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A Silver Lining for the Music Industry
By Eric de Fontenay (Founder & Publisher)
(more articles from this author)
2003-04-10
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The music industry was already facing a dreary week as Best Buy painted a grim picture for the CD retail market by announcing plans to unload its Musicland businesses. But the ripple effect from Sony Music's announcement that it was cutting 1,000 positions, or 10% of its company's workforce, due to an anticipated 13-15% decline in the global music market is likely to be felt even harder. The first victim was EMI which saw its share price plummet.

Why EMI? Unlike the other major record labels, EMI is not part of a media conglomerate despite repeated attempts. While the music market's decline is likely to worry Sony Music executives, Sony as a whole can point to several bright spots that paint a far more rosy picture of the broader entertainment industry. It's consumer electronics divisions for example can look forward to a growing market, both in the digital audio and video sectors, not to mention video games. Nor is AOL/TW seeing everything all in black as HBO taps into new revenue sources from DVD sales to syndication and RoadRunner adds to its growing list of cable modem subscribers (to the chagrin of AOL). Nor have I heard much complaining from the conglomerate-owned movie studios.

The problem is that this rosy picture of the entertainment sector is partially at the root of the music industry's present predicament. For media conglomeration, whether you like it or not, it's simply a natural result of the growth of new entertainment products & outlets. The immediate impact has been greater competition between them for consumers limited time & purchasing power. Here the music industry has not faired very well. A music CD simply does not seem to have the same appeal as an XBox game or DVD blockbuster for today's discerning consumer. Even MTV has to compete with 24-hour news channel, video-on-demand and the latest pay-per-view WWE event.

The good news is that media conglomeration is also a natural outcome of the convergence among what were previously distinct entertainment products as a result of digital technology. This provides the music industry with two opportunities. First, since there are no longer distinct entertainment products but converged ones, music can grow as other media sectors and products grow. The starkest examples are shows like American Idol that ride off the popularity of reality video. Or (ironically) Sony's PlayStation2 Amplitude video game, music & wrestling, Gateway's Rip-Burn-Respect,... the list goes on and on.

Maybe EMI should take a page from upstart French TV broadcaster M6 which literally transformed its business thanks in no small part to Loft Story, the French version of Big Brother. By retaining all rights and engaging in an aggressive cross-media strategy targeting every platform - TV/video, recorded albums, radio, magazines, web - M6, among other accomplishments, landed several singles in the #1 spot on the French charts and now boasts of its role as a cutting-edge record label.


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