No investor – TMI is over

When Germany’s entertainment distributor TMI filed bankruptcy in late September last year people involved had hoped that there might be a chance to save the business, or at least parts of it. These hopes have now been shattered. Trustees, who already in mid-December had terminated the TMI headquarters in St. Leon-Rot, have now also given up on the remaining TMI locations in Bremen and Alsdorf.

The administrators had been trying to keep up trading throughout the fourth quarter but more and more TMI clients defected to competing ditributors. That basically left the company without sufficient business. In total, some 500 jobs are affected by this collapse. TMI was founded in 1989 and during better times generated annual revenues in the area of €280 million ($360m).

Sony hires a Ghost to run Epic

Sony Music has done it once, why not try it again? While producer legend  Rick Rubin is still trying to turn around the music industry as head of Columbia Records (is he really?), the other Sony label group will get some hands-on experience with a creative-person-gone-music-exec soon. The major music company has hired acclaimed songwriter/producer/performing artist Amanda Ghost (aka Gosein) to run Epic Records. 

Ghost will replace Charlie Walk who had to walk in December amidst a firing spree at the company. Ghost will assume her position on February 16 reporting directly to Columbia/Epic Chairman Rob Stringer. 

“I’m not a conventional choice as an executive in the music business”, Ghost said in a prepared statement. “But it is testament to the new mood at Sony where content is now king and the music business is being put back in the hands of creative talent such as myself.”

Ghost is probably best known for James Blunt’s hit single “You’re Beautiful” which she co-wrote and for which she had received an Ivor Novello Award (the UK’s songwriter prize). Aside form Blunt Ghost has worked with performers like Beyoncé, Shakira, Jay-Z and Kanye West in the past. According to Sony Music her records have sold north of 25 million copies worldwide in the last three years. 

Ghost also used to be busy as a recording artist herself. Warner Music in 2000 released her debut album that goes by the name of – wait for it – “Ghost Stories”. Anybody listened (or maybe even bought) that? Let me know.

Is MySpace slashing staffers?

According to the Wall Street Journal Fox Interactive Media (FIM), the News Corp. division that also houses MySpace, is aligning its workforce to the current global economic climate. FIM has started last month to cut back about 5% of the head count, or approximately 100 people.

Layoffs include all units of FIM and MySpace is not exempt, even though spokeswoman Dani Dudack is quoted in WSJ, saying: “We are constantly aligning our business and resources to focus on the core strategic initiatives of MySpace. We currently have open positions, are actively hiring in areas including but not limited to MySpace Music, Business Development, and other product initiatives. We expect to have more MySpace employees at the end of this fiscal year than we currently have.”

Everybody who thought social media networks are somewhat recession-proof should probably rethink. Econalypto is everywhere. It’ll be interesting to see what this could mean for the planned launch of MySpace Music in Europe.

UPDATE: Word from inside the FIM camp (check comments below) is that there were at least 13 staffers let go today at MySpace. There’s no assurance there won’t be anymore cuts in the future …

The music business is no place for pessimists and naysayers

Yesterday I allowed myself to look at recent events in the industry with a worried attitude. Wrong, say people who know better. Pierre Perrone at the UK’s The Independent walked the grounds of Midem and talked to some industry figures who all seem to be rather upbeat about the times ahead. Here are some examples of their quotes. Quite infectious. 

“The doom and gloom people, it’s time they left and retired” – Harvey Goldsmith
 ”It’s tough out there, nobody’s denying it, but what do we do to get out of it? (…) How can new bands utilise the internet to help them break through? How does it all work for the fans? How do the fans hear about new artists and start to get involved with them? The new braves, Reverb Nation and Hot Spin, and all these new technology opportunities, basically help acts break through and help fans get to the acts. MidemNet showed the solutions are coming through. There are ways of connecting fans with new acts so everyone’s gung-ho. The doom and gloom people, it’s time they left and retired. Every day you wake up, somebody sends you a track to listen to or you hear about a band you go and see them live, you just get really invigorated and turned on by it. (…) We’ve got ourselves in a mess, now let’s dig ourselves out of it and just get on with it. I feel we’re going to have a great year.”

“I’m very optimistic about the future of live music” - Michael Eavis
“This is my first Midem and I got this green award. I’m very optimistic about the future of live music. People respond to an artist, they buy the records, or now the downloads and they come to the concerts. Live music, especially in Britain, is a very vibrant force. It’s very attractive and it’s good fun.”

“This industry has always lived with piracy” – Alison Wenham
“The British are good at internationalising their business – we only have 8 per cent of our sales in the UK. This industry has always lived with piracy. The supply chain has been disrupted by the demise of Pinnacle but the independent industry is mercurial. We don’t like the duopoly, Sony and Universal, routinely controlling 80 per cent of the charts and the visibility, but I’m always hopeful. You’ve got to remember this industry has been going through an agonising decline for eight years. We haven’t suddenly hit the buffers like the finance industry. So we are rather war-torn but we’re also hardened and resourceful.”

“Are music fans going to stop enjoying music? It’s not going to happen” – Feargal Sharkey 
“All of us have to grapple with a little thing called evolution which has a nasty habit of sweeping you aside as irrelevant should you decide not to cooperate. But the most important thing is the music. We know 63 per cent of 14- to 24-year-olds in Britain are downloading music and not paying for it but, on the upside, we also know they are passionate about music. It registers above mobile phones, game consoles, DVDs. Are young people going to suddenly stop wanting to be creative and make music? Are music fans going to stop enjoying music, wanting it as part of their lives? It’s not going to happen. All the music industry ever did was provide a bridge between creators and fans. That bridge is always going to be there.”

“We have to accept that there’s going to be a new way of doing things” – Brian Message 
“I’m really optimistic about the future of the music industry. It doesn’t mean it’s going to be easy. The gravy train of the past is gone. It was a great production line, great returns, being able to buy copyrights and own them forever. Managers used to make 20 per cent commission for no investment. We have to accept that there’s going to be a new way of doing things. Flexibility is the key. There are no rules anymore. The key word is value. Free music is a valuable part of the artist proposition. If we need to get into a market where we don’t have a base, we can do something with free music to stimulate interest. Let’s focus on that artist-fan relationship. But there’s a myriad of choices out there. There’s no one model any more. It’s not easy. Everybody needs to be creative and come up with what they think is the best plan for their artist. “

The spiral keeps turning

The new year in the business of music is already off to a lousy start. And it’s not even February yet. Lay-offs, bankruptcies, paltry sales, etc. 

Here are some of the worst news from the last couple of days: 

• Incredibly low sales figures in the U.S.
• Alliance Entertainment consolidating even more
• Clear Channel cuts 1,850 jobs after Q3 losses
• Sony forecasts annual loss
• Midem attendance was down
• Trans World Entertainment/f.y.e. to close another 70 stores

Are these signs of an accelerated downward trend? Or just singular results that examplify the recurring weakness of the slack season?
What do you think? Drop me a line.

Know all about what’s going an at Midem without being in Cannes

Actually, going to Midem should be mandatory for anybody who wants to cover the music business. There is probably no other place where one can find as much expertise and inside stories as in mid-January at the Côte d’Azur. That’s bad for me, because I didn’t go this year. If you need to know what’s going on over there in France I recommend you check one or all of these sites: 

• BBC News summary
• music ally blogstravaganza
• MusikWoche Midem coverage
• paidContent goes MidemNet
• and Billboard is there, too
• Music Week stays busy as well

It’s “Game Over” for Circuit City

Filing for Chapter 11 just was not enough to help Circuit City out of the slump. The nation’s second-biggest electronics retailer will be liquidated after it failed to attract a bidder for the chain that currently still employs some 30,000 people in 567 U.S. stores. 

“We are extremely disappointed by this outcome,” said James Marcum, who until today is acting as CEO for the retailer. “We were unable to reach an agreement with our creditors and lenders to structure a going-concern transaction in the limited timeframe available, and so this is the only possible path for our company.”

The liquidation sale will start tomorrow (Jan 17) and will run until March 31. Circuit City has appointed Great American Group , Hudson Capital Partners, SB Capital Group and Tiger Capital Group as liquidators. The company says as of August 31 it had $3.4 billion in assets and $2.32 billion in liabilities. 

Up until yesterday (Jan 15) it had appeared as if there might be some kind of rescue scenario for Circuit City. The Wall Street Journal had reported that there were at least to active bidders, San Francisco-based private equity firm Golden Gate Capital and Mexican billionaire Ricardo Salinas Pliego. Golden Gate had asked for a 30-day auction delay to analyze the business. Salinas had bought 28.5% of CC stock in recent weeks. No details have emerged, why these bidders didn’t prevail in the process.

Sony Music cuts staff

The renaming at Sony is done – with the start of 2009 Sony BMG became Sony Music Entertainment – but the slimming down isn’t. Billboard reports that the second-biggest major company has started to reduce its staff in the U.S. At least 30 people were let go on January 15, the majority of which at the company’s distribution arm Sony Global Digital Business and U.S. Sales. That is the devision headed by Thomas Hesse. 

More cuts happened at RED, Sony Music’s distribution arm for third party independent labels, and at Columbia Records, where several regional promotion staff members were handed their pink slips. According to Billboard, the layoffs will be completed by January 16. No details have been released on how many employees will be let go in total.

Shop closings begin at Zavvi

British retail chain Zavvi which went into administration on December 24 is being downsized by Ernst & Young. The chain formerly known as Virgin Megastores closed 22 of its stores, leaving 178 people without a job. The remaining 92 Zavvi shops are to stay open for business. 

In fact, Ernst & Young ordered a fire sale at the chain, starting tomorrow. Zavvi will cut prices accross all product lines by 20%-50%. In the meantime, the administrators are trying to find a buyer for the retailer. Ernst & Young say, so far they have “received 60 expressions of interest”.

While I was away …

Welcome back, readers of Höf’s Mixtape. Sorry it took me so long to get back online. While I was kicking back in Germany the music world continued to create news. More than I anticipated, actually. In retrospect, though, none of them were real game changers or sensations. But for matters of completeness and for my own sanity I compiled what I think deserves mention. 

Instead of rounding up the old news in chronological order I am listing them by relevance. So this is what’s been missing here: 

• The biggest tours of 2008 were not by the biggest CD sellers. The global #1 was Madonna with a gross of $281.6 million according to Pollstar, followed by Céline Dion with sales of $236.6 million. Bon Jovi sold tickets worth $176 million. Fellow Jerseians Bruce Springsteen & the E-Street Band raked in $166 million in ticket revenue, and The Police managed $120.6 million in sales. Completing the list of Top Tours in 2008 are Neil Diamond, the Eagles, André Rieu, Kenny Chesney and Coldplay. 
• Steve Jobs decided it’s time to say good-bye to the old pricing dogma of 99 cents per song and got rid of DRM in the iTunes Store as well. Downloads (in the AAC format!) will now come without digital locks at three different price points. Watch for iTunes users predominantly cherry-picking songs at 69 cents. $1.29 anybody?
• Related I: iPhone users can now shop wirelessly at iTunes via 3G (fast, sort of) and EDGE (really not fast at all). Can you hear AT&T and other carriers who are trying to sell DRM-ed OTA downloads cussing at Jobs?
• Related II: Apple so far has sold six billion songs via iTunes. Averages around two billion a year now. 
• The recorded music market in the U.S. remains a battlefield. Album sales were down 14.4% in 2008 at 428.4 million units according to Nielsen SoundScan figures. Digital track sales rose 27% to 1.07 billion units, digital albums gained 32% and sold 65.8 million units. The CD album which still accounts for 84% of the entire business collapsed another 19.7% to 360.6 million copies sold. Vinyl, however, made a comeback to 1.88 million albums (an increase of 89%). 
• More SoundScan I: Album market share (catalog & current combined) leader was again Universal Music with 31.52% of overall sales (slightly down), followed by Sony BMG (25.30%, slightly up), Warner Music (21.38%, up by more than one point) and EMI (8.97%, slightly down). The combined share of independent labels decreased half a point to 12.83%. The same pecking order applies to download market shares. 
• More SoundScan II: The best selling albums of 2008 were “Tha Carter III” by Lil Wayne (2.874 million units), “Viva La Vida”/Coldplay (2.144 million), “Fearless”/Taylor Swift (2.112 m) and “Rock N Roll Jesus”/Kid Rock (2.018 m). Top selling album artist was Taylor Swift who had two titles in the Top Ten for a total of over 4 million sales. The best selling digital tracks were “Bleeding Love” by Leona Lewis (3.42 million units), “Lollipop”/Lil Wayne feat. Static Major (3.161 million), “Low”/Flo Rida feat. T-Pain (2.979 m) and “I Kissed A Girl”/Katy Perry (2.977 m). Top selling digital artist was Rihanna with a total of almost 10 million sales. 
• More SoundScan III: Where does the shrinking number of album buyers get their fix? The mass merchant category (Wal-Mart, Best Buy, Target, etc.) is still #1 at U.S. album retail with a share of 37% (down 3 points, though), followed by chain music stores (i.e. f.y.e.) with a 33% share of the market (also down 3 points) and the non-traditional outlet segment with almost 25% (up 7 points) and indie music stores covering the rest. NTOs include digital, internet, mail order, venue and non-traditional retailers, with digital accounting for 65% of the segment. 
• While 2008 was an annus horribilis for the U.S. record industry, the business accross the pond did far better than expected. BPI figures show the labels sold 133.6 million albums in the UK - a decrease of only 3.2% (some pundits were fearing up to 10%). The singles market was up 33% with 115 million units (mostly downloads) sold. 2008’s best selling album was Duffy’s “Rockferry” with 1.685 million copies. But Take That came awefully close with 1.446 million copies of “The Circus”. The record only had one month to achieve this sum. Even more impressive: The best selling single was “Hallelujah” (a Leonard Cohen cover) by X factor winner Alexandra Burke. The track sold 888,000 units in just two weeks. Overall entertainment sales in the UK were encouraging considering the tight consumer budgets everywhere. The Entertainment Retailers Association (ERA) said its members sold more product in 2008 than ever before. 
• At the RIAA some people started using their brains. The label group decided it’s time to end the witch hunt on music fans. Since the RIAA started suing alleged filesharers in 2003 legal proceedings have been opened against about 35,000 individuals. P2P fans shouldn’t pop the champagne bottles yet, though. The WSJ wrote: “Instead, the Recording Industry Association of America said it plans to try an approach that relies on the cooperation of Internet-service providers. The trade group said it has hashed out preliminary agreements with major ISPs under which it will send an email to the provider when it finds a provider’s customers making music available online for others to take. Depending on the agreement, the ISP will either forward the note to customers, or alert customers that they appear to be uploading music illegally, and ask them to stop. If the customers continue the file-sharing, they will get one or two more emails, perhaps accompanied by slower service from the provider. Finally, the ISP may cut off their access altogether. The RIAA said it has agreements in principle with some ISPs, but declined to say which ones.” Good luck with that. 
• Just when you think reason is taking over, something stupid happens. Like Warner Music pulling their content from YouTube. It’s about the money, what else.
• Meanwhile, Universal Music says online video streaming is making a significant contribution to the company’s bottom line. eLabs EVP Rio Caraeff told CNet that the category was up 80% last year in U.S. revenues. Company insiders estimate Universal’s video streaming business at around $100 million. 
• No surprise then that the majors are rumored to plan their own video streaming service, perhaps in collaboration with Hulu or YouTube – think “YouTube Music” like MySpace Music. 
• Wholesale distributor EUK was killed after administrators failed to find a buyer for the company. 700 people were laid off. 
• As a result of the EUK drama British retail chain Zavvi (formerly known as Virgin Megastores) went into administration on December 24. Some 2,300 permanent staff and around 1,000 part-time workers are in danger of losing their jobs. Zavvi operates 125 stores, HMV is said to be interested in buying some of the locations. 
• Stateside, retail chain Trans World Entertainment (f.y.e.) also experienced a dissappointing holiday sales season. Comparable store sales in the nine weeks to January 3 decreased 14%. Total sales for the period were $287 million (down 24%). TWE closed 18% of its locations during the quarter. 
• What to do when your CD sales are tanking? If you ask Mike McGuire at research group Gartner, all you need to do is let go of the physical format alltogether. Rather than focusing on the the retail CD as a primary revenue generator, McGuire says, labels should move to a “digital first” strategy before Christmas 2009. Well, I don’t know …
• Universal Music Germany bought out joint venture partner X-Cell Records. 
• The highest German Court (BGH) ruled on the licensing of music as ringtones in a case that had been ongoing for years. In short, music publishers cannot ask for a two-tier licensing system that compensates both, the actual recording and the sound editing. Expert comments can be found here and here.
• Prince wants to release three albums this year. All without the help of traditional label means. Physical formats will be carried by one undisclosed major retailer, digital will be handled by one as-of-yet unnamed download store. 
• Removing DRM for download sales at Amazon MP3 so far has failed to put a dent into Apple’s lead with iTunes. But at least they can claim to be #2 now without being heckled. 
• 2009 will be a year of jam band glory: The Dead will go on their first tour since 2004, Phish will reunite and probably play Bonnaroo, and the Allman Brothers Band will celebrate their 40th anniversary with some live shows.
• Last.fm had to lay off 20% of its staff. 
• Anatomy of a flop. GNR’s “Chinese Democracy” at Best Buy? Nobody seems to care. Not even Axl. 
• The Long Tail? Not so long, after all. 
• Michael Robertson (MP3tunes) writes an open letter to Douglas Merrill (EMI). Good read. 
• Sales of Nokia’s “ComesWith Music” cell phones in the UK have been “OK, but not earth shattering”.