U.S. market at nine months: CDs down 17%, downloads up 20%

The fourth quarter will have to be sensationally good, if the music industry wants to end 2008 anywhere near the 2007 final numbers. Three quarters into the year the future looks bleak. CD sales are down by 17.1 percent at 249.2m units. Total albums are down 11.7 percent to 297.9m copies. 

Download sales, however, are up by 20 percent to 795.8m track units. Digital growth still doesn’t compensate for the physical losses. If you convert download sales into “track-equivalent albums” like Nielsen SoundScan are doing (a rather pointless statistical excercise, imho) you get a total of 377.4m copies – 5.3 percent less than last year’s Q1-3 number. 

September was an especially grim month: Album sales decreased by 20.4 precent. Between January and August the average monthly decline was only 9.3 percent. Is the situation on Wall Street finally hitting Main Street? Are people buying even less music now that the overall economic outlook gets darker? 

Bestsellers this year so far: Lil Wanye – “Tha Carter III” with some 2.5m albums sold; “Bleeding Love” – Leona Lewis with 3.1m downloads sold.

MySpace Music: Six days, one billion streams and how many downloads?

This will be sold as the success story for the coming days: MySpace Music said it served one billion streams in its first six days of existence. And of course it can boast some high profile exclusives like streaming rights to “Dig Out Your Soul”, the upcoming album by Oasis. 

What does this one billion number mean? Well, hard to tell. In theory, every MySpace user listened to ten songs on the service. Big deal. Ask last.fm or imeem what numbers they are doing. And we don’t know how much labels/publishers/artists get for those streams. 

One thing is for sure, though: MySpace Music didn’t create any significant download business via Amazon MP3. If it had, there would have been a press release saying how much the partnership is boosting track sales. 

Here are the Top Ten tracks after one week of MySpace Music: 

1. “Whatever You Like” – T.I. – (10,910,737 plays)
2. “Can’t Believe It” – T-Pain – (4,216,580 plays)
3. “So What” – Pink – (4,181,983 plays)
4. “My Life” – The Game feat. Lil Wayne – (3,892,562)
5. “Miss Independent” – Ne-Yo – (3,507,279)
6. “I’m Yours” – Jason Mraz – (3,079,125)
7. “Hot N Cold” – Katy Perry – (2,756,316)
8. “Paper Planes” – M.I.A. - (2,561,909)
9. “Crush” – David Archuleta - (2,344,735)
10. “Got Money” – T-Pain & Lil Wayne  (2,235,201)

After playing around with the service upon the launch I didn’t go back until now. Not a good sign, is it? 

What would Bob say? 

“Content is not king, distribution is.  That’s what gave the major labels their power.  They could get the records in the store and get paid for them too!  But with anybody able to get their stuff on iTunes, the labels needed another monopoly.  Hence, MySpace Music. MySpace Music is just as fucked up as the original MySpace site.  With a user interface so complicated and so unintuitive that you bounce right off of it, to another site, the same way a meteorite bounces off the Earth’s atmosphere. But it’s worse.  I got the AOL click of death.  Remember the days of dialup, when we had to keep clicking to tell AOL we were still on and shouldn’t be disconnected?  MySpace Music has this same feature.  It wouldn’t keep playing the song I wanted unless I clicked and said I was still in front of the computer.  No roaming around the house, no going to the bathroom, you must listen to your music in one place and be prepared to tell the service you’re still here, even if you’re deeply into writing or another site.  Sure, they’re trying to avoid click fraud, but isn’t that how the labels got in trouble to begin with?  By worrying so much how they could get ripped off that their solutions failed? I hope MySpace Music fails.  Because it fucks the indies in the ass.  They weren’t asked to join, to reap in the revenue…it’s like working on the plantation.  Furthermore, free downloadability has been eviscerated.  If you WANT to give away your music, you can’t.  A step backward in MySpace world. The ads cheapen the product to the point where the site has no soul.  It’s only about the money.  MySpace?  Isn’t that a scam two guys cooked up and Rupert Murdoch purchased to make a ton of bread?  You’ve got to think of the consumer first, the bread second.  You’ve got to make the audience believe it’s the number one consideration.  It hasn’t been this way in major labelville for eons, and it still isn’t.”

Kings of Leon break US Top Ten at #4

Okay, I admit it. I’m a fan. A chart debut at No.4 is cool, even though the Kings of Leon deserve even better than that. 74,000 copies of “Only By The Night” sold in the first week are a career best for the band from Tennessee. Let’s hope the album doesn’t tank now in the coming weeks like almost every other Top Ten record recently.

Apple to close iTunes in case of a royalty hike? Yeah, right

According to a Fortune report Apple has been threatening to shutter its iTunes Store should the Copyright Royalty Board increase the rates for mechanical copies in the permanent download business. A decision in this matter is expected this week. Eddie Cue, head of everything iTunes at Apple, won’t raise prices and he sees no whiggle room for Apple or the labels to absorb more costs.

“If the [iTunes music store] was forced to absorb any increase in the … royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss – which is no alternative at all,” Cue wrote. “Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [the iTunes music store] if it were no longer possible to do so profitably.”

Currently Apple, other retailers, and their label partners pay 9.1 cents for every song with a duration of up to five minutes (1.75 Cents apply for every additional minute). The Digital Media Association (DiMA), the RIAA and of course Apple want to lower that rate to appr. 6 to 8 Cents. In fact, they would prefer to pay a percentage of revenues instead of a flat fee per song. Music Publishers, represented by the NMPA, want the rate to go up to 15 Cents per song. 

Nobody knows how the CRB will rule, but don’t expect Apple to follow through with their threat. They won’t have to. Nobody – including the publishers – will kill iTunes over royalty rates. Apple controls about 85 percent of the download market. And this pie feeds to many bellies. Apple sold 5 billion tracks in 5 years, and analysts expect iTunes will register some 2.5 billion song purchases in 2008. 
This is just showing some muscle. A closure of iTunes? No way.

Sony BMG and Popkomm bicker over strategic direction

German trade show Popkomm is just around the corner (October 8-10) and the backroom drama which in the past has been handled rather quietly is suddenly boiling up.
Ever since Europe’s most important music industry event (next to Midem) moved from Cologne to Berlin five years ago, some people in the industry have been questioning the role of Popkomm as a relevant international destination to conduct business. EMI was the first major to stop exhibiting at the trade show (something they started in Cologne). This year Sony BMG said “nein danke” and didn’t book a booth. 

In an interview with Financial Times Deutschland Sony BMG CEO Edgar Berger said in June that his company would only return to Popkomm if some structural enhancements were made. It wasn’t simply about saving the money, but to spend it wisely, Berger had said, adding that in the past Sony BMG had not been able to sign one new contract as a result of being part of Popkomm. 

With two of the four majors missing Popkomm Managing Director Ralf Kleinhenz now via MusikWoche accused Berger of deliberately hurting both, the trade show and the German market with his public criticism. A Sony BMG spokesperson responded immediately by claiming the Popkomm management was lacking the ability to accept criticism, especially the constructive kind. “Music is supposed to be front and center. We are afraid that Popkomm won’t endure next year unless it changes”, the spokesperson said.

Germany’s TMI files for bankruptcy

TMI, one of Germany’s leading entertainment distributors and VMI specialists, is fighting the bear market. The company filed for bankruptcy on September 30th and went in receivership. The administrators announced that they are trying to uphold trading as usual and to not impair the operation. This basically means TMI will continue to operate under what in the U.S. is called Chapter 11. Trustees are currently looking for potential investors. 

TMI covers the complete range of entertainment media products. The company lists more than 230,000 articles in their portfolio with a heavy focus on music (160k titles), DVDs, games, books and software.
TMI employs some 500 people at various sites with half the staff located at the headquarters in the city of St. Leon-Rot. The company’s main clients include retailers like Amazon, Buch.de, Edeka, Globus, Marktkauf, Medimax, Kaufland and real. 
Outside of TMI’s native German market the distributor also operates a subsidiary in Austria which is not involved in the bankruptcy filing. 

German trade weekly MusikWoche first broke the story.