Good morning, and welcome to the new Music Biz 2012.
If you’re keeping track, this is also NARM’s 54th Annual Convention. For our newcomers, it is the very first official convention for the hub of all our digital initiatives…digitalmusic.org.
We’re so pleased to bring the event back to Los Angeles…and to the Century Plaza. In fact, it’s only the fourth time that we’ve ever repeated cities…and venues…in consecutive years. And we did it because of your positive reviews.
For the past half dozen years, the NARM leadership has asked the questions and acted on your feedback to inform and guide what I would consider to be a major transformation of our organization.
It was essential that we honored the commitment to our legacy, while also making changes that would coincide with, and even more importantly, anticipate the needs and the reshaped profile of the evolving music business we serve.
Transformation is obviously not as simple as it looks on TV and in movies like The Avengers. Getting angry and becoming The Incredible Hulk, spinning in circles to morph into Wonder Woman or re-emerging from a phone booth as Superman. Our expected metamorphosis hasn’t come without some of our own moments of frustration, or even anger. And I can personally attest that there have been times when it seemed like we were going in circles to get people aligned to advance a specific objective.
Too physical? Too digital? Truthfully, it has sometimes felt, as Ed Christman so aptly observed in his Billboard interview with me last week, like we were in a “damned if we do and damned if we don’t” situation.
I hope you’ll agree that it doesn’t need to be that way and that the association had to make some bold moves. We dove into the deep end of the pool on some issues and initiatives where it seemed we had to take the lead. Being risk averse was not an option. The game plan was to put everyone on notice to expect the unexpected…and then to deliver on that to our members and the industry. In doing so, like Superman breaking out of his phone booth, we have indeed re-emerged in a new form.
So before I go any further, let’s make sure we’re on the same page in terms of this event. It’s where the music business meets. From Dimple to Target… From Atlantic to Alliance…From WIPO to HFA…From Spotify to Super D…From Amazon to Aporia…From Music Hype to Epic…From Microsoft to Muve…From EMI to Universal… There is no better example of a music industry event that is a true commerce and content melting pot. And I want to make one thing crystal clear. The proverbial welcome mat is now, has always been, and will always be there, for anyone and everyone who is passionate about advancing the business of music…physical, digital or mobile.
You are here, so you should be the focus. First and foremost, you set your agenda. We provide the forum and add flavor with our programming, networking, music, and other events. You want to talk with each other about artists and music, where the business is now and where we want and need it to go next week, next month, and next year. So, yes, it is a high wire act of sorts as we navigate the delicate balance of expectations and emotions, frustrations and forecasts, issues and answers. A lot of scrutiny comes our way, not just from within the organization, but from those judging us from a safe distance. And that comes with the territory. But, before I deliver my 2011-2012 Business Review, I want to set the stage by going back to 2008 to an independent consultant’s analysis of how members said they thought NARM could demonstrate its value and continued relevance. Here’s a recap and our scorecard.
You wanted us to bring this event to a music and entertainment business center and help lower costs. We slashed registration fees during the recession, and began making plans to bring the event back to LA. Incidentally, most fees are still at pre-2007 levels. Room rates for the past three years have been under $200 and this year the Century Plaza has given you a discount on all your food and beverage and complimentary WiFi in your room. Plus, we added a Junior Staff rate to provide an affordable opportunity for employees to be here who don’t usually travel to industry events.
You wanted us to help you better understand consumer behavior and provide market intelligence. We organized a follow-up to our popular 2007 study on music discovery behavior last year which I will talk about shortly, as well as created a FREE webinar series that has offered several dozen programs from a range of data providers, sharing market and consumer insights.
You wanted us to be more inclusive of the independent community. On the label front, we partnered with A2IM on three introductory music business courses from 2009 through 2011. Together, we further developed a one-one-one meeting program at every convention to encourage more interaction between the indie label and retail constituencies. A2IM was also the first official Affiliate Partner for the launch of digitalmusic.org. And just yesterday, the Boards of NARM and A2IM met to discuss some possible joint initiatives. On the retail front, we were the first major financial sponsor of Record Store Day in 2009, and have provided advocacy support on various legal and promotional issues. There are actually more independent physical store representatives here this year than in the past five years, and they are engaging with their partners to ensure a healthy and profitable future for physical media.
You wanted us to enhance our PR and social media profile. We retained a New York-based agency with music industry experience and an LA-based social media consultant, and we are commenting and engaging the media and members weekly, encouraging an open and productive dialogue on the business via Facebook, Twitter and LinkedIn. More on this later.
You wanted us to refresh our brand image and better establish digital’s role. We created a new logo and web site, brought in companies representing new models in the subscription, streaming and metrics space and in other product categories like apps and related services, hired a full-time digital strategist Bill Wilson and built the Digital Think Tank, which evolved into digitalmusic.org, and added more digital representation on the Board, welcoming companies such as emusic, Microsoft, Nokia, Spotify, and Verizon. The membership and leadership are pretty evenly split between physical and digital, mirroring the industry we represent.
Now let’s also get some context for the Association’s activities and achievements over the past 12 months by looking at the landscape in sales, public policy and industry developments.
When I spoke to you in May 2011, I was able to share some positive news about music sales for the first time in about seven years.
Adele’s blockbuster album 21 had been in the marketplace for less than three months, but we already knew that something big was happening…and we were right. She earned worldwide critical acclaim, broke through genre and demographic barriers, and may turn out to be the first artist in years whose newest album could reach RIAA Diamond Award sales status of 10 million.
A few weeks after the convention, Lady Gaga’s Born This Way was released to great fanfare. Shortly thereafter, we reached positive year-over-year album sales volume and held that position through year’s end.
In addition to Adele and Gaga, we’ve seen truly stellar results from some other extremely talented and versatile young women with strong, diverse fan bases…
…Taylor, Rihanna, Nicki, Kelly, and Katy, who we will honor tomorrow night. In fact, in the US, female artists dominated most of the top spots in albums and digital track sales and revenue, as well as airplay.
For the first time, RIAA reported that in overall sales for 2011, digital edged slightly above physical products. Track and digital album sales were up significantly in volume and revenue over 2010, and subscription services revenue and users also hit new high marks. More than 100 million digital albums were sold in one year for the first time.
Vinyl continued its upward trajectory…and even the decline in CD sales was stemmed considerably, due in large part to sales of catalog. RIAA is also including royalties from the synchronization of recorded music in movies, TV shows, video games, and other media to better reflect music’s overall commercial impact.
As we look at where we are now in 2012, with the current crop of groups like…Fun., One Direction, The Wanted, and Big Time Rush building momentum, not to mention highly-anticipated new albums from Justin Bieber, could the Pop music pendulum be shifting in the guys’ direction this year?
As of this week, while we still find ourselves in the plus column for tracks, digital albums and TEAs, as well as vinyl, overall album volume year-over-year has slipped just a bit to a near-flat position. Let’s keep our perspective that a year or two ago, that in itself would have been enough to pop the champagne corks. So, I’d say a spirited competition among today’s young Pop stars for the top of the charts would be great for fans and an energizing opportunity for the industry as a whole.
Even though we’ve seen some encouraging sales results in the year, let’s not forget that the industry still remains less than half the total value seen at its high in 1999 due to the massive theft of intellectual property that continues not just here in the US, but worldwide.
So it was particularly encouraging when RIAA announced last summer that a number of leading ISPs had agreed to implement a graduated response system to help educate consumers with an eye toward reducing copyright infringement violations. According to the newly-formed Center for Copyright Information, it looks like this Copyright Alert System program is on track to begin implementation in the next few months.
NARM has also joined with nearly two dozen industry trade groups to express appreciation to the Department of Justice for its recent investigation and enforcement action against Megaupload.
This marks an important milestone in the effort to secure a legitimate online marketplace for consumers, creators and commerce partners. According to a recent Commerce Department report, industries that depend on intellectual property directly account for 27 million American jobs, or 19% of total US employees. Those industries account for $5 trillion in value added to the US economy, which is 35% of total GDP. So finding solutions is not only important for our industry, but for our country’s economy as well.
Fostering the legitimate commercial marketplace has always been something NARM supports and encourages. So we applaud the recently-announced agreement on mechanical royalty rates intended to cover current music formats and new product and service categories.
The standardizing of rates and terms encourages innovation and fosters growth of new digital and physical products and services in the marketplace, giving consumers more choices around the music they love. Our members look forward to engaging in the next steps of this process as they look at how these new rates and terms will figure into their own visions for the next decade of creative and competitive music delivery.
Also along these lines, we hosted a standing room only meeting here yesterday of the World Intellectual Property Organization’s “Roundtable on the International Music Registry and Copyright Infrastructure in the Digital Environment.” Our VP Bill Wilson is digitalmusic.org’s liaison to this group.
The first IMR event in North America, this get-together provided an opportunity for participants to discuss the current trends and prospects for the IMR’s evolution and help illuminate copyright law at a time when there is more uncertainty than ever about what copyright means on the Internet.
In 2011, we saw the long anticipated US introduction of Spotify and Muve, as well as the entry of Facebook into the music arena. Not to mention new business model developments at Amazon, Google and iTunes.
And after a relatively quiet period of consolidation, the major acquisition of EMI’s recorded music and publishing divisions by Universal and Sony, respectively, made headlines. Most recently, INgrooves purchased Fontana. We’ll hear more about that deal when Ian Rogers interviews Robb McDaniels later this morning. And IODA and The Orchard have merged.
Is blending trending? The smart money would say yes, but I guess we’ll have to wait and see.
But you don’t have to wait to see and hear what’s been going on at NARM over the past twelve months and what we have in store for the coming year.
We officially announced the debut of digitalmusic.org in September 2011 at SF Music Tech. As the hub for all of our digital initiatives, there are six working groups that have been active and engaged tackling topics around monetizing online music.
With our hiring of former Billboard digital specialist Antony Bruno last fall, we have accelerated our efforts to help bring both improvements and change.
One of the first work groups established under the Digital Think Tank was dedicated to digital supply chain and operations. After exhaustive research and due diligence with our supplier and digital retail members, an industry white paper highlighted the challenges and needs in this space. The group decided that the best course of action was for NARM to rebuild our legacy physical EDI database into a robust Product Platform and completely revamp it to resolve many of the current problems found of the business.
Last year, we showcased a preliminary version here at the convention. Since then, in November 2011 we re-launched the physical database to include cleaner and more complete information, further underscoring our commitment to the format’s important role in the industry, and finished software development for the digital side.
Currently, we are ingesting massive amounts of digital product from all of our suppliers to create a centralized music product metadata repository which is usable by any retailer as a resource and a base on which to build countless new member services.
These include resolving UPC collisions, managing rights revocations, creating a registry of GRiD and DDEX DPiD’s, and identifying the “newest” iteration of a release with multiple versions.
And here’s something every company with limited bandwidth and shrinking headcount can sink their teeth into: Each year there are so many music events and festivals such as the Grammys, Coachella and the CMAs just to name a few, around which music must be promoted and merchandised. Starting today, NARM and digitalmusic.org members can sign up online to subscribe to an automated list of physical and digital products, matched to those industry events. This will save you and your staff countless hours in re-keying and searching to cross promote nominated, winning and performing artists and music.
The last year has seen an explosion of both subscribers and traffic to music services. It is essential that we pay close attention to how this segment of the business is contributing to the industry’s growing digital revenues around the world.
The Subscription Music Work Group spearheaded the creation of the first-ever subscription services “On-Demand Songs” chart with Nielsen BDS and Billboard. Announced during South By Southwest in March, the new chart is available on the digialmusic.org website and on Billboard.biz.
This new chart measures every on-demand request and plays from listener-controlled radio channels on Work Group member companies MOG, Muve Music, Rdio, Rhapsody, Slacker, and Spotify. Sony Music Unlimited and Microsoft Zune’s data is expected to be integrated shortly.
Further, on-demand streaming data is now factored into the tabulation of the Billboard Hot 100 rankings, enhancing a formula that includes digital download track sales and physical singles sales, as tracked by Nielsen SoundScan; as well as radio airplay and other streaming services, as tracked by Nielsen BDS. Never in the 50-plus year history of the Hot 100 have music fans had more of an influence on the chart’s rankings as they do today.
We launched the new Music Start-Up Academy in April 2011 to educate entrepreneurs about the basics of the business and to bring the next generation of legal music products and services to market faster. The first series of classes at co-working space General Assembly in New York was a success, so we made plans to take the show on the road in 2012. With the presenting support of the new Application Developers Alliance, we have held events in February at Rdio’s headquarters in San Francisco; at SXSW and, most recently at the storied Qwonset Hut recording studio in conjunction with Belmont University and the Copyright Forum in Nashville. It’s ready to head to Los Angeles, Boston, back to New York, and to DC among other cities.
With the support of our Apps & Gaming Work Group, we have just announced the next installment of the Music Startup Academy will focus on game developers. It will take place at the Grammy Museum here in LA on Wednesday, June 7 to coincide with E3. This Work Group is also looking into a matrix of music-app related APIs to help not only broaden the exposure of music app innovations, but to more easily give labels, artists, and managers quick access to the app development resources at their disposal.
And, as you saw when you entered the room this morning, we’re introducing a new pop up demo and display area today, App Alley, to showcase companies as varied as Mashery, Bandsintown, Fanzillo, and Thefuture.fm.
The Contextual Metadata Group may be just about the only place where it is going to be possible to work on the metadata issues in the entire supply chain.
We already have The Recording Academy, RIAA and DDEX at the table. According to Co-Chair Paul Jessop, with this level of collaboration, we may be in danger of actually making progress on getting metadata to “flow like water” from the mind of the creator to the eyes of the consumer.
Yesterday, we held the first-ever Town Hall on Metrics to begin exploring exactly how all the new customer data available can be used, what measurement tools are working and what holes still exist. With all of this data, it is time to more fully understand the customer and to create better offerings. Going forward, this Work Group will create a special data and metrics learning center on the digitalmusic.org website where there will be white papers and archived webinars.
In the past eight months, digitalmusic.org has now grown to include not just our own members but the affiliation of a number of industry trade and professional groups such as A2IM, AFTRA, Application Developers Alliance, BMI, DDEX, HFA, MRI, The Recording Academy, RIAA, SESAC, and Sound Exchange.
And just last week, we announced that we have crossed the pond as we are teaming up with our sister organization the Entertainment Retailers Association for digitalmusic.org/UK. Despite digital music’s surging growth in the UK, there are still a number of key business issues to be resolved and we are delighted to be able to pool resources and expertise with our colleagues there. My counterpart, ERA Director General Kim Bayley, who is here with us this week, will serve as digitalmusic.org UK’s Director.
Just as we both had a shared interest in making Record Store Day successful in both countries to support independent retail, we see the need to jointly promote the health of the digital music industry. Many of the members of both our organizations are global players, and it’s critical we expand our horizons to address issues on that scale. The first agenda-setting meeting of digitalmusic.org UK will take place on May 29 in Central London under the chairmanship of Ben Drury, CEO of 7digital and Deputy Chairman of ERA. This will be followed by the UK chapter’s first Music Start Up Academy, which will take place in the autumn.
Last year, the Research Committee strongly advocated to update the 2007 study on music discovery among US consumers.
So we partnered with the major music companies and our member Alcatel Lucent to commission NPD to look at the level at which consumers are engaging with music, and consumer listening habits. The report was issued in November 2011 and is available to all NARM and digitalmusic.org members.
What did we learn?
- Music discovery remains as relevant and important as ever, and in fact, 80% of respondents report that discovering music makes life richer.
- 10% of musically active consumers account for nearly half of all music purchases.
- AM/FM radio remains the main source of discovery for consumers across all demographic and buying segments. But the lack of back announcing is a critical deficiency. In fact, three out of four consumers who hear a song and just wait to hear it again, claim they would shop more if there were more announcements of song and artist information.
- Visual influencers such as scripted TV, competition shows, award shows, web-based music video channels and movies taken together come close to matching radio’s impact, but consumers also want more information from these sources of discovery.
- Social media, apps and other digital influencers are gaining traction but still not mentioned by a significant portion of consumers.
- Interest in cloud based services rockets among the most engaged music consumers.
- “Superfans” value ownership, whether physical or digital.
Since the study was done prior to Spotify and Facebook entering the music mix in the US, I’m sure the ranking of discovery influencers will continue to evolve. And with TV and other visual media becoming even more powerful marketing tools, we are having dialogue with industry groups representing these areas to explore how we can address consumers’ concerns. How do we better facilitate the discovery process and next steps to monetization by ensuring information about the songs and artists is more readily available and easily accessible. This is why we are having a round-table this afternoon in partnership with Ted Cohen and TAG Strategic bringing together some of the key players to address the challenges and opportunities of TV and the connected consumer. And we’re talking with the National Association of Broadcasters about the back announcing issue.
NARM continues to be a major supporter of Record Store Day because physical stores contribute so much to local communities and culture as well as our industry.
The fifth annual event on Saturday, April 21 raised the bar over previous years, spiking global sales with stores reporting double-digit increases from last year from as much as 10% to 50%. With more than 300 special releases and over a million people turning out to celebrate around the world, Record Store Day 2012 was outstanding in every way, and we congratulate all of the organizers and participating businesses.
The Back To Black Friday event at Thanksgiving is yet another example of the unique and vibrant contributions these savvy retailers bring to the table to excite their customers and support the music industry as a whole.
While the Record Store Day events take place twice a year, the Give the Gift of Music program is alive and well 365 days a year with a dedicated web site and social media component. We highlight stories about all of the many ways that music is used to enrich people’s lives through charities, special events, tributes, and so much more.
Two of our most notable campaigns in 2011 were…
Countdown to the CMA Awards, featuring Taylor Swift and other artists and a contest where fans got to write essays about how a nominee has inspired them. Among the winners were stories from a speech pathologist who used Lady Antebellum’s music to help one of her deaf students to express himself; a mother who watched her daughter emerge from the devastating aftermath of physical abuse thanks to Taylor’s inspirational songs; and a wife whose bond with her husband was strengthened through the words and music of Blake Shelton.
And a holiday campaign featuring Michael Buble where fans told us how the music during this magical season of the year has made a difference in their lives. Among the winners were stories about how long lost friends were reunited after one of them sent the other a song they recorded together in high school; how a gift of a music player from her parents helped a girl overcome her homesickness after relocating to Japan where her father was stationed; and how a husband helped arrange a session for his wife who wanted to record a handful of songs for her ailing mother.
With your ideas and especially support from the artist community, we can continue to expand and enhance this worthwhile program in the year ahead.
It’s important to us and to the industry that the media and membership gets a balanced view of what’s happening in our business and at our association via all of the current communication tools available. And when earnest cheerleading is needed, ours is unabashedly the loudest voice you will hear…on a daily basis if necessary!
We are committed to bring you data, insights and viewpoints, both here at the annual event and during the year, because we can all learn from each other.
Our online seminar series provides research, product presentations, and opportunities for case studies and dialogue every month.
Our Entertainment & Technology Law Series, established residence in New York, bringing in the top legal experts to talk about the most current cases and business challenges. We are also looking at ways we might modify and customize our Music Startup Academy curriculum to bring it to member companies as part of their orientation and training programs for interns and new hires in person or online.
So you can see we’ve been pretty busy. But never too busy to take a moment to remember and pay tribute to some of those we have lost.
As you all know, sadly we are mourning the death of Adam Yauch from The Beastie Boys. In the past six months, six other very special people who were honored by NARM for their creative and business achievements through the years passed away:
- Jerry Leiber, who with his lifetime songwriting partner Mike Stoller received the Outstanding Achievement Award for Musical Collaboration in Chicago in 2010.
- Nick Ashford, who with his wife and songwriting, producing and performing partner Valerie Simpson, received that same Award in San Diego in 2009.
- Don Cornelius, the legendary producer and host of Soul Train received the Presidential Award for Sustained Executive Achievement in Chicago in 2007.
- Dick Clark, the visionary entertainment entrepreneur and impresario, hosted many NARM events through the years including the 10th, 30th and 40th anniversary awards banquets, received the Presidential Award in San Francisco in 1998. It was one of the great privileges of my career to know and work with this amazing man.
- Davy Jones, who performed at NARM as part of The Monkees and took home several Best Seller Awards. On a personal note, the very first album I ever received as a gift, for my 10th birthday, was Meet The Monkees.
- And…Whitney Houston, who was introduced to the industry at NARM by her mentor Clive Davis in the mid-1980s, and was subsequently honored with many NARM Best Seller Awards.
In closing, I can assure you we will be refreshing our curb appeal because it attracts new companies to our community. More than 70 newcomers are here this year, providing you the chance to discover partners to profit in the music space. But to keep everyone engaged, you’ve got to have more than curb appeal.
We will help cultivate ways to help drive music commerce in new directions, whether innovating the physical media experience and value proposition, or enhancing the digital marketplace. That’s a promise. It’s what consumers want and what our mission and members demand. And, like all businesses, we look for our own new revenue opportunities to ensure we have the resources to serve you effectively in the years to come. In its Music Biz 2012 issue, Mark Pearson of HITS posed the question as to whether the industry has turned a corner. Most of you were justifiably cautious in your responses. Personally, I am bullish on our prospects. But, regardless of whether we have turned this corner, we don’t know what’s around the next one. What we do know is we can never turn back. With the leadership of your Board and staff, your Association will be here to support your businesses, respond to your concerns, engage people and develop consensus, and take action to nurture this business we all love so passionately.
Have a great Music Biz 2012!