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Friday, February 13, 2009

Muzak Hits The Skids

The elevator background music company Muzak has filed for bankruptcy, stating that although they had reasonably good revenue, debts from more than a decade ago were forcing them to restructure.

I'm shocked that this company is still around. It's pretty easy to choose an  XM Radio channel to do the same thing (although XM/Serius may file bankruptcy soon as well), and companies like Truesonic and Play Networks have better technical and business models and are hipper too. Word is that the company survives mostly because of very long-term contracts with it's customers.

Muzak's bankruptcy isn't really about their product, as much as many musicians and consumers would like it to be. It's more about the current credit crunch and how difficult it is to refinance debt.  As a result of the bankruptcy, all equity will be wiped out for the shareholders as Muzak restructures in an effort to emerge on the other side with a cleaner balance sheet.

But most of us would still prefer to think it was all about the what they did to the music that pushed the company to the brink.

Thursday, February 12, 2009

5 Reasons to Hate The Live Nation and Ticketmaster Merger

If ever there was ever a reason for anti-trust legislation, this is it. The boards of concert promoter and artist management company Live Nation and the hated ticketing agency Ticketmaster have approved a merger, with the new company to be called Live Nation Entertainment.

How can this be anything but bad for the pocketbooks of concertgoers? In an era when more competition would be a good thing, we get less.  Ticketmaster draws the ire of customers by adding various "convenience charges" to the face value of the ticket, usually increasing the overall costs by 25 to 33%, depending upon the face value of the ticket. A recent post to the Leftsetz newsletter talked about a $12 advanced sale ticket to a club ($14 at the door) that wound up costing $21 as a result of service fees, or more than the day of show price.

OK, so what's so bad about this merger?  Let me count the ways.

1) You think that ticket prices will go down as a result of the merger? Guess again. No competition means no incentive to lower prices.

2) Up-selling. The customer list of the combined companies will be huge so expect the new company to use them to up-sell the customer to extract every last $$$.  Limo to the concert? Hotel party room? New CD or digital download by the artist? You'll get a chance to buy it all in addition to your ticket. Don't expect a discount though.  That's not the Ticketmaster/Live Nation way.

3) Secondary ticket sales. If tickets to a concert are sold out, you'll be directed to a fan-to-fan ticket sale site to buy a ticket at scalper price. Guess who gets a piece of this? This is already happening with TicketsNow (which is owned by Ticketmaster) but expect it in a big way soon. In fact, there was a pretty big dust-up with Bruce Springsteen just last week in this regard.

4) Ticket fees included in the face value of the ticket price. I'm surprised they haven't been doing this all along.  If there's only a face value price that you're paying, you have no idea what the extra charges are. Unfortunately, they could be a lot higher than even what we're now used to paying. They'll be charging more but you'll think that you'll be paying less!

5) Have you ever seen a company get bigger and provide better service or products for the consumer as a result?  A public company is in the business of selling its stock, not its products.

From a legacy artist standpoint (coming from Live Nation's management) this deal is probably a good one. There's an economy of scale in terms of ticket sales and the ability to make a lot more money. That doesn't necessarily help the business though, since what it really needs is artist development.  Helping already well-off legacy artists make more $$$ isn't a long term solution.

At least this merger is not the sure thing it probably was during the Bush years. It's too early in the Obama administration to predict how they'll deal with an antitrust case though.  And since the merger was announced, both company's stock prices have taken a beating, so Wall Street isn't convinced either. Only time will tell if the merger is to be granted or not, and how much it will end up costing consumers.

Wednesday, February 11, 2009

Sponsored Artists - Wave of the Future?


Avril Lavigne's manager Terry McBride thinks that sponsors like Coke or Doritos will replace record labels in the future, according to a recent article in The Register. This sounds totally plausible, since a major brand has plenty of advertising money that they can easily supply to an artist's recording and touring budget, while the record labels of the near future can probably only allocate a similar budget only to their biggest selling acts.

If this prediction comes to pass, it will push music further into the doldrums, since it only makes sense for a major brand to back an established artist. Artist development (which is what the industry really needs most these days) will really be a thing of the past.

So it's no surprise that major label EMI announced that it will begin exploring brand advertising  partnerships for their artists, which really puts the onus of ethics on the artists themselves. It begs the questions: Can an EMI artist refuse a relationship with a brand if she finds the brand doesn't share her world view? Can an EMI artist refuse a relationship with a brand if the dollar split isn't high enough? Can an EMI artist refuse a relationship if the whole idea of sponsorship lies outside the artistic viewpoint of the artist?

Madison Avenue is increasingly responsible for dictating musical tastes in America, as evidenced from everything from radio to television to print. Will sponsorship finally drive the mainstream music industry over the brink of relevance?


Tuesday, February 10, 2009

DVDs Now In The Same Sinking Boat

DVDs are finally catching up to CDs in terms of plunging sales as 4rth quarter shipments in the US and Canada fell 32% to 454 million units sold. That drop is the worst since sales of DVD began being tracked in 1997. The sales decline is being attributed by analysts to rental services like Netflix and streaming Internet services.

Predictions of an 11% drop in units shipped for 2009 has the major studios re-thinking their movie strategies, since a large portion of the income stream from a movie has come from DVD sales in recent years.

But what's being overlooked is the fact that most of the income has come on the back of the studios catalogs (older movies that are just being released on DVD).  As with the music business, catalog sales are basically an inexpensive source of rather large cashflow, since there are no production costs and usually only small marketing costs (compared to a blockbuster movie) involved.  But as with the music business, once you've released every title in your catalog on DVD, you're stuck with only the movies that you're currently making, and that might not be enough to make the consumer part with his hard earned $$, especially in this economy.

Some in the film industry think that Blu-Ray is the DVD's replacement, but they're in for a surprise. Why should Joe Sixpack part with his dough for an expensive player and discs when his current DVD is working just fine?  The picture is "good enough", which is just what the record labels heard when they tried to introduce the SACD and DVD-A on the basis of superior quality.

The music industry failed miserably when their catalogs ran dry, their replacement technology failed, and new technologies began nipping at their heels. What will the film industry do?


Monday, February 9, 2009

20 Most Popular Facebook Artists

Here's a list of the 20 most popular musical artists on Facebook according to Allfacebook.com. Take notice that there's no new act that you could qualify as "breaking" via Facebook on this list.

1. Rihanna (1.52 million)
2. Coldplay (1.49 million)
3. Lil Wayne (1.34 million)
4. Linkin Park (1.33 million)
5. Chris Brown (1.3 million)
6. Metallica (1.22 million)
7. Pink Floyd (1.16 million)
8. Bob Marley (1.13 million)
9. Red Hot Chili Peppers (1.12 million)
10. Justin Timberlake (1.05 million)
11. AC/DC (997,000)
12. Daft Punk (912,000)
13. Beyonce (906,000)
14. Queen (900,000)
15. Evanescence (873,000)
16. Jonas Brothers (843,000)
17. Radiohead (793,000)
18. Kanye West (792,000)
19. Katy Perry (791,000)
20. Akon (753,000)

This list illustrates that you still need some marketing muscle behind you to make a significant dent in the high end of the music business as far as visibility is concerned. For all the hopes of star discovery and distribution expected of the Internet, it's still mostly unrealized potential.

Sunday, February 8, 2009

The Grammy Awards Show


Something has to change with the Grammy Awards Show. It's too slick, too TV, too Hollywood to be relevant in a way that's required of music today. 

Forget about the awards themselves and their voting for a second, the Grammy broadcast should be the music industry's best showcase; the show that keeps old fans coming back and brings in new ones. Yet each year the show grows more out of touch.

Yes, they try to be as hip as they can (and there are truly some the hippest industry people in the organization), but instead of the irreverence of the true artist we get the craftsman trying to play it safe, which ends up not pleasing anyone.

What to change?

1) Change the lighting for one. Go to any concert and what do you see? Lots of darkness, depth and shadows, that's what.  See any shadows or contrast on the Grammy show?  

2) Let's make it look like a concert, where the performers are bigger than life. Forget those wide shots and give me close ups from low angles.  Don't think TV, think performance. Go watch Woodstock for a template.

3) Can the inane banter. No jokes, no small talk, just get down to business and we'll all be more comfortable.  Some of the so-called jokes last night were enough to make you squirm.

4) Stop those contrived artist pairings. They all feel like they've been scotch-taped together. I'm all for it if there truly is a synergy between artists, but most of the time it just feels like they're thrown together in order to get as many names on the program as possible.

5) When award shows go wrong is when they're asked to be television events. They're not, so don't even try to make them so. The Grammy's is no exception. If you can't make it big enough to play to the viewers at home, then at least play to the people in the arena. At least play to someone, because right now it seems that no one is satisfied.

Maybe it's not possible to make the Grammy broadcast a true event.  Maybe it never was, even in the beginning. If that's the case, let's dumb it down and give it back its dignity. Or send it to cable where it can be itself without the network ratings expectations.

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