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Music Labels Continue to Ignore Basic Economics

Friday, March 10, 2006 | 11:55 AM

It continues to astonish, but the recording industry STILL does not have a clue WTF they are doing. Utterly amazing.

A story in the NYT Thursday reveals that the actual levels of business knowledge and economic understanding that exists in the recording industry. The answer, it turns out, is nonewhatosever.

Proof for this revelation is what the RIAA braintrust now thinks is hurting CD sales: its legal digital downloading that is holding back CD sales. Not illegal P2P, as the RIAA likes to tell us, but legal sales!

Consider:

NYT: As blockbuster hits go, the R&B smash "So Sick" is hardly new territory for the 23-year-old singer known as Ne-Yo. Before crooning the song on his own album, he was a co-writer on the 2004 chart-buster "Let Me Love You" for the singer Mario.

But there's one big difference: even though fans could hear "So Sick" on the radio for the last two months, they couldn't buy it at popular online services like iTunes or Rhapsody, or anywhere else for that matter. Breaking from the music industry's current custom, the singer's label — Island Def Jam — decided not to sell "So Sick" as an individual song before Ne-Yo's album hit stores last week. Label executives worried that releasing the track too early might cut into sales of the full CD — a fear that figures heavily in the music world's lumbering entry into the digital marketplace.

The results of fans' pent-up demand for Ne-Yo are now clear: his CD "In My Own Words," burst onto the national album chart yesterday at No. 1, with sales of more than 301,000 copies, easily ranking as the biggest debut of the year so far. And just as eye-popping: the digital single of "So Sick" sold almost 120,000 copies in its first week, according to Nielsen SoundScan."

Let's ignore for the moment the collossal business savvy reflected there: Even though our customers have demanded digital downloads for nearly a decade now, LETS NOT GIVE IT TO THEM. My physician has advised me to avoid these absurdly perverse discussions without consuming healthy doses of valium prior.

Instead, lets consider what is being ignored by the industry -- its amazing that the focus remains in the wrong place.

The rocket scientists in the recording industry would have you believe it was all the pent up demand that led to all those sales, because they held back downloadable singles. I guess that means the other all the CDs that opened big that also allowed downloads were anomolies (um, not).

You have a read little further down in the article to get to the true reason for the very strong CD sales of Ne-Yo's CD "In My Own Words" :

"There is still plenty of debate over the effect of holding off on sales of the digital single; many also note that Island Def Jam offered a discount to retailers who stocked the album, allowing it to sell at stores like Target for $7.98 last week." (emphasis added)

Holy snikes! In case you missed that small detail, allow me to repeat it for you: The CDs were sold for

$7.98!

$7.98!

$7.98!

Unless you go to Amazon, in which case it is $7.96

How much more obvious does it have to be to get these microencephalic idiots to realize they have priced themselves out of the mass consumer market by charging $15.99 per? How many more brick and mortar retailers have to go belly up before they get a clue?

Consumers have long ago figured out that CDs as sold by the major labels represent a poor deal for the dollar. How many times can I buy a CD soundtrack (Hi-Fidelity, Garden State, The Big Chill) that costs more than the DVD of the film?

Whether a CD gets played mre than a DVD is irrelevant to the person standing in Target, with a 45 minute audio CD in one hand ($15.98) and a DVD of the same -- 2 plus hours of Audi/Video Movie, plus hours more of interviews, outtakes, directors commentary, etc. for the same or less money.

The bottom line is while all other media entertainment has dropped in price or given you alot more for the same price -- games, DVDs, internet, software, etc. -- CDs retain their prior price point. In the fiercely competitive market for consumer entertainment dollar, they Recording Industry has simply become non-competitive.

Economics 101 is why CD sales have slid so perniciously. Until sub $10 CDs become the norm, I expect to see the slide continue.

Amazing that these guys are allowed to run companies; If it were up to me, they should only be handling rounded safety scissors . . .

UPDATE March 10, 2006 3:43pm

I almost forgot -- this is the music industry -- these guys are anti-competitive, serial price fixers. First with CDs, and now they stand accused of price fixing digital downloads.

No wonder the whole concept of competition is so foreign to them!

Source:
Labels Halt Downloads to Increase CD Sales
JEFF LEEDS
NYT, March 9, 2006
http://www.nytimes.com/2006/03/09/arts/music/09sing.html