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04.30.07 Jim Donio Addresses Attendees
During Opening Session & Annual Meeting In Chicago
Good morning and welcome to the 49th Annual
NARM Convention. This is actually our first Convention in Chicago since
our very first Convention...in Chicago...in 1959. And we're thrilled to
be back. We've worked on putting a brand new spin on this year's
Convention in a number of ways, especially bringing the Chicago
experience to you and bringing you out to experience Chicago.
From our native Chicagoan award honorees, Don
Cornelius, and the band Chicago, to featured events like Chicago-area
retailer Dedry Jones's interview with Chaka Khan, to excursions on Lake
Michigan and to the Merchandise Mart, and time to enjoy the music and
nightlife at Buddy Guy's Legends, this year's Convention more than
others in recent memory, truly embraces the host city.
Attendance is strong and on par with 2006,
topping 1,200 delegates and counting. This underscores that attending
NARM is an important business event for all segments of the industry
during any economic cycle.
Thanks to our Convention Committee and all the
music and special event sponsors, advertisers, speakers and performers
who are playing such an integral role in this year's event.
We continue to face seismic shifts in our
business, affected by how fans discover and consume music, and how well
we are meeting their wants and needs. Both physical and online pirates
plague our industry worldwide. Efforts to combat piracy are ongoing on
the national and international stages.
The 2006 losses of Musicland, Tower and
Capitol among others, along with contraction at so many other companies,
have been troubling realities. RIAA's recently-released year-end
statistics documented the drop in physical album sales, but CDs
continued to account for the overwhelming majority of overall music
sold. Digital sales are a bright spot, but at this juncture are not
completely offsetting the shortfall in CD sales. We all know how 2007's
sales profile has begun, and where all the forecasters have already
concluded we're headed.
Is it just me, or do you ever feel like some
onlookers are fairly giddy about our travails? They've concluded
we're doing nothing to reverse the situation. They've written us off,
and this is equally troubling. Well, since I am not here to sell more
newspapers or magazines, boost readership of my blog, or play to anxious
analysts, I choose to adopt a more balanced and reasonable
view.
We are undergoing an unprecedented transition
that has our industry concerned and uneasy, particularly since there are
no quick fixes. Our mandate is to innovate now, and find the best new
music and the most creative and exciting new ways to deliver it using
physical, digital, mobile, or a blend of all three.
Here's the key. New ideas will be developed
and executed by our own collaboration, cooperation and partnership that
is open to and genuinely embraces a new paradigm. Maybe even drawing
competition closer together?
There are actually some pretty exciting
alternatives from suppliers on the table right now that could invigorate
consumer interest in owning physical product. A number of these ideas
will be part of the dialogue here over the next few days.
The promise of developing profitable digital
models is also encouraging, especially exploration of how to marry the
digital experience with brick and mortar retail businesses, via in-store
media stations, web-based commerce or bundled offerings.
Partnerships between Trans World and
Passalong, and Circuit City and Napster have made news recently. Best
Buy's collaboration with Real Rhapsody will be highlighted in a panel at
this Convention. Amazon appears poised to move into a new digital realm.
And independent New York retailer Other Music has just unveiled a
digital offering, announcing that, "we are a real record store going
digital and we are open for business."
If you choose to look, you will find a healthy
and vibrant community of sellers of all shapes and sizes who are working
diligently with their trading partners to meet today's challenges and
innovate to deliver music and other forms of entertainment to their
customers.
Virgin Entertainment had a solid year. Newbury
is opening new stores. Many independent retailers are thriving. Criminal
Records, Music Millennium, Twist and Shout, Waterloo, just to name a
few. Silver Platters, Dimple and Rasputin's have stepped up to
grow their operations with former Tower locations.
A group of Urban music retailers have just formed a new coalition. And
from the never say never department, there's even some renewed energy in
the vinyl and turntable business.
And Tower's legendary founder, Russ Solomon,
is opening a new store, R5, in the exact location of the original Tower
store in Sacramento. We will welcome him back to NARM as a new
independent retail member nearly 50 years after he was the
groundbreaking first retail member of NARM in 1960.
Let me take a few minutes to touch on NARM's
past year. Our membership numbers are stable, with a host of new
companies in our ranks. We also had our fourth consecutive year in
positive financial territory.
Here are some highlights of our progress on
some of the Association's key initiatives and priorities:
Coming out of our first Marketing Symposium
last summer, we identified several ideas to help fuel sales of physical
music. Topping the list was Jim Urie's suggestion to mount a catalog
promotion, taking a page from the AFI's programs celebrating great
movies.
We would focus attention on albums and the
emotional attachment people have to great artists and great music, and
in doing so, help sell more music. After all, albums are still relevant
and important, even in the growing age of song downloads.
A retail committee came up with a ranked list
of 200 albums that were embraced by music fans when they were first
released ... but that could also have continued success
today.
Our Marketing Council developed the promotion
to work on multiple levels: to introduce younger listeners to older
classics, to reacquaint older listeners with their favorites, and to
help brand outstanding newer releases for both older and younger music
fans alike.
We were fortunate to partner with the Rock and
Roll Hall of Fame, and to secure so much industry-wide interest. Music
companies supported a media and marketing campaign, and nearly 80 retail
companies agreed to highlight the program in stores, on websites, in
ads, and in other materials.
Of course, once the list was revealed on March 6, there were healthy
debates, cheers and challenges. Even Howard Stern got into the act. And
that's exactly the point.
People were suddenly talking and blogging about albums and collecting
CDs. And not just our list, but others as well. The reach of the media
attention even stretched as far as China and Italy.
We logged more than a million pages on Google,
tracked more than 10 million potential media-driven impressions,
hundreds of thousands of visitors to the promotion's web site, and
lifted sales over levels prior to the effort. For more information, you
can still visit www.definitive200.com.
We met yesterday to evaluate the promotion's
performance and, based on the constructive feedback we received from the
council, we will take what we have learned and build on it for future
efforts to benefit the industry.
Let's shift our attention from marketing
catalog to new releases. In its first year, NARM has been deploying its
weekly New Release e-mails as a tool for the industry to draw attention
to the new music hitting stores every Tuesday. Response has been very
positive.
Plans to enhance the service this year with
the addition of DVD and, eventually, video game product information are
underway.
I cannot address the topic of new releases
without touching on abiding concerns about the flow of the releases
throughout the year.
At the 2006 Convention, Hastings Entertainment
CEO John Marmaduke proposed that the industry was flirting with what he
dubbed "seasonal suicide," with so many key releases clustered in the
late 3rd and 4th quarters of the year, contributing to lost revenue
opportunities that affect everyone from the artist to the label to the
distributor to the retailer. John has personally spearheaded an
effort to help analyze how to profit from seasonality and provide data
to better inform the industry-at-large.
Looking exclusively at the Top 400 releases
per year as a baseline, consider these Nielsen SoundScan
stats:
* In 6 out of the past 7 years, the #1
album for the entire year was released no later than May.
* High-profile artists have continued to
release albums during the 4th quarter, even though average sales for a
new 4th quarter release have decreased by 35 percent over the past 3
years.
* Between 2000 and 2006, total album
sales from new releases during the 4th quarter dropped from 60.2 million
to 31.1 million.
Here's the big opportunity for the industry.
SoundScan estimates if just 15 of the releases from the 3rd and 4th
quarters were spread out during the 1st and 2nd quarters, those albums
would obviously have a longer life cycle and could generate millions
more in additional album sales.
Two seminal academic papers on seasonality
further inform this discussion. They suggest that albums by superstars
should be released during the first two quarters and at the end of
November to provide for a more even distribution in each
quarter.
On the other hand, artists that need time to
build a following should be released in September and October.
We've clearly seen some movement. Examples like Norah Jones, Martina
McBride, Maroon 5, and Linkin Park, among others, are very encouraging.
We need to do more and sustain it.
I implore artist managers and label executives
to give serious attention to their competitors' schedules in music, as
well as DVD and video games to set launch dates that do not overlap or
that minimize competition. You have the chance to benefit the health of
the entire industry.
Nielsen SoundScan executives will talk much
more about this data at their presentation today.
We are once again working with The NPD Group
on research to illuminate consumer behavior for our members so they can
make more informed business decisions and stimulate sales.
The study poised for release today seeks to
show how consumers are discovering music and what influences their
decision to purchase. Next up later this summer is a study of the boomer
consumer that will take a more in-depth look at their lifestyles and
what the industry can do to encourage more music consumption from this
influential segment. It also heralds a new collaborative partner for
NARM ... AARP, which is co-sponsoring the study.
NARM led the way among the entertainment
retailing community last year with a statement urging the adoption of
compatible DRM standards and interoperability.
NARM also joined the Coral Consortium, a
collective effort of companies and organizations, including RIAA and
MPAA and some of its members, with the common goal of reaching an
interoperability standard.
Recent announcements obviously cast new light
on this issue and I am sure this topic will figure prominently in
discussions here at NARM.
In another important decision positively
affecting the delivery of digital entertainment to consumers, just last
week a federal court ruled that downloading music files is not a public
performance. NARM supported that position in a friend of the court brief
with the Digital Media Association and the Entertainment Merchants
Association. As a result, digital music providers are not required to
pay additional royalties.
NARM's pledge to provide its members with information about current and
future digital business opportunities led to the creation of our
first-ever Digital NARM.
The first-rate line-up of speakers, panels,
presentations, sponsors, and networking booths are geared toward selling
digital entertainment and exploiting opportunities with new technology
to maximize both digital and physical business models, including the
ongoing exploration of in-store kiosks and media stations.
Can you believe that NARM will turn 50 next
year?
We've already been identifying ways we can remember the people, events
and achievements of the past half-century. You'll see a video crew here
this week capturing memories and moments for us to use in next year's
program.
More importantly, as we approach this
milestone, we've also been charting the future course for NARM, and how
it can continue to best serve its members. In a strategic planning
session in February, the Board examined the current landscape and looked
ahead to future trends.
The Board agreed that NARM should focus its
efforts and resources exclusively on the music space, but examine its
programs and services to ensure the Association remains relevant as the
environment evolves.
That means NARM must accurately reflect and
represent the entire landscape of how the industry delivers music to
consumers, now and in the future, embracing physical stores, online
stores, physical product, downloads, mobile, and subscription
models.
Here's our new, streamlined mission statement:
NARM advances the promotion, marketing, distribution, and sale of music
by providing its members with a forum for diverse meeting and networking
opportunities, information, and education to support their businesses,
as well as advocating for their common interests.
Accordingly, NARM's new tagline delivers a
positive and proactive message: "advancing the business of
music."
In closing, I want to re-emphasize that all
segments of our industry can and will co-exist within the NARM
community, with each playing a vital role in bringing fans the music
that entertains and inspires them.
It's all about choice. Consumers want choices,
not just in their music, but in the way they discover and purchase
it.
The entire industry benefits when the consumer
has robust choices, and as long as we are all competing fairly to
attract and serve the consumer, the consumer wins.
These are times when doing what feels safe
might in fact be the riskiest move of all.
In coming here this week, we all seek to learn from each other's
experiences, and benefit from a collective wisdom which acknowledges
that working together really matters. By striving for new solutions, we
can all advance the business of music. The stage is set for you here in
Chicago to have some candid dialogue, explore fresh approaches, hear
some great music, and have some fun.
Here's to a stellar convention!
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