Ethan Smith. Wall Street Journal. (Eastern edition). New York, N.Y.: Jul 15, 2005. pg. W.1
[With album sales down, record companies are touting their big acts, hoping fans will pay for entire discs by Foo Fighters or Springsteen. But Ethan Smith asks: Should we just buy the single instead?]
AMELY GREEVEN rarely ventures into music stores and hasn't replaced the iPod she lost in January. When Ms. Greeven does pick up new music, she becomes the kind of customer the recording industry is desperate for -- one who buys entire albums, not single songs.
"It would never occur to me to pick through an album song by song," says Ms. Greeven, a 31-year-old marketing consultant and writer in Los Angeles who usually buys music online. "I still take the leap of faith and buy the whole thing."
With album sales down almost 8% this year and single downloads continuing to rise, the $34 billion recording industry is in a fix. How can it keep consumers buying compact discs, which account for the bulk of the industry's revenue, but still satisfy the expanding audience that wants to cherry-pick hit singles? In a nod to the inevitable, labels are working to make more single tracks available through downloading, subscription services and even deals that one day will allow consumers to download music onto cellphones. At the same time, the industry appears to be placing its larger bet this summer on the familiar names they think still have the power to sell entire CDs -- from Coldplay's adult-friendly "X&Y" to Bruce Springsteen's acoustic "Devils & Dust."
Which poses a crucial question for consumers: Is it worth buying the whole CD -- or just a song or two? To find out, Weekend Journal asked retailers, radio programmers and record company executives to help us sort through summer's big releases for a good cross-section of rock, country, pop and hip-hop. Then we ran the albums by a few of the most experienced ears in the industry, including the colorful Walter Yetnikoff, former CBS Records chief executive; Emmanuel "E-Man" Coquia, music director at Power 106 FM in Los Angeles, an influential hip-hop station; and "American Idol" judge Randy Jackson, who is a producer and musician.
The panelists weighed in in favor of buying rock group Nine Inch Nails' new "With Teeth," even though the band is encouraging fans to download the album's remixable cuts "Only" and "The Hand That Feeds" for free, using Apple's GarageBand or other specialized software. On the other hand,
they gave a thumbs down to the Foo Fighters' two-CD set, which sold more than 500,000 copies in its first three weeks in stores. (Their complaint: not enough material to fill two full CDs.)
These days, even recording-industry executives acknowledge privately they alienated some consumers by resisting single-song sales for so long -- frustrating people who felt they had to pay $15 for a full CD when all they wanted was a single cut. But analysts believe that change is afoot. "We're going to see a lot of pop music returning to singles, and that's going to shake up the industry," says David Card, a senior analyst at Jupitermedia Corp.'s Jupiter Research. Nearly all of the labels are trying to make music available in as many forms as possible, starting with more product on services such as iTunes, which sells about four-fifths of all legal music downloads, as well as Napster, Rhapsody and AOL. Most of these services charge 99 cents a song, with Wal-Mart's rate a dime cheaper.
Napster, Yahoo and Rhapsody offer "all you can eat" subscriptions, where consumers pay a flat monthly fee between $6 and $15 for access to an unlimited amount of music. As for the cellphone downloads, they're still a ways off. The plan eventually is for consumers to be able to download songs from a special service, directly to handsets -- just as they do with MP3 players. (The phones will probably have limited ability to store songs, more along the lines of Apple's iPod Shuffle). Apple and Motorola have built a prototype for a hybrid iPod- cellphone, but its commercial rollout has been delayed.
For now, record executives are sticking to CDs because that's where the bulk of their revenue lies -- even though the margins on digital sales are better than CDs. On average, labels collect $10 to $12 a unit on CDs that retail for an average $15, but they have to pay for manufacturing and shipping, and handle unsold discs returned by retailers. Digital sales sidestep those costs, plus the industry takes in at least 80 cents for a track that sells for 99 cents online. Still, even a recent optimistic forecast from PricewaterhouseCoopers shows that by 2006, digital sales (including cellphone ringtones) will account for no more than 25% of the industry's projected $42 billion global revenues.
In Los Angeles, Ms. Greeven says she heads to the music store for ideas. Proof in point: In a blue mood a couple of weeks ago, Ms. Greeven was wandering through a Virgin Megastore when she stepped up to a CD listening station and heard a dance song. "It lifted my spirits so much, I ended up spending over $100."
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