Sunday, August 06, 2006


Day two of NARM's annual meeting started off with a brief presentation by president Jim Donio, where he gave an insightful overview of the industry and shared several ways in which NARM is trying to help its members. For example, the organization's Media On Demand task force has evolved into a broader Digital Entertainment Council to deal with the wider range of challenges facing the industry. Key advocacy priorities on the horizon are: music licensing reform (i.e., SIRA), Anti-piracy, improved ratings & labeling as well as more emphasis on artist development. Donio also announced that next year's Spring NARM meeting will be held in Chicago from April 29 - May 2nd.

Last week's sales numbers were not pretty. According to Nielsen SoundScan figures, physical album sales were the lowest they've been since January 1994. Although physical CD sales continue to decline when compared to last year's numbers, the simple fact is: America's passion for music remains. With the plethora of entertainment choices brought on by new technology, this basic passion has evolved though and retailers need to continually adapt or get out of the game. [Too many choices = situational shopping.] Any business that's going to be successful needs to have parallel paths.

One of the main challenges the industry faces is how to get the consumer 'off of the couch' with so many entertainment choices. To effectively meet this challenge, retailers need a much more sophisticated understanding of their shopper base. In addition, NARM's members need to
work tirelessly with the distribution companies to raise awareness of new product releases, especially for new media formats.

Another industry-wide problem is that the configuration of certain CD/DVD sales data may be misleading when you actually sit down and try to analyze certain data trends. For example, are CD's that are included with DVD box sets counted as CD sales or a DVD sale, etc...? With all the numbers flying around this year's conference, it's interesting to note that ringbacks, subscriptions, kiosks and streaming sales are not normally factored into the music industry's overall sales figures. This is due to the fact that Soundscan only reports on album sales and digital song downloads. However, from a macro level when these additional sources are factored in, there are many new types of revenue streams that help paint a much brighter picture for the health of the industry.

The "State of Music Retail Discussion" consisted of several big box retailers including Gary Arnold, Sr. VP of Entertainment from Best Buy Enterprise and Darrell Tucker, VP Merchandising, from Target Stores. The general mood was positive - although Arnold thinks that the overall retail industry is "choppy", especially when considering the fact that Best Buy made more money last year selling MP3 players than CD's. John Marmaduke, CEO of Hastings Entertainment, stated that "CD burning and increased competition from video games are the driving forces behind the lagging sales and digital by itself - is not a bad thing...We've got to figure out how to make a living selling the long tail artists....Formulaic promotions may help (i.e., focusing on the 80's slice of the catalogue)."

During the same panel it was also mentioned that reversing the multi-year downward sales trend can possibly be achieved through the practice and execution of flawless category management and product mix modifications. In other words, if the retail experience is designed and delivered effectively - consumers will still patronize retail stores. Case in point: people don't necessarily go to Starbucks just for the's for the EXPERIENCE. However, changing the retail experience requires a lot of effort - which will no doubt result in some heavy experimentation and failures. During this transitional phase, one of the keys to success will be to stay flexible.

According to Target's Tucker, "the digital format was chosen by the consumer in a non-retail friendly way, so we're going through a cultural shift as a result and we're now only at the tip of the iceberg." Digital IS the revolution and no one company or entity will own the music business in totality.

Today's youth are hungry for content and knowledge about it. The fact is, kids aren't hanging out anymore at listening stations in the stores. With hundreds of new releases every year, how is the consumer to know or choose what to buy? Any customer assistance in this area would be helpful and welcomed. Thanks to p2p and the internet though, the average consumer now knows more than most music store clerks. Best Buy is aware of this problem and has over 7,000 employees tasked specifically to media. Basically, they're trying to create a community inside the company where these media employees can share and inspire one another.

According to Maramaduke, "The music industry needs to figure out that you can't continue to do business the old way and wait to release all of your best titles in the 4th quarter. Music can't effectively compete with video and video game sales because they own this part of the fiscal year because they spend over a billion dollars in advertising...Unfortunately, the music industry isn't based on research - It's based on habit."

The morning session ended with a keynote by Chris Sacca, Google's Head of Special Initiatives. Sacca said that "the big opportunity in digital music is in developing the ecosystem: one that allows consumers to move content from the home to the car and between devices with ease." I couldn't agree more. Google appears to have reconsidered rumours of it's desire to make a retail play in music and is putting the brakes on music and other areas of digital entertainment, which I'm sure was a sigh of relief for NARM members.

The a2im's acting presdient Don Rose hosted the "Indie Show" skit in the afternoon which was tailored after David Letterman's show. Licensing opportunities in new arenas were discussed amd the humorous approach was quite refreshing. Attendees heard from Bob French, Mix & Burn, Adam Sexton, Groove Mobile and Amaechi Uzoigwe, from World's Fair.

To end the day in style, the Sony/BGM cocktail party was held on a massive 60 foot sailboat moored in the Gaylord's salt water lagoon and was as tropical as you could get without the humidity. (The entire resort is housed under a gigantic glass dome resulting in a theme-park- like atrium atmosphere with no insects and cool air conditioning everywhere you go).

Also noteworthy for NARM's history book, Sprint was onsite mobile-casting some of the nightly performances directly onto its Power Vision network. Loyal fans who couldn't make the show could tune in to a channel on Sprint TV and watch the performance stream live on their cell phones, which is an interesting new broadcast channel and delivery method...

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