overtaking Wal-Mart as the top music seller in the U.S. NPD has been tracking a "sharp increase" in downloads over the past several months. (Oh, you mean that "sharp" 28.7% year-over-year increase in single track sales, which pales compared to 51.9% at this point last year?)

What a perfect storm: iTunes overtakes Wal-Mart, and Wal-Mart is pressing for improved wholesale prices. The transition to digital is natural, expected and inevitable, but labels need to protect their cash cows during the transition. My advice is to play ball with Wal-Mart. Any lost shelf space, any reduction in inventories, will take away potential sales to those tens of millions of Wal-Mart shoppers who still prefer to buy CDs.

Posted by Glenn at 12:54 PM | Link
|Wal Mart||iTunes|

Billboard's Ed Christman recently wrote about Wal-Mart's push for lower CD prices and a tiered pricing plan. In a nutsell, hits would be $12 and different levels of catalog at $9, $7 and $5. A proposed promotional program would put the top ten or 15 titles at $10.

We've heard of this sort of thing in the past (though not with these specifics). In October 2004, Rolling Stone had an article about Wal-Mart's push for $10 CDs (retail, not wholesale). The situation was described as tense...and this was three and a half years ago.

In Christman's article, a quote by a Wal-Mart merchandise manager stuck out:

When you look at sales declines with physical product, and you have a category declining like it is, you have to make decisions about what the future looks like," he said. "If you have a business that is declining and you want to turn it around, it really takes looking at it from all angles."

The decline of the CD gives Wal-Mart greater leverage to make a serious push for the sort of lower prices it has publicly wanted for years. But does anybody really think lower CD prices will turn around the format? I don't. While I have no evidence to offer, I'd wager CD purchasers are less price sensitive than those who have moved on to downloads. (They're certainly older, and older consumers tend to have higher incomes.) In dropping prices, consumers save a few bucks while labels give away margin to consumers who are more likely -- because of their price sensitivity -- to have bought the CD anyway.

What's so wrong with lowering prices? Nothing, if you're a consumer. But if you're a label, you have to understand the margin you're going to need to make up with increased volume. Here's an example, with totally hypothetical numbers. Let's say a CD's wholesale price is going to be dropped from $8 to $6. To maintain the same level of revenue, a label needs to increase sales volume by 33% (($8-$6)/$6). And let's say the gross margin on that CD is $4. To maintain the same level of contributed margin, sales volume needs to increase by 100% (($4-$2)/$2).

Let's be honest...sales aren't likely to double under the new pricing and promotion scheme. So labels are looking at the two options faced by so many of Wal-Mart's vendors: Find cost efficiencies or lose Wal-Mart's business. Said one executive, "The decision might come down to: Do we give up 20 percent of our business in order to not lose the entire business?" Yes, that's exactly what you do. Look at Rubbermaid's rare defiance of Wal-Mart demands as a good example of what happen if labels lose Wal-Mart's business. Wal-Mart dropped Rubbermaid products when it passed along cost increases. A few years later, Rubbermaid was acquired by a competitor.

Posted by Glenn at 8:47 AM | Link
|Wal Mart|

• Album sales climbed 11% last week, buoyed by the inclusion of first week sales of The Eagles' Long Road Out Of Eden of 710,000 units.. Sales were 13% lower year-over-year. For the year, album sales are down 14%. Digital track sales rose 4% last week and were 49% higher than the same week last year. For the year, sales of digital tracks are up 46%.

• The Eagles' Long Road Out Of Eden was included in Billboard's Top 200 album chart after the magazine changed its policy which now considers an album that is sold exclusively by one retailer. That policy change came after Wal-Mart, the exclusive distributor of the album, agreed to release its sale numbers. Good move. There are going to be more album exclusives in the future. They should get the same billing as other albums. Too bad this policy wasn't in effect when Garth Brooks' Wal-Mart exclusives were released. (AP)

• Even though Wal-Mart gave Long Road Out Of Eden a good online push, digital downloads accounted for about 0.5% of total sales. The rest came from sales at physical Wal-Mart stores.

• Universal Music Classics & Jazz is selling unprotected MP3 downloads at its official site, www.classicsandjazz.co.uk. (Billboard.biz)

• Sony Erikson is planning an Internet music portal and has all four majors on board. The updated PlayNow service is set to launch in the Spring. According to the WSJ article, some (I assume not all, though it is unclear) tracks will be available in MP3 format. (Wall Street Journal)

• Red Bull, the energy drink company, is "pushing a serious music initiative" and has hired executives and built a studio at the company's Santa Monica headquarters. (Digital Music News)

Posted by Glenn at 8:29 AM | Link
|Wal Mart|

• Missy Elliot's Doritos campaign looks like the future of hip hop: A multi-platform campaign (including an exclusive track) created by Goodby, Silverstein & Partners and managed by Violator Management. In June, Warner Music Group created a joint venture with Violator called the Brand Asset Group. Hip hop may still have some pop culture influence -- less than a few years ago, I believe -- but sales are falling faster than pop, rock and country. Touring isn't much of an option, so corporate advertisers are looking very attractive. This kind of campaign is the best way to extract value from artists. (Billboard.biz)

• Wal-Mart's download store may have cheap MP3s, but it's still an inconvenient way to get music onto an iPod. (The Macalope)

• U.K. venture capital firm Ingenious Media is backing albums by heritage artists like UB40, Peter Gabriel and Travis. The firm has raised $79 million in part by attracting investors with tax benefits. U.K. tax law allows the fund not to pay taxes on any profits. Ingenious receives an annual fee for managing the fund plus 20% of any profits. (Wall Street Journal)

• Just as NBA star Ron Artest did when he was suspended, NFL star Adam "Pacman" Jones is promoting an upcoming release on his record label. National Street League will release Posterboyz's album on Tuesday. Posterboyz consists of Jones and producer Spoaty. (NewsChannel5.com)

• Oops. The headline of this Forbes article says, "Sony BMG Spent $240M Lobbying in 2007." The correct number, $240,000, is given in the body of the article. (Forbes.com)

Posted by Glenn at 12:49 PM | Link
|Marketing||Wal Mart||Warner Music Group|

• RealNetworks, MTV and Verizon are teaming up for a mobile music service called Rhapsody America. MTV's URGE music service will join with RealNetworks' Rhapsody subscription service to create a music service that can be accessed via PC, mobile phone or (compatible) portable media device. Verizon's V CAST will be the service's mobile platform. (Press release)

• Wal-Mart has announced the launch of $0.94 MP3 downloads and $9.22 MP3 album downloads. The catalogs of EMI and Universal Music Group are available in the MP3 format at 256 kbps. The original, 128 kbps WMA tracks will also be available. The first things I noticed at the music download page were links to $3.88 MP3 albums (which are all EP's and singles), $5.88 MP3 albums (catalog titles like Bon Jovi's Slippery When Wet) and $7.88 MP3 albums (Norah Jones' Come Away With Me, for example). Unfortunately, Wal-Mart's updated digital store does not support Firefox. (Press release)

• Solange Knowles, sister of Beyonce, has signed a worldwide co-publishing deal with EMI Music Publishing. Knowles is currently promoting Baby Jamz, a hip hop-oriented toy line created by Planet Toys and Music World Entertainment, her father's company. (Press release)

• Another Madonna-to-LiveNation? article, but this one has some numbers and word of a rival. "One source estimated the value of the Live Nation offer to be $180 million, with the touring giant potentially licensing the recording rights for roughly $30 million. ... It is doubtful that WMG, the only label Madonna has ever been signed to, would give up the Material Girl without a fight. Sources say that the company has made a counter-offer to Madonna that also includes a touring component that could be helmed by rival promoter AEG Live." (Billboard.biz)

• Said the CFO of Emmis Comminications about satellite radio, "The people that utilize satellite radio often toggle between AM and FM and satellite radio, and it really hasn’t caused a measurable effect in our business yet. ... Satellite radio is a niche business focused on people willing to spend 13 dollars per month for the radio. Which for long-haul truckers or people who are advocates of a music format which may not reach a mass market – if you’re a passionate Blue Grass listener in New York City – it probably makes sense for you. But I think they’re still challenged. It’s a challenging business model to launch a billion-dollar asset in space and try to build up a mass-market audience quickly. And with 15 million subs it’s tough, which is why they’re trying to get the merger done. In large measure they’re trying to work with the government to solve a business model problem." (Radio Ink)

• Verve Music Group has named Mitchell Cohen as its VP of A&R. Cohen was previously SVP or A&R at Columbia Records. (Billboard.biz)

Posted by Glenn at 11:37 AM | Link
|Mobile Music||Publishing||Radio||RealNetworks||Rhapsody||URGE||Wal Mart|

• Universal Music Group took the lead in cutting CD wholesale prices, and it's doing the same (in Europe) with digital albums. Catalog titles, though, not new releases. The initial group will consist of 1,500 titles by such artists as Bob Marley, R.E.M. and Stevie Wonder. Prices are dropping to £6.99 from £9.99. Some UMG catalog titles are already sub-$9.99 at U.S. iTunes, though they are not part of an organized program as in this case. (Read article at Reuters)

• EMI Music Publishing is really getting into joint ventures. (See link yesterday about joint ventures on Broadway musicals.) Billboard reported EMI Group has offered a joint venture to Marty Bandier, who resigned as chairman of EMI Music Publishing yesterday. "Bandier said he would have an equity stake, according to the source. The venture would be under the EMI Group umbrella, but separate from EMI Music Publishing." If a joint venture beats a licensing fee, it can certainly beat a salary. (Read article at Billboard.biz)

• Found in an article about record label Thrill Jockey and its almost reluctant forays into digital music: Thrill Jockey is about to launch a new download store that will also host tracks by Rune Grammofon, Touch, Smalltown Supersound, Mosz, and Morr Music. The site will sell albums only, for $10 each. Read the article for a look at the other side of the industry, those labels that would prefer to stick to physical product but are being forced into digital sales. (Note: A late-night blogging session produced a fantastic typo. The original post referenced Touch & Go. The article is about Thrill Jockey. Thanks for reader Sam for pointing out the error.) (Read article at Chicago Reader)

• They may not have a ton of street cred, but the big portals can sure help make a career. Yahoo! Music will produce a music program that will be sponsored by Nissan. The show, titled "Nissan Live Sets on Yahoo! Music," will be broadcast on both the Internet and a high definition TV channel to be named later. Christina Aguilera and Incubus will be the first guests. (Read bits and pieces of an article at press release)

• Sonific announced a widget for Typepad that will allow users to post free music players on their blogs. Sonific pulls from a catalog of over independent 50,000 songs. Unlike Snocap's Linx widget, which can be placed on blogs and MySpace pages, the Sonific widget does not allow for purchases. (Read press release)

• MySpace has licensed technology from Gracenote to block unauthorized uploads of copyrighted music. Wrote Louis Hau at Forbes.com: "Perhaps the most curious aspect of the MySpace-Gracenote pact is that it took so long for the News Corp. unit to put a serious filtering system in place. ... Frustration over MySpace's failure to implement a satisfactory filtering system prompted Universal Music Chairman Doug Morris to lash out at the site during an investor conference in September." (Read article at Forbes.com or press release)

• Not mentioned yesterday: Garth Brooks' five-CD, Wal-Mart exclusive CD set is out this week. Given that fact, the retail giant certainly had good timing when it declared Brooks has sold 20 million CDs in the first year of his exclusive arrangement with Wal-Mart. Oh please, Wal-Mart, become a Soundscan reporter. (Read post at Hits Rumor Mill)

Posted by Glenn at 8:26 AM | Link
|EMI||Indies||MySpace||Online Stores/Services||Publishing||Universal Music Group||Wal Mart|

• The Eagles follow in Garth Brooks' footsteps by creating a "long-term strategic marketing agreement" with Wal-Mart. The Eagles' stated reason for being attracted to Wal-Mart is the company's position on sustainable business practices. While Wal-Mart is indeed getting serious about its responsibility to stakeholders, I'm sure The Eagles were attracted to the control and expected revenue from the deal. (Read press release)

• Australia's music download tally is predicted by one research company to double next year. Analyst Marc Ganz of Ibis World sees the CD now going past the maturity stage and into the life-cycle's decline phase. I don't agree with one thing he said, though. Ganz thinks the lower price of digital music will drive down CD prices. All I've seen from labels -- other than Universal Music Group -- is extra content and stable prices, not less content and lower prices. Next year, EMI will add content to every CD. Do you think it's going to drop prices? I don't. Not in the next year or two. (Read article at ABC.net)

• Orange Country emo-ish band Midnight Hour has signed with Interscope Records. (Read post at Punknews.org)

• Not a surprise, but it's nice to have it in writing: JupiterResearch predicts the iPod's market share is safe from Microsoft's Zune for 12 to 18 months. (Read article at Digital Trends)

Posted by Glenn at 11:06 AM | Link
|A&R||Research||Wal Mart||Zune|

Country legend Garth Brooks, who has an exclusive agreement with Wal-Mart, will release a five-DVD box set through the retail giant. The Entertainer will be out on November 1st with the low, low price of $19.96.

Four of the discs have entire concerts (one from 1991, one from 1993 and two from 1997). The fifth disc is a collection of videos spanning the years 1989 to 2005.

Nearly a year ago, Wal-Mart released a Brooks CD box set titled The Limited Series. The company claims it sold over 500,000 units on the first day of release. Since Wal-Mart does not report Brooks' sales to Soundscan, the title never appeared on the U.S. charts.

Posted by Glenn at 1:50 PM | Link
|Wal Mart|