Is the CD dead?
CD sales are dropping. Illegal file-sharing is rising. CD stores are closing. Profits and jobs are vanishing. And the biggest bands in the world are deserting labels and giving away their wares.
In the Canadian music industry, the times, they are a-changing ó and not always for the better.
But before you start singing the blues for record labels and rock stars, remember that just like an old LP, there are two sides to that story.
On this side: The Canadian Recording Industry Association.
“Things are about as bad as they can possibly get at this point,” laments Graham Henderson, president of CRIA. “For the most part, people are really struggling right now.”
Looking at some of his numbers, it’s not hard to see his point. According to CRIA, which represents the major record labels, the Canadian music industry has been in a slow but steady decline since 1999, losing nearly half its sales and jobs. From 2005 to 2006, CD shipments dropped by 11%, down from $544 million to $482 million. In the first quarter of this year, CRIA reported a 35% drop ó what it called “unprecedented” ó and a 19% decline between January and August.
On the flip side are critics who say the situation isn’t as desperate as the CRIA claims.
“CRIA always says the sky is falling,” counters one industry insider. “That’s their role.”
As a lobby group out to win favourable treatment and tougher legislation for its members, it’s in CRIA’s best interest to paint the grimmest picture possible.
Other sources such as Neilsen SoundScan Canada ó which calculates sales (net) as opposed to shipments (gross), a very different measurement ó suggest total album sales dropped less than 5% last year, and business in general is down about 11% so far this year. A recent StatsCan report found sales of sound recordings dropped 3% to $575 million between 2003 and 2005, but the industry still posted healthy profits. While record production dropped 8.6%, expenses fell nearly 15% during the same period, resulting in a 7% profit margin.
Why the difference? According to another industry insider who spoke on condition of anonymity, CRIA’s alarming 35% first-quarter drop can mostly be explained by other factors such as post-holiday returns, a lack of big releases and the rising Canadian dollar, which decimated the industry’s “secret” export market.
Still, major labels aren’t exactly popping the champagne. Not when Canada’s last nationwide chain of music stores ó Music World ó announced earlier this month it is going out of business.
“It’s an extremely challenging business right now,” says Randy Lennox, president and CEO of Universal Music Canada. “Good people have lost jobs. Talented peple have lost jobs. We’re an industry that has a lot less people in it, and it pains us very much.”
The cause of the decline? Once again, it depends on who you ask.
Many say the industry has only itself to blame, charging that for years, greedy record companies have been taking advantage of consumers with shoddy, overpriced albums that have only one or two good songs. No less a figure than Island Def Jam Music Group Chairman Antonio (L.A.) Reid recently said, “The decay we are seeing has more to do with the lack of quality in the music.”
The CRIA’s Henderson disputes those allegations, claiming the real problem is far more obvious: “People have stopped buying music because they can now get it for free.”
Illegal file-sharing, which began chipping away at the industry with the advent of Napster in 1999, has now reached epidemic proportions in Canada, with more than 1 billion unlawful downloads per year, CRIA says. Coupled with toothless copyright legislation and legal decisions okaying personal peer-to-peer file-sharing, it has created a perfect storm of piracy that is not only decimating physical CD sales, but also preventing the burgeoning digital market from taking up the slack ó and thus deterring new investment throughout the industry.
“It affects the whole music scene,” Henderson says.
Again, others aren’t so sure. And not surprisingly, they all have their own solutions. Many in the North American industry look at the expanding mobile market as a solution. New Columbia music head Rick Rubin champions a subscription-based approach, with consumers paying a monthly fee to access millions of songs. Some artists, such as Neil Young and Prince, have begun giving away CDs with concert tickets, repurposing music from product to promo tool. Others ó such as Radiohead, who let fans download their latest album and name their own price ó seem to envision a future without record companies. Still others, such as Madonna and Korn, have signed wide-ranging partnership agreements, which many analysts see as the way of the future.
Here in Canada, CRIA has been concentrating its recent efforts on lobbying Ottawa for copyright reform ó which the Harper government promised in the latest Throne Speech. But that doesn’t sit well with the Canadian Music Creators Coalition, a group of artists (including everyone from Randy Bachman and Steven Page to Chantal Kreviazuk and Avril Lavigne), who believe CRIA plans to launch American-style lawsuits against fans.
Not every member of the industry is in turmoil, however.
While retail sales are soft and competitors such as Music World are closing stores, HMV Canada is bucking the trend, says president Humphrey Kadaner.
“Despite the suggestion by many that consumers are no longer purchasing CDs, that is not borne out by our experience,” he says. “I joined HMV Canada four years ago, and over that period of time we have increased the number of CDs we have sold by 15%. Last year we sold nearly 15 million CDs; that is a lot of CDs.”
Kadaner is far from the only optimistic voice in the crowd. Other retailers such as CD Plus and Sunrise have seen similar growth in sales of indie titles, imports and hard-to-find items that chain stores don’t carry. And indie labels such as Sonic Unyon haven’t faced the same sort of declines as their major-label cousins, thanks to more loyal customers and smaller, more realistic business practices.
“We think this is going to be a great period for independent artists and labels,” Sonic Unyon co-owner Mark Milne says. “Change is always good.”
Despite the problems of the shrinking market, Universal’s Lennox also remains optimistic.
“I’m not some guy feeling like the ship’s going down,” he says. “It’s evolving, it’s changing. Those of us that are gonna move with it are gonna win this thing, and there are many of us that are very committed to doing just that.”
Still, others fear the industry faces death from 1,000 cuts.
“We’ve slowed the bleeding but we haven’t stopped it,” says a worried John Jones, Western Regional Manager for Warner Music Canada. “And you can still bleed to death slowly.”
Is the CD dead?