Record companies and especially BPI seem to have totally lost the plot and now it is us, the consumer, that will be paying the price!
Anyone who reads my Blog will realise that I have a long and deep relationship with music retail – I have been a part of the industry for over 14 years and in that time seen a lot of things come and go – some I’m happy of seeing and others disappointed that it has come to this.
The recent and sorry state of affairs is the loss of Fopp! – being Scottish, I have always had a warming to their good clear pricing structure, old school style layouts, friendly and knowledgeable staff that would always play or recommend something to you (something that Virgin & HMV seem to lose around the mid-‘90s!) and great prices!
As well as the on-going issue of CD-WOW and their “parallel” import case – just stuns me!!!
Here is an industry that is in decline – CD units may occasionally rise to over 200million units – but as a retailer these will mean negative margin, from fierce price promotions from supermarkets, online and downloads – so the perceived values of a music CD is now at such a low that selling a Top 10 CD is now around £7.99 – compared to 10 years ago where they were £14.99. Has the record labels moved their cost price accordingly?
Let’s say that 10 years ago the cost price of a CD was £9.09 – now in 2007 has the record companies moved with the times and give a cost price to the retailers that is relative to the new selling price of £3.00 – I very much doubt it – but please prove me wrong.
So what retailers start to do is look at how they can offset these negative or minuscule margins – by thinking around Jersey, Guernsey and other off shore operations – at least with no VAT they can start to recoup some of this lost margin. Of course there will be uproar that these companies are flouting tax rules and as such the government should close this loophole – where has this come from commerce, government, record companies.... someone isn’t happy and asked for pressure...
Then on to that thorny subject of “parallel imports” – for the uninitiated parallel imports is where companies buy legitimate product abroad (say Hong Kong, Australia, US) and sell these on into the UK – the upshot is that say a band like Keane – big in the UK unknown in US – to break the band in the US the US record label will heavily discount the release in order to create awareness and sales due to the album being sold at retail at $4.99 compared to £7.99 in the UK. Buyers then purchase these legitimately from their US suppliers at the reduced cost and pass these savings onto the consumer. Sounds like a fair deal doesn’t it – legitimate copies, from the record label, consumer gets cheap CDs, retailer protects their margin everyone wins!
NO! The BPI would protest that this is not a fair playing field for the rest of the UK retailers, record industry and artists... informing the industry that they are trying to protect and allow British talent to grow.... really!
When the record industry is more concerned with the easy route such as reality pop shows, MySpace etc.. rather than talent scout the clubs and halls of the UK looking for that next big thing!! Oh yes – but the UK industry is slightly different – there is no real commitment to long term development of bands as this will cost time money and effort and seeing as the UK industry is driven by marketing gimmicks and spin – then there is no real push to build an artist. I’m not saying that this doesn’t happen – more a case of it is the exception to the norm.
So in 2007 we see such institutions as HMV, Virgin struggling to keep going – Fopp, Music Zone, MVC all gone to the wall, CD WOW being fined £41Million and have their assets frozen, while other similar retailers continue to do the same, but are left un-touched, Universal throwing their toys out the pram as iTunes takes an even stronger hold on the market (ever wondered why??)
So as these retailers shut down or struggle to survive – while companies like UMG still gross €5Billion revenue – what hope do music retailers Online and offline) have?
More importantly what hope do consumers have?
Times are a changing folks and something has to be done – take a look at my Fee or Free Music Subscription to point one direction to stimulate growth in music sales – but this needs to be supported fully by the record labels and not charge the retailer silly money per track, per download, per listen, per blink.....
I hope that we see Fopp back, hope that CD Wow continues and hope that the record labels look hard within themselves and realise that they are slowly but surely killing the industry on a day by day basis....