First, I hope you were pleased with the information you
received earlier today on consumer preferences with respect to giving music as a gift.
Gifting in our industry has been as high as 17% and as low as 7%, so anything we can do to
encourage gifting will be helpful. This research gets us off to a good start.
RIAA is working on proposals from a number of ad agencies
designed to target certain of the cluster groups identified from Gwen Lipsky’s last
project, and those efforts may also go a long way toward growing our business. Lastly,
we’ve also identified genre identification as a logical topic for further research.
If we can help eliminate consumer confusion about where to find the music they want in our
stores, it should facilitate purchases.
Source-Tagging Solution Requires Industry
Cooperation
Second, I’d like to reiterate the plea made yesterday
for source tagging. Every day that goes by without this valuable tool is a day that the
industry needlessly loses millions of dollars to thieves. Our trading partners know what
we need, and the vast majority of us are ready, willing, and eager to intelligently manage
these systems. So let’s make my speech at the NARM convention this coming March a
time where I can congratulate everyone for finally achieving this important objective.
Street Date Violations Should Not Be Tolerated
Third, there was discussion on the panel yesterday of
street date violations. The personnel in my store have to live week in and week out with a
chronic violator who even goes so far as to put signs in his store that say "We have
it and J&R doesn’t."
No, this won’t put me out of business, but that
doesn’t mean it should be tolerated. We all need to work together at solving the
problem — retailers by honoring the integrity of street date, and trading partners by
aggressively identifying and punishing the offenders.
Jazz CD Sampler Delivers New Fans
Fourth, I want to thank and congratulate everyone on the
tremendous success of the NARM Jazz sampler. We shipped 90 thousand CD’s last May and
have been near the top of the Billboard charts ever since, including a nine week run as
number one. We think we’ve delivered thousands of potential new jazz fans, and
it’s up to all of us to follow through with them.
Bullish About New Technology
Next, I hope you are all as excited as I am about DVD. Our
company has been bullish about this new technology since we first saw it demonstrated a
few years ago.
I am delighted that consumers have also been excited by
this new product and have purchased both hardware and software in record numbers. I am
also bullish about audio DVD and am hopeful that the ongoing deliberations regarding the
audio standard will soon yield yet another exciting product for my shelves.
At J&R, we hear about new technologies every week. The
pitch frequently is that "this will revolutionize your business." There is one
new technology that truly is revolutionizing our business, and not just because it’s
faster, or has a better picture, or clearer sound.
I’m speaking, of course, of the Internet. Some of you
were hopefully at the town meeting on this topic Friday morning. No matter whose
predictions you think are the most accurate, one thing is for sure: the growth of online
music sales is going to be exponential over the next few years.
First there were a few pioneers, like CDNow, Music
Boulevard, and Tower. Today most major retailers either already have a site up, or are
actively planning a launch. In fact, my son, Jason, was planning to come to the Fall
Conference with me, but he’s too busy at home getting the J&R site ready to start
offering music.
So if your company has yet to start thinking about your
presence on the Internet, my message to you is "What are you waiting for?" This
is an exciting opportunity for music retailers and you’re missing out if you
don’t jump in the water now.
Addressing E-commerce Issues
The water analogy was used pretty effectively in
yesterday’s Internet session by Dr. Macdonald when he noted that sometimes the worst
perspective about water comes from a fish. The issues surrounding e-commerce in general,
and music in particular, are thorny. We’ve got to make sure that we’re all being
careful in the months and years ahead to step back occasionally to analyze the decisions
we’re making and the effect they have on our consumers, our companies, and our
trading partners.
Yesterday’s session, and the creation of NARM’s
Online Music Retailing Issue Forum, are important contributors to the process of education
and dialog that will be required to help maximize the potential of the Internet for the
entire spectrum of NARM members.
Online Promotional Play Necessary
In that spirit, I would like to offer NARM’s
perspective on a few issues that have come up through the Issue Forum since its launch
last spring.
The average brick and mortar retailer typically has music
playing in the store for the entire time the doors are open for business each day. The
obvious reason is to help promote the sale of that music in our stores.
Common sense dictates that an on-line equivalent to
in-store play should be equally available to the growing population of Internet consumers,
yet the current "in-store play" exception to copyright infringement, which
permits and encourages such promotional playing, may not yet technically fit the online
world.
Moreover, when Congress gave sound recording copyright
owners the exclusive performance right for digital audio transactions, it failed to create
a comparable "in-store play" exception for sound recordings.
The law should be brought up to date. RIAA, ASCAP, and BMI
should all help us to ensure that this valuable promotional tool of the past is not lost
in the future. After all, the more music we sell, the better off everyone is.
We are all also aware of the troubling issue of piracy on
the Internet. This is a good time to pledge NARM’s support for efforts to protect the
copyrighted works of our trading partners and our artists.
We have worked together in the past to stamp out
counterfeit product and today the United States enjoys one of the lowest rates of piracy
anywhere in the world. Let us continue to lead the world in helping to stamp out piracy on
the Net.
Room Enough For Everyone
Not surprisingly, as with any new technology, there are
those who are fear-mongers when it comes to the Net. ‘Oh, the record company is going
to start down-loading music directly to the consumer and retailers will be cut out of the
picture.’ or ‘Oh, the artist is going to start down-loading music directly to
the consumer and cut labels out of the picture.’
There are those among us who truly believe that either or
both of those scenarios are what the future holds. However, I believe that the fruitful
relationships between artists and labels and retailers of the past will continue to bear
fruit in the future.
There is ample opportunity to grow this business in such a
way that there is room enough for everyone. Artists will still need labels to help them
design promotions and analyze sales on the Net.
Labels will still need retailers who have the brand name
consumers know and trust to execute those promotions and to deliver those sales - both
online and offline.
We should all be envisioning a future in which consumers
have a wide variety of choices that meet their shopping preferences, so while we learn and
improve our Internet marketing skills, let’s not take our eye off the ball when it
comes to our brick and mortar stores.
Those of you who know me know that I’m never without
my little Scion. It has my calendar, my phone numbers, and it’s what I use to check
for e-mail every day. But what do all those things have in common? They’re all about
communicating with people. So I view this handy new piece of technology as a way to
enhance my relationships with people, not as a way to replace them. The Internet is no
different - it’s a way to enhance the business, not replace it.
Upcoming Initiatives
One of my goals as Chairman of NARM this year is to help us
focus on these important industry relationships. In the coming months the NARM Board will
be meeting with the Boards of both RIAA and the IFPI. Our purpose is two-fold: to foster
dialogue on a variety of important subjects and to nurture the relationships with our
trading partners - one person at a time.
In closing, I want to again thank all of you for coming to
the conference, for coming to dinner tonight, for listening so attentively to my remarks,
and for bringing to this organization your enthusiasm and your optimism. Together we will
ensure that the remarkable success we have all enjoyed in the past decade continues in the
next decade.
