Pop music will never be the same again. The MP3 player, available in the UK from next month, will enable consumers to download music from the Internet for free. This threatens to inflict further injury on an industry already hit by discounts and audience fragmentation.
The arrival of the MP3 adds to fears that this will be a cruel Christmas for the music business. However, not all executives are so pessimistic. One executive says: “People talk about the business being in crisis, but there will be a lot of albums by established artists out for Christmas – Whitney Houston,
M People, Duran Duran, George Michael, and Alanis Morissette. All of these are proven million-selling artists.”
What the executive neglects to mention is that three of the five acts – Duran Duran, George Michael, and M People – will release greatest hits compilations rather than new material. Compilations sell well, but not in the tens of millions of new releases.
This goes some way to explaining the music industry’s poor growth in recent years. According to the International Federation of the Phonographic Industry (IFPI), UK sales for the first half of this year rose by just three per cent to 680m, following three years of declining album sales.
With the notable exception of the US, the pattern is much the same across the world. Sales in the world’s four biggest music markets over the past six months have been unimpressive. The market grew by four per cent in Japan, but fell six per cent in Germany, and by one per in France. Only US sales roused the industry from its torpor with an impressive 12 per cent growth. The European market has only managed one per cent growth this year.
One band manager says: “Things are getting worse. Historically the music industry has been able to ride out recessions. This was true in the Seventies and Eighties. But twice in the Nineties the industry has been hit by a downturn.”
Much of this can be blamed on the demise of the super act, the artist who shifts tens of millions of units with a new album release. A decade ago there were many examples: U2, George Michael, Madonna, Duran Duran, Michael Jackson, Prince. Today there are two: The Spice Girls and Alanis Morissette. Between them, these acts have sold over 40 million albums. It is album sales that matter – in the UK they account for 85 per cent of revenues.
Where there was once rock and pop, there is now grunge, Eurodance, hip hop, lounge, acid jazz, drum n’ bass, industrial metal and break beat.
The sales at music retailer HMV matched the industry this quarter and rose by three per cent to 85m. A spokesman says: “There has been a shift in what people are buying. Rather than one album selling 2 million copies, there are now ten acts selling 200,000. Albums are not the events they used to be, such as when bands like U2 released records in the Eighties.”
More acts selling fewer copies add to marketing costs, because ten plans of attack are needed instead of one. According to media monitoring company, Media Monitoring Services, the media spend of the UK record industry in the first six months of 1998 was 38m, an increase of 27 per cent compared with the same period last year.
Capital Radio’s director of programmes, Richard Park, pioneered the cheery music show format which many stations now use as standard.
He says: “It’s not a trendy thing to say, but we could do with a few tunes and people who can play their instruments. Dance music has been prevalent for some time and a lot of that is people in their bedrooms with a keyboard. It’s hard to market that to a wider audience. And the rapid turnaround of dance numbers does not create careers.”
Rick Blaskey, who was an executive producer on projects like Skinner and Baddiel’s “Three Lions”, is more vocal in his criticism of dance music: “The death of the supergroup has meant the demise of glamour. The acts are like big brands which pull in light listeners and build up the market as a whole.”
He continues: “Dance music is the antithesis of glamour. It has a smaller audience, and brings in less revenue. Usually, a dance single won’t have a follow-up album and so is put on a compilation album. There is no tour, because there is no band. A band on tour stimulates sales wherever it goes.”
Blaskey and others like him argue that music lovers in their mid-30s and above are not being catered for. This is not a wise strategy given their much higher disposable income, compared with teenagers and those in their early 20s.
Radio 2, and the scores of Gold “greatest hits” stations around the country have capitalised on this age group and continue to grow in popularity. The radio industry has thrived on this back catalogue format. But the record industry now needs a different approach if it is to prosper.
Successful new bands create an enormous amount of free advertising – not only for themselves but for the whole industry. New acts are the lifeblood of a business that is always searching for the next big thing. Most importantly, sales margins from new acts are significantly higher than back catalogue albums.
The record industry sells music in three price bands. New releases are sold at full price, usually about 13.99. Compilations and back catalogue albums by the most popular artists are sold at mid-price, 9.99. And the rest of the back catalogue sells at a budget level of 5.99. So new music is worth a great deal more.
BPI figures show that since 1996, revenues from mid-price and budget albums have increased by 12 per cent each, while for full price, the increase over the same period is four per cent. As a spokesman for HMV puts it: “There is an increasing reliance on budget and mid-price albums.”
The big five record companies – EMI, Warner, Sony, Bertelsmann and PolyGram – which account for 75 per cent of global music sales – have come under sustained pressure in the Nineties. The issue for them is not merely to get back to mass-appeal acts, but to change the way they market these to the consumer.
Park says: “British music is at its lowest ebb since The Beatles. There are fewer records in the US chart than I can remember. If I were at a record company, I would be aware that there is a lot of work to be done on talent and innovation. Companies need to get their bands closer to the public. There should be more personal appearances, and grass roots promotions.”
The record companies are fighting a rearguard action, as seen by the importance that EMI places on its commercial markets division. Commercial director Richard Grafton’s task is to exploit the company’s 100-year-old back catalogue through film, TV, advertising, or any other means. He says: “All record companies have become much more focused on this area in the past five years. There are fewer acts around with mass appeal and long-term staying power.”
However, Grafton adds: “This is not an industry heading for recession, but it is heading for a period of stagnation.”
Music has moved to commodity status. This can be seen on the Internet, which threatens limitless mass piracy. Or in the way supermarkets have been able to take ten per cent of the market purely by offering discounts rather than service or a wide range of products. It is reflected in the fact that after Top of the Pops, the most important TV forum for new music is general entertainment shows like The National Lottery Live rather than dedicated music shows.
For the music business to regain its health, it needs to nurture acts which can create a stir, not just in the industry itself, but among the wider public.
Irish family band The Corrs sing old-fashioned pop music. They failed to get a record deal in the UK, so travelled to the US where they were eventually signed by Warner. Their first album, Talk On Corners, has sold a million copies in the UK and a total of 4 million copies worldwide.
Few critics suggest The Corrs are the answer to the music industry’s problems, but 20 more acts which sell in such numbers might be. The success of bands like these would not only give record companies prized full-price sales, it would allow them the financial security to sign more interesting acts.
Music’s “wow” factor has been replaced by “so what?” The way music is bought and listened to is changing, as the MP3 will no doubt successfully demonstrate. The US industry’s failure to get the MP3 banned by the courts last week merely adds to the impression of an industry in retreat. The only hope for the record companies is to develop big new acts rather than recycling old tunes, old stars and old music.