Good morning, and welcome to the 53rd Annual NARM Music Business Convention.

We’re so pleased to bring the event back to Los Angeles. During its formative years, the Convention alternated mostly between Los Angeles and Miami. The last time NARM was in LA was actually in 1990, and it was right here at the Century Plaza. Coincidentally, that was my very first Convention at NARM, so the CP holds a lot of special memories for me.

We were beginning the final phase of the millennium, and the Convention theme that year was “Welcome to the Digital Decade.” Motown Records celebrated its 30th anniversary at our Opening Reception. The six major labels – BMG, CBS, CEMA, MCA, Polygram, and WEA – hosted music presentations. Sony Classical introduced the possibilities of recording music videos in HDTV. New formats took center stage with “DAT: What Is It And What Does It Mean?” And, with Tipper Gore leading the charge, NARM offered a seminar entitled “To Sticker Or Not To Sticker: The Censorship Issue.” Soon after, the Parental Advisory Program was born. We learned to dance the Lambada. And our significant others enjoyed a special program entitled “Tea & Surgery.” Where else but at NARM in LA could you combine an elegant high tea with a presentation on cosmetic enhancements and liposuction. And who could forget one of the infamous parties at the iconic Tower Records’ Sunset Boulevard store. Lyle Lovett headlined the Awards Dinner co-hosted by KISS’ Gene Simmons. Hopefully one of us has gotten better with age.

In the end, the 1990 Convention will forever be remembered for that year’s Scholarship Foundation Dinner. Columbia Records presented the entertainment – Michael Bolton and Harry Connick, Jr., with surprise guests Kenny G. and Branford Marsalis. But, it was the unknown newcomer who took the stage for a duet with Michael who stole the show. Mariah returned the very next year to headline the same event for which she had been a walk-on guest only one year earlier. And 21 years later, she boasts worldwide sales of 200 million singles, albums and videos, multiple GRAMMYS and, most recently, twins Moroccan and Monroe.

No one who attended that welcoming Convention could have envisioned the very unwelcome outcomes the digital decade would actually bring, and what unimaginable developments the next one would provide. So, here we are today … clearly leaner, understandably meaner, but hopefully a lot wiser for having survived the amazing transformation our business has endured since we last occupied this ballroom.

At that moment in time, piracy was a problem, to be sure, but it was limited, not insignificantly, to the organized bootlegging and counterfeiting activities of physical product. What we confronted then existed in devastatingly stark contrast to the situation we all continue to face now … rampant illegal downloading worldwide that has contributed to a 52% decline in music sales in the past 10 years. According to a recent NPD study, in Q3 2010, only 16.5% of American Internet users over the age of 13 say they purchase music. That’s mind-numbing.

In the past year, individuals, companies, industry groups and government agencies have stepped up the battle. The grassroots Music Rights Now initiative has helped alert the highest ranking government officials that something needs to be done…and quickly.

The MUSIC United Coalition, of which NARM is a member, along with several dozen other music industry trade and professional organizations, has helped to educate music fans and policy-makers about piracy.

We have called out the bad actors, highlighted the need to shut down rogue web sites, and advised and lobbied Congress on the unprecedented damage that piracy has done to our businesses and how enforcement initiatives need additional resources.

The message is resonating. Vice President Joe Biden has committed the Obama administration’s fierce determination to protect the country’s intellectual property. He deflected comments that fighting piracy is “simply protecting outdated business models.” Biden was clear and unequivocal, “Piracy is outright theft. People are out there blatantly stealing ideas and robbing us of America’s creative energies. There’s no reason why we should treat intellectual property any different than tangible property.” But, he also challenged the entertainment industries to pool their resources and do an even better job of educating the masses on the impact of piracy.

It is also imperative that we eliminate the friction and respect the interests and rights of both those involved in creating music, with those fostering technological innovation in media delivery and consumption. This type of partnership could yield a win-win for everyone involved.

From NARM’s perspective, the best defense is to also ensure we have the best offense. That means the marketplace has to operate as efficiently and effectively as possible. But, the who, what, when, where, why, and how of our mercurial marketplace is constantly shape-shifting.

So, we begin this decade with the talk once again speculating whether the music business’ days are numbered. Seriously? We’ve been down, but certainly not out. Consider the stats and the recent deals. To give us some context, we should remember that SoundScan did not exist when NARM met here in 1990. The way we measured sales sometimes brought on more questions than answers. Today, thanks to Soundscan, BigChampagne, Next Big Sound and many new metrics tools, we can quickly assess the landscape. Actionable data is beyond essential to harness the potential for future growth. This is so important that we’ve actually got several sessions on the agenda here addressing this topic.

When I gave my first speech as President in August 2004, sales were up. But, 2004 was the last year we saw successive weekly year-over-year sales increases. Until now.

In Q1 and 2 so far, we have had 12 weeks where sales were higher than the corresponding week in 2010. Track sales, which had been barely positive in 2010, are up almost 10%. Digital albums are up nearly 17%. Catalog sales are up more than 5%. And the precipitous drop in CD sales has been stemmed from an over 20% drop at a high point to declines of just 8%. Finally, when we take all formats into consideration, and with track equivalent albums, I am happy to say that sales are up 1.6% for the first time since 2004.

The most obvious question is why? I don’t think there’s one answer, but several key influencers: great music, better value, new promotional approaches, improved trading partner collaboration, the death of Limewire, more non-traditional outlets, enhanced connections with fans, gifting, etc. And the next question is have we hit a bottom. We’ve thought so before and been wrong. Maybe this time? Only time will tell.

On the financial front, some media outlets have just reported that there is considerable interest in investing in various aspects of the music business, clearly even recorded music.

And the furious bidding on Warner Music and last week’s outcome proves that there are at least 3.3 billion reasons music is a good investment. Remember that Warner Music Group was sold in 2004 for $2.6 billion. Even adjusted for inflation, that’s about a $1.5 billion growth in valuation. Not bad.

During NARM‘s storied half-century, we’ve heard this song of the industry’s demise sung more than a few times before. I know, I know. The physical well is perceived as just about dry, and there are those who assert that supporting this business model any further is ill-advised at best. While others question the course of the digital and mobile bandwagons.

Certainly, there are lots of issues to be worked on and worked out when it comes to the new cloud-based models, employing meaningful mechanisms to bring the subscription services onto a level charted playing field, and the next stage of development on the mobile apps front.

I don’t know exactly what the future music business will look like, and I’m not sure there’s anyone right now who does.

So, let’s review the facts:

1. There will be songs written, published, recorded, distributed, promoted, marketed, and performed live.
2. There will be ways for music to be purchased.
3. There will be myriad other products and services around the music that will need retail expertise to effectively connect them with consumers and make the sale happen, plus an operational infrastructure that ensures the customer gets what they want, when they want it.

What this means is that what’s behind the music, or maybe more accurately, what’s underneath the music, must provide a simple, useful foundation on which to build whatever business lies ahead.

That’s where NARM comes in. Each and every business owner and executive in this room who invests their money and their time to support NARM deserves to understand the return on that investment, not just for themselves but for the industry-at-large. How else can you justify your continued engagement with the organization?

So, as our customers, here’s your 2010-2011 business review.

Digital Initiatives

The NARM Digital Think Tank is headed by VP of Digital Strategy and Business Development Bill Wilson. There are now six working groups that are tackling the major issues around monetizing online music: Digital Supply Chain, Metrics & Sales Analysis, Product Development, Music Subscription, Music & Gaming, and Metadata. The DTT is working hard to create the most valuable operational information architecture possible for the industry. NARM has done it before.

We created a Distributor Database, helped to establish electronic article surveillance standards and spearheaded many other operational benchmarks. Announcements of mega-scale industry projects such as the publishing Global Repertoire Database and the World Intellectual Property Organization Music Database and DDEX are examples of other efforts in which NARM is collaborating.

In fact, Bill was recently invited to participate in these WIPO discussions.

And the DTT’s efforts are being recognized. A recent Billboard piece said, “NARM has emerged as a vital force behind industry-wide initiatives to deal with some of the most intractable issues getting in the way of maximizing music sales on digital platforms.”

You’ll get a more detailed briefing on |the DTT’s activities, the new database and more at Bill’s presentation at the Digital Breakfast tomorrow morning.

Consumer Intelligence

Because of the seismic shifts in fans’ discovery influencers and consumption behaviors, NARM knows we need to help the industry better understand the nature and implications of how consumers are learning about music. So I am pleased to announce this morning that NPD will be conducting a new study for us. Where does discovery happen? Which methods are most effective in spurring purchasing? Where is that purchase taking place? How does device ownership affect the process? Are there differences for familiar vs. “new” artists? What would motivate engaged music consumers to spend more and what would motivate those who aren’t spending to re-enter the marketplace? Results of the study should be available in a few months.

Marketing & Promotion

NARM is always looking for new ways to provide labels with affordable opportunities to promote their artists and new music.

At this Convention, you’re actually wearing one of those new ways. We’ve partnered with Dropcards to have our badges double as download cards. Just use your log-in to listen to the tracks featured on the back of the badge and visit the web page to learn more about the artists.

NARM has been a major supporter of Record Store Day for the past three years, underscoring our deep commitment to give voice and resources to the physical stores that contribute so much to the industry, local communities and culture. This year’s event was outstanding in every way and we congratulate all of the organizers and participating businesses around the world. The in-store appearances and unique content delivered to fans was amazing. And let’s not forget the commerce! The results saw independent stores’ album sales rise 39% that week and contributed much of the 8% increase in total album sales, according to Nielsen SoundScan. Independent stores’ 182,000-unit bump accounted for 41% of that week’s increase in unit sales. Clearly, the impact of Record Store day even went beyond the exclusive releases and appeared to help previously released titles.

Our Give the Gift of Music Campaign is an industry-wide initiative we revitalized jointly with RIAA in 2010. Our goal was to refresh the concept for a new music business and marketplace, while maintaining the message and spirit of the original effort from 1980…everyone loves to give and receive music. Enlisting the support of more than 50 artists to share their own music memories, we’ve created an interactive web site where fans can also share their own stories, search for gift ideas, let friends and family know the types of music gifts they’d like to get, and more. Here’s a preview of one of the most recent videos presented by Big Machine recording artist Martina McBride that will soon be added to the site.

The entire industry has stepped up to help us promote the campaign, featuring the logo on packaging, in ads, in store displays, online, and in various types of marketing and promotional efforts. The indie retail community’s Back-To-Black Friday event had Give The Gift Of Music as a centerpiece.

With Father’s Day, graduations and wedding season approaching, all you need to do to get involved is download the logo from the site at givethegiftofmusic.info.

There’s a Facebook and Twitter presence and we’ve worked closely with our artist, label and organizational allies to connect the dots across various platforms. We also have more than a dozen trade and professional organizations who are adding their voices to the chorus of support.

The next phase of development includes working with the renowned firm Ketchum Sports & Entertainment to help identify potential brand partners and other alignments that will help bring the Give The Gift Of Music to an even larger audience.

Education & Community

NARM continues to offer many distance learning options for you by bringing analysts and new players to your offices via our online seminar series, offering research, product presentations, case studies, and dialogue.

The Entertainment & Technology Law Series, which we’ve held in Chicago, New York, Los Angeles, Nashville, and San Francisco, brings in the top legal experts to talk about the most current cases and business challenges. There is a program here on Thursday afternoon.

And we just launched a Music Start-Up Academy in New York at the General Assembly campus to educate entrepreneurs about the basics of the business.

This year’s Convention balances the broader themes, interests and needs of members and the desire to conduct private business. We’re also addressing specialized topics for a growing and changing population of entrepreneurs and executives.

I want to stress that what I believe sets NARM apart is that our commitment to you goes beyond this annual gathering. When you join NARM, you are a part of a community that is there the other 361 days of the year to get work done for you and with you.

At every Convention, there are cool things happening around us, and headline-grabbing developments in the business to add some juice to the gathering. This year, we hit the jackpot. From the sale of Warner Music Group and the impending developments with EMI, shifts in leadership at Universal and Sony, to the discussions about Amazon’s, and now Google’s, cloud services, to Anderson’s alignment with Best Buy, to what’s going to happen with Apple’s music service, to the speculation on Spotify’s U.S. coming out party, and Microsoft’s Skype deal, this will not be a boring NARM.

NARM’s membership and Convention attendees mirror market trends. This is the only event that brings together such a diverse mix of physical, digital and mobile commerce players, service providers, labels, distributors, tech companies, developers, artists, managers, attorneys, analysts, marketing agencies, educators, students, media, and more.

In fact, there are about 100 companies, organizations or individual professionals here for the first time. We welcome Alcatel Lucent, CommerceSocial, Echo Nest, Indaba, Intel, Livewire Mobile, MXP4, Nimbit, Rdio, RIM, RootMusic, Slacker, Smule, Spotify, T-Mobile, and Taco Bell, among others. There are also members of the junior staff teams from many of our LA-area members taking advantage of the proximity of the event. We’re so glad to have you join us.

NARM is about being the forum for two-way communication between commerce and content. That’s really our wheelhouse.

As the industry changes, artists and their representatives need to be more aware of the underpinnings of the retail process.

Yesterday, we concluded our 2-day Music Business Crash Course with our friends at A2IM and we held the first-ever Artist Managers Town Hall to give that constituency a better sense of what’s under the hood and to invite them to be a part of a new Artist Managers Council within NARM.

Rebrand … Rebuild … Renew

This all reflects the continuing shift in the very fabric of the organization. You will meet lots of new people and explore new business here in LA.

In fact, we were featured in yesterday’s LA Times. NARM has taken a proactive role with its PR around sales trends, industry events and changes within the organization itself. We will consistently explore how to place the business in a positive light in the media whenever possible, and to respond accordingly when it is not.

You might not know that this landmark and iconic sign was at first “Hollywood Land” for a new housing development. It was changed to just “Hollywood” to embrace the entire district, not just the original development. You also might not know that when that famous sign fell into disrepair, it was someone from the music community, Rocker Alice Cooper, who actually led the charge in the late 1970’s to restore the sign to what we see today.

As you’ve learned this morning, NARM has also had some work done. We’re not the organization we used to be. There are new ideas and initiatives taking shape at NARM all the time, and more opportunities for you, your company and your colleagues to engage.

Our business needs an organization that is advancing every opportunity to monetize music – through whatever channel available, whether physical or digital – and helping to promote the value of this incredible artistic product that we in the industry are so lucky to be involved with.

So, if there’s something I have not mentioned in this morning’s business review that you think should be on NARM’s “to do” list, or something that’s not working, you’ve got the perfect opportunity to chat with me or any other member of my staff who are here to serve you this week … and for the next 12 months.

With your voices and your vision, NARM will play a starring role in the music business’ life story for years to come.

Have a great Convention!