Times are continuing to change! Indeed, it seems we’re now living through another digital revolution – or perhaps even a continuation of the same one. Because of this, lets call it, “evolution”, my label AD Music, is making major changes so that it can continue to release recorded music – so that it can survive!
In recent months I’ve been asked why we’ve opted to concentrate more on downloads and release titles on CDR instead of CD and why we embarked on the download journey way back in 1997. The latter is probably the easier to answer; digital music was the future back then, it’s the future now, Dave Mantripp and I could see that. Whether we like(d) it or not is irrelevant, it’s what the internet and the technology that it spawned has given to the world. The genie is out of the bottle!
As to CD vs CDR, well, that’s a debate that will continue to rumble whatever I say here. My view is more of a pragmatic one – we have no choice!
CD sales have fallen at a rate of around 10-15% per year for the last few years, depending on which business stats you read. And read just about any music stat you like from any source and it will be followed by a ‘-‘ and that’s been the pattern for a few years now. AD Music’s CD sales are falling by 10% per year and because only 20% of those CD sales are direct sales from the AD Music web site – the rest are through distribution – our profits are minimal at best. And therein lies the biggest problem with CD sales! They may be our largest income stream, but their decline has made them unsustainable. Add into the mix a large number of CDs returned from the USA distributor previously accounted for as ‘sold’, and it only goes to further confirm the fragility and decline of the CD market.
Sadly, I’m fully aware that in our own way, we are contributing to a ‘self fulfilling prophecy’, ie: the death of the CD. I’ve read blogs and posts where fans cite figures that imply ‘the European CD market is still strong’, albeit shrinking. But they fail to grasp that the 3 major record labels in Europe share more than 80% of total sales and 90% of the Top 2000. So when you consider that 80% of all new releases are released by the thousands of independent labels, then it’s clear that indie sales equate to a very, very small share of the market.
So, as CD sales continue to decline, we are faced with the reality that the CD is all but dead. In the USA, CD sales fell to their lowest recorded level in 2014! A formerly popular medium is now withering at a commercially meaningful rate. But don’t be fooled into thinking downloads will save the day, because downloads are also falling, with Itunes sales dropping by 13% in 2014!
Perhaps even more worrying is that overall music sales are in decline. People don’t need music to survive, they have more important things to spend their money on these days, although they do still need music, so that much is in our favour I suppose.
Technology has drastically changed consumer purchasing and listening habits to such an extent that streaming is rapidly becoming the preferred medium of choice. Indeed, streaming was up by 54% in 2014 with 164 billion songs streamed, (one of the few stats followed by ‘+’) and it’s increasing again in 2015. It’s here to stay, it’s the music model of the 21st Century, the way the consumer wants to access and listen to music, one of ‘immediacy’ with minimal cost.
It’s worth noting at this point that much like Facebook ‘like’ stats, 1% of the top earning music artists account for 90% of music industry sales, or FB likes, take your pick!
The recorded music industry is being transformed, not by one simple digital revolution, but by the evolution of the digital age. The MP3 and illegal downloads started it all off and then Itunes and MP3 players paved the way to music becoming a cheap, disposable commodity. That has resulted in the profits for recorded music cascading and made it difficult, if not impossible, for music labels of all sizes and genres, to survive.
And so now it evolves once again as music fans embrace streaming. The effect of streaming impacts so adversely on digital album and track sales that they fall at nearly the same rate as CD sales. The big hope is that the download decline will eventually be offset by streaming revenue and other revenue like ‘On Demand Video Services’.
For the last decade, downloads were at least helping to offset the losses in CD sales and that enabled labels like AD Music to continue to invest in physical product, even though CD sales were declining. Sadly, there comes a point where a ‘bottom line’ in CD sales is reached, a point where smaller labels have to say, “We can’t spend this money anymore on a product that is no longer commercially viable, even for the sake of ‘Art’ and a loyal core fan base, because it’s killing us, we’re losing money”. I sympathise with the loyal fanbase who only want CDs, believe me when I say that as an artist from the ‘old school’, I still want my music on CD. But the simple truth is that the fan base is at least 10 times smaller than it was 15 years ago and it’s no coincidence that those numbers also equate to CD sales.
So, it is clear that with the growth of streaming now clearly negatively affecting digital purchases, and with CD sales continuing to decline, we need to embrace the growth in streaming to keep revenue stable and more importantly (with my artist hat on!) to keep releasing music.
We’re in an age where the ‘album’ means less and less and the consumer wants single songs and has far more choice in music as well. The era of ‘the album’, in the context of a collection of songs, isn’t dead, but clearly we have to adapt it to suit the digital age – to ignore that simple fact is folly on a grand scale! This means changing and adapting with shorter albums, and perhaps more compilations and EP style releases, or even just single song releases.
It’s worth noting that our 3rd most popular download release is the ’40 track Best of’ we released on Itunes last year!
A brief word on vinyl; sales up by 52% in 2014 – sounds great – but vinyl sales equate to a fraction of physical sales and they’re restricted to the back catalogue of bands like ‘The Beatles’ and to contemporary DJ related style music. It’s expensive and completely not relevant to our genre of electronic music in any meaningful business sense.
Two years ago we had the idea of the ‘AD Music Shop’ and were going to bring on board non ‘AD Music’ artists and sell their product. The thinking behind the idea was to expose the AD artists to a wider customer base by bringing more people to the website. Also, it’s worth noting that generating CD revenue was never our main plan with this idea, it was to expand our digital download portfolio.
Unfortunately, several things happened to torpedo that plan; Firstly “Google” moved the goalposts (again!) and secondly, EU VAT regs on digital products came into effect in January 2015 forcing us to reduce our direct digital cost to the customer significantly, to remain competitive. The upshot of this was that despite the move to our new website, there was really no financial incentive to take on additional work for a minimal return.
The idea of directing everything to our website was always to maximise our combined efforts and because, in simple terms, we’re not sharing the CD and download income with anyone else. Physical product sold through our distribution network makes minimal profit. We rely on our direct website sales for the profit, which makes the Google and VAT changes all the more disastrous for our website. Because CD sales have slowed so much, as a company, we are simply not able to press even just 500 CDs only to sell 150 over 3 or more years – and that’s what’s happening now for many of our titles. We’ve reached that point where CDs are no longer financially viable – pure and simple!
To that end, we’re concentrating more on the digital product and backing that up with a CDR produced ‘in house’. We’ve purchased an industrial CDR burner and an additional printer and except for the artists that we know are financially viable, all titles will be CDR, pressed in small batches as required. This reduces our overall stock holding (a good thing) as well as reducing our manufacturing costs.
We’re also looking at making our downloads available as Apple Lossless and on Memory sticks and even at 24bit/48k for the audiophiles.
I know some fans think we should be doing this for the “Art” – and oh, were it that simple – and for individual artists who choose the route of doing it themselves, without the overheads of a ‘business’, then they have my full admiration. But a business can’t be a charity and simply throw money away. It has to at least cover its costs and be able to reinvest in new product. We can no longer do that with CDs, but we can with downloads and CDRs! That’s the reality of the new world order!
It’s worth noting that the CDRs we’re manufacturing ‘in house’ are high grade CDRs that cost 5 times more than conventional CDRs and they have a very low error rate. They also have a lovely gloss surface that look very professional when printed and all CDRS are tested in the new multi-burner process. Most CDR titles will be on slimline trays with an identifiable ‘AD’, style booklet and on body print. The exception will be where original CD print is still in stock and the standard jewel case and tray will be used. We will also offer a “Lifelong, no quibble replacement guarantee” on the CDRs, just as we would would on a faulty CD.
A point about sound quality; there is a lot of conflicting information comparing the CDR to the CD. Simply put, obviously the two ARE different because the method of storing the data is different. However, CDRs today are of a much better quality than they were even 5 years ago and assuming the method of recording is high, then I seriously challenge anyone to say the audio quality is different. We manufacture the CDRs from the same master that would be used to manufacture a CD. There are a lot of very knowledgable technical people online who categorically state that there is “No difference” in the audio quality.
While the audiophile fans who insist on having their music on CD above any other format may hate all this, (as do I!) the reality is that they are now so few that they can no longer impact upon the way many labels think. That may sound unsympathetic to a small section of fans who have loyally supported an artist (or label) over many years, but this new technology does mean we are able to provide the music in higher rate formats than is possible on CD; providing it at 24bit 48k or higher, for example, either as download or on memory sticks. These are things we need to look into further to keep the loyal audiophile fans with us.
It isn’t all doom and gloom, but the finances of music mean that we have to stay ahead of the curve to survive. Interestingly, many music experts believe that music revenue for UK music in the USA market could double in 2016, which is another reason to embrace streaming and not waste money on a physical medium that is so obviously in decline.
As a matter of interest, our album download sales have actually increased by 12% this year and track download sales have increased by a whopping 25% this year compared to the same period last year. Those two sets of figures at least show there is increased audience interest for our music in download format.
We actually had 908,536 tracks streamed in the first 6 months of 2015 for which we received an income of £1263.02 and I can’t believe that anyone reading that stat isn’t shocked. But it’s simply the economics of the new digital model. With 75% of our digital income coming from the USA, that would appear to confirm the view that the American music consumer is driving the market and the digital evolution. And the world will follow.
So, that’s where we are – embracing the digital age in all its glory!
Data from: Nielson Music Report, Impala, Billboard, The Atlantic, IFPI. The Guardian, Statista, BBC,
David Wright, September 2015.